The Milan Commercial Court rejects a damages claim of a telecommunication operator because of the limitation period (Uno Communication and Vodafone)

The Milan Commercial Court rejects a damages claim of a telecommunication operator because of the limitation period (Uno Communication and Vodafone)

di Giovanni Scoccini e Francesco Bruno disponibile su www.concurrences.com

Introduction

On the 3 April 2014, the Enterprises Court of Milan rejected the damages claim brought by Uno Communication against Vodafone because of expiry of the limitation period (5 years under Italian law).

This case arose as a follow-on action from a decision of the Italian Competition Authority (hereinafter “ICA”) against Telecom Italia (Telecom), Wind and Vodafone. Penalties were imposed on Telecom and Wind, while the ICA accepted the commitments proposed by Vodafone on 24 May 2007. The investigation established various abuses of dominant position in the form of discriminatory practices on the market of the supply of wholesale termination services.

•The ICA investigation and decision

In February 2005 the ICA started an investigation against Wind, Telecom and Vodafone for a possible abuse of dominant position. According to the ICA, these operators imposed conditions on their final fixed-line consumers for their use of integrated fixed-mobile services which were more favorable than those offered to their competitors (such as Uno Communication), specifically in relation to call terminations on their respective mobile networks. The ICA considered each mobile network of the investigated firms as a separate relevant product market. Consequently, Telecom Italia, Wind and Vodafone were considered to be dominant in the respective markets of their mobile networks.

This was a typical case of margin squeeze. Telecom, Vodafone and Wind were dominant in the wholesale markets and supplied a service of call terminations on their mobile networks to fixed-line operators, such as Uno Communication, which were competing with them in the retail market of fixed-line services. The integrated fixed-mobile operators were found to charge their competitor in the downstream market a price for the input which was higher than the price that their commercial divisions were offering to the final consumers for the calls from fixed-line to mobile phones. For instance

According to the ICA this discriminatory behaviour could potentially exclude from the market the competitors such as Uno Communication ,which did not offer integrated fixed-mobile services. .

On 10 November 2006 Vodafone proposed a commitments to the ICA pursuant to art. 14-ter of Italian Law no. 287/1990. The ICA published the commitments for the market test on 25 January 2007 and it accepted them on 24 May 2007. The ICA imposed a penalty on Tim and Wind in August 2007.

•The Uno Communication’s claim before the Enterprises Court of Milan

Uno Communication is an operator that offers fixed-line services in the telecommunication market. For the functioning of its business it has to make agreements with fixed-mobile operators, such as Vodafone, in order to allow its clients to call people who use Vodafone as a mobile operator. With this purpose, Uno Communication and Vodafone signed an agreement in March 2003.

Following the public enforcement of the ICA described above, Uno Communication brought a follow-on claim for damages alleging that it had suffered loss and damages for a total amount of €12,337,839 because of Vodafone’s abuse of dominant position. Uno Communication filed its claim with the Enterprises Court of Milan on 24 February 2012. The heads of loss were:
1.Higher prices paid for the call termination services because of Vodafone’s discriminatory policy.
2.Reduction of profit margin because Uno Communication did not pass on the higher costs of the call terminations to its clients.
•The judgment of the Court

As a starting point, the Enterprise Court of Milan decided to analyse the first pleading of Vodafone: the expiry of the limitation period. According to the Judge, the damages claim brought by Uno Communication appeared reasonable because Vodafone’s abuse of dominant position had been ascertained by the ICA. However, the Court held that it was necessary and more efficient to first examine the principal defense of Vodafone.

The limitation period for bringing actions for damages is five years. Problems arise when establishing at what point the limitation period begins to run. Under Italian civil code, it begins to run from the moment that the victim becomes aware of the damage caused by an unlawful behaviour. In antitrust cases the Italian Supreme Court has re-interpreted this general principle ruling that the limitation period commence to run from the moment the victim becomes aware the damage has been caused by an unlawful behaviour. Therefore, the question is when does the claimant becomes aware that he has been harmed by an antitrust infringement.

In the judgment at hand, the Enterprises Court of Milan held that the plaintiff was perfectly capable to become aware of the abusive conduct of Vodafone before the final decision of the ICA because of the contractual and competitive relationship with the infringer. The Judge analysed the telecommunication market and the relationship between the plaintiff and the defendant. Uno Communication operates in the fixed-line telecommunication services market and it is a direct competitor of Vodafone in this market sector. In addition, the parties made an agreement in 2003, as mentioned before. Therefore, the limitation period was held to start from the commencement of the ICA’s investigation (February 2005) or, at the latest, from the publication of the commitments proposed by Vodafone (25 January 2007). As a result, given that Uno Communication started its action on 24 February 2012, the limitation period of five years had expired in both cases.

To conclude, the Enterprises Court of Milan rejected the damage claim brought by Uno Communication because of the expiry of the 5 years limitation period.

•Comment

The Judgment at hand is very interesting and controversial because of its approach to the limitation period calculation. It follows the ratio of a less recent Judgment of the Italian Supreme Court (no. 2305/2007) which predicated a necessary case by case approach.

The Enterprise Court has held that the starting point was either the moment of the commencement of the ICA’s investigation or the date of the publication of the commitments offered by Vodafone. According to the judge that was the moment when the claimant could have become aware of the unlawful conduct that harmed him if he had been diligent.

The decision of the Court of Milan can be considered reasonable if we look at the facts of the Uno Communication-Vodafone case because:
1.It was a case of abuse of dominant position. It is usually easier for the victim to be aware of the infringement and of the damages suffered in an abuse than in a cartel case, where the agreement is secret;
2.Uno Communication operates in the same market as Vodafone, as its competitor or as contractual party. Therefore, the plaintiff was expected to have more awareness of the abusive conduct and its right to start an action for damages, as opposed to a firm which operates in a different market or a natural person;
3.the proposal of commitments by the infringer looks like a sort of acknowledgment of abuse.

However, Calculating the commencement of time limitation from either the opening of the investigation or the publication of the commitments cannot be used as a general principle in the area of private antitrust enforcement because it appears to be in conflict at least with (i) the principle of effectiveness; (ii) the new European Directive on private antitrust enforcement; (iii) recent judgments of the Italian Supreme Court.

The Enterprise Court of Milan has not considered the eventuality that the investigation could end without the ascertaining of any infringement. A truly cooperation between public and private enforcement would suggest that claimants should be allowed to wait for the outcome of the investigation of Competition Authorities. This would avoid the filing of unmeritorious claims based on investigations that end without finding any infringements.

The approach of the Enterprise Court of Milan might seriously threat the principle of effectiveness of follow-on actions. In particular it could make it very difficult to bring a follow-on action based on a decision of the European Commission. The average time from the opening of a proceeding to the adoption of a prohibition decision by the EU Commission is 28.5 months and it exceeds 30 months for cartel cases[1]. Taking into account that non-confidential versions of the decisions are usually made available by the Commission only a few years later after the date of adoption of the decision, it is very likely that the claim will be time-barred before the claimant will be allowed to read the decision that ascertained the anticompetitive behaviour that has harmed him.

It might be considered to clash with the recently approved Directive 2014/104/EU as well. The latter states in Recital 36 that “National rules on the beginning, duration, suspension or interruption of limitation period should not unduly hamper the bringing of actions for damages”. In addition, Article 10 of the Directive states “Member States shall ensure that a limitation period is suspended or, depending on national law, interrupted, if a competition authority takes action for the purpose of the investigation or its proceedings in respect of an infringement of competition law to which the action for damages relates”. If the Court had used this approach, the claim of Uno Communication could not be time-barred. However, it is important to note that the Directive has not been ratified yet by the Italian Parliament and at the time the Judgment was written, it was still only a proposal.

Some judgments of the Italian Supreme Court (no. 8110/2013 and 12551/2013) are more closely aligned with the Directive intentions. The Supreme Court stated that the starting point of the limitation period should follow an objective criterion and begin to run from a certain identifiable date, such as the publication of the ICA’s final decision.

To conclude, the possibility that the claimant becomes aware that he has been harmed by an antitrust infringement before the final decision of the Authority cannot be excluded. However, the commencement of the investigation and the publication of the commitments should not be considered as relevant facts for this assessment, because they are not valid evidence of the infringement. The claimant who wants bring a follow-on action has to bring as evidence the decision of the Authority ascertaining an infringement. Therefore, he should be allowed to wait for the final decision without any prejudice of his right to get compensation.

[1] Sample period of the statistic: prohibition decisions from May 2004 to December 2013.

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