Facilitating the presumption of injury resulting from exchanges of pricing information – The Schlecker judgment of the German Federal Court of Justice

The EU Representative Actions Directive in Germany and The Netherlands: one small step or one giant leap for access to justice?

I. Introduction - General remarks on the EU Directive and collective actions in Europe

Citizens throughout the European Union regularly face harm as consumers, passengers or patients. While European Union law provides various mechanisms to protect against unfair or anti-competitive practices, defective medicines, or breaches of personal data, it can be challenging for individual consumers to seek recourse once their rights have been violated. After all, initiating legal proceedings can be arduous and costly, which often makes it difficult to justify the effort in bringing individual cases involving potentially small amounts of damages. Collective legal action, however, proves to be a more accessible and efficient recourse for groups of consumers whose rights have been infringed. The Representative Actions Directive (the “RAD”), which came into force on December 24, 2020, introduces a common framework for collective actions across the EU.[1] It aims to ensure that consumers are able to protect their interests via representative actions, allowing for redress measures to seek damages in addition to the pre-existing injunctive measures. The RAD follows in the footsteps of the Damages Directive which marked a shift in the approach to the private enforcement of damages claims more generally across Europe in an attempt to level the playing field.

With the RAD having now been implemented in almost all EU Member States, and with the increasing focus of collective redress, this article takes stock on how the RAD has been implemented into German and Dutch law being examples of two jurisdictions which took different approaches. As we explore in this article, while the RAD brought about some significant change to the German civil procedural law, Dutch law already enjoyed a certain advantage over other Member States prior to the RAD in terms of collective redress and therefore required fewer changes to the existing law. Putting aside the RAD, the debate that has been had around its implementation – and the importance of widening access to justice – demonstrates how the acceptance of collective redress continues to grow in the European Union and its Member States and so the RAD marks only the start and not the end of the debate.

II. Transposition Procedure – How did the NL/DE legislators approach the Directive

As is usual with EU directives (Art. 288 (3) TFEU), the RAD does not prescribe all the details of an EU collective action. Instead, it defines certain minimum standards and goals that must then be implemented at the national level by the member states according to certain implementation deadlines.

The deadline for Member States to adopt legislation implementing the RAD passed on 25 December 2022. The RAD also required that, by 25 June 2023, the newly implemented legislation should have come into effect.

1. Netherlands

While representative entities have long been allowed to seek collective injunctive measures in the Netherlands, relatively new legislation has paved the way for claimants seeking collective redress. The Act on the Settlement of Mass Damages Claims in Collective Actions (“WAMCA”), which entered into force on 1 January , 2020, enables such entities to claim monetary damages for unlawful events (not limited to breaches of competition law) occurring on or after 15 November 2016.[2] Given the existence of this comprehensive class action regime, the transposition of the RAD could be achieved through a fairly limited adaptation of Dutch law. Notable modifications include the supplementation of litigation funding requirements and further regulation of the binding nature of collective action outcomes. These adjustments were effectuated through the Implementation Act of 2 November 2022 (the “Implementation Act”), amending Book 3 of the Dutch Civil Code (“DCC”) and the Dutch Code of Civil Procedure (“DCCP”). The Implementation Act went into force on 25 June 2023.

2. Germany

Unlike in the Netherlands, the RAD required the German legislator to formally establish a new collective action procedure. Previously, German civil procedure law only formally provided for injunctive relief and two so-called model proceedings for aggrieved investors and consumer associations.[3] In these model proceedings, however, no action for damages was possible, but only preliminary questions could be resolved in advance (whereas the claimants – in absence of a settlement – had to pursue damages through their own proceedings). Particularly, but not exclusively, in relation to cartel damages proceedings, it has become increasingly common that injured parties bundle their claims using the so-called assignment model with the help of a debt collection service provider.[4]

In light of this, the implementation of the RAD had been eagerly awaited, especially as the responsible federal government had announced its intention to strengthen collective legal protection not only for consumers, but also for companies. The German government’s official draft of the new representative action for damages, titled “Abhilfeklage”, was published by end of March 2023 and therefore after the implementation deadline. By attempting to at least meet the entry into force deadline of June 2023, there was little time for thorough discussions on the main ideas of the draft. After some hasty last-minute changes, the law came into force on 2 December 2023. The resulting legislation is the Act for the Enforcement of Consumer Claims (Verbraucherrechtedurchsetzungsgesetz “VDuG”).

III. Key issues

1. Standing

The RAD provides that representative actions may only be initiated by organizations that have been recognized as qualified entities (“QE”) by a Member State. The RAD distinguishes between ‘domestic’ representative actions, which are initiated by the QE based in the Member State in which it was deemed qualified, and ‘cross-border’ representative actions, where a QE initiates an action in a different Member State. In the former case, Member States are free to set their own QE requirements. To initiate a cross-border representative action, however, a number of admissibility requirements must be met. All Member States must publish a list of designated QEs to bring cross-border actions.       

  • Netherlands

The Implementation Act includes various criteria Dutch organizations should meet to be designated as QE. In addition, on July 10th, 2023, the Dutch Minister for Legal Protection issued the Decree on Qualified Entities for Cross-border Representative Actions,[5] establishing additional rules for the application procedure. Altogether, these requirements largely align with the admissibility requirements that already apply under the existing collective action regime (Article 3:305a DCC). For example, representative organizations are required to operate on a non-profit basis, have a supervisory body and have effective mechanisms in place for the participation in decision-making of the persons whose interests the legal action seeks to protect.

The RAD supplements the pre-existing standing requirements in some respects. To be designated as QE, in addition to the regular standing requirements,[6] a representative organization must have a website from which it follows: (a) that the organization, pursuant to its articles of association, represents consumer interests and has actually publicly represented such interests for its request for twelve months; (b) what the organization's general sources of funding are; and (c) that the organization is not subject to insolvency proceedings.[7] While under the WAMCA ad hoc interest organizations may also bring claims before Dutch Courts, the requirement posed by the RAD that a QE must have represented consumer interests for at least twelve months prior to their application effectively precludes ad hoc organizations from applying to be designated as cross-border QE.

As of 8 December 2023, only one entity has been designated as QE to bring representative actions at a European level, i.e. the Investors’ Association VEB (“Vereniging van Effectenbezitters”).[8] As a result, the VEB is, at present, the only Dutch organization that is qualified to bring ‘cross-border’ representative actions before the courts of other Member States, as well as ‘domestic’ collective actions before the Dutch courts.

  • Germany

Section 2 of the VDuG implementing the RAD gives standing to a QE from other member states and also to the 65 associations currently registered in Germany according to § 4 of the German Law on Injunctions (Unterlassungsklagengesetz “UKlaG”). However, there is an additional requirement that the QE is not allowed to finance itself with more than 5 percent of its revenue coming from private companies (e.g. donations from private companies instead of the public funding that most traditional German QEs rely almost completely on). To qualify for the UKlaG list, the association also has to meet certain criteria, for example, regarding size (75 persons or three sub-associations) and permanence (at least one year registered as non-profit organization). German ad hoc associations are therefore not granted standing as QE. In practice, these overly stringent requirements mean that only a very small number of consumer associations are authorized to make use of the new legal proceeding.

2. Personal/material Scope

The RAD’s scope of application covers infringements of EU consumer law laid down in EU directives and regulations referred to in Annex I to the RAD. While it only protects the interests of natural persons that qualify as consumers, Member States remain competent to make provisions of the RAD applicable to areas falling outside the scope of Annex I, such as competition law.[9]

  • Netherlands

While the RAD is specifically aimed at the protection of the collective interests of consumers, the pre-existing Dutch WAMCA already had a broader reach. Under the WAMCA, representative organizations may also act on behalf of companies, investors, employees or in the public interest. The application of the WAMCA is not limited to the field of consumer protection, but it is in principle open to all areas of law.  

  • Germany

The German legislator made use of its discretion to broaden the personal scope of the RAD. Small companies that employ less than 10 persons and whose revenue does not exceed EUR 2 Mio are free to join a redress action alongside consumers (§ 1 para 2 VDuG).

The VDuG can in principle be applied to all areas of private law. Therefore, in general, e.g., also antitrust law and cartel damages are covered. However, this would require a consumer association to engage in the rather specialised area of private antitrust enforcement. It also remains to be seen whether there will be cases based on competition infringements in which consumers have suffered such a significant damage that would motivate them to register for a collective action, and that are not too complex/specialised for most of the traditional consumer associations and the admissibility requirements of the VDuG (see further below on this).

Small companies could join and benefit from the new collective action in the area of competition law, as long as they are harmed in a similar way like consumers (e.g. by purchasing the same product). But since companies are often not harmed at the same purchaser level as consumers (e.g. as a reseller), it needs to be seen whether many antitrust cases prove suitable for the joint enforcement of companies and consumers under the new regime.[10] Claims must be substantially similar to be part of the same “Abhilfeklage” (see below). It seems rather unlikely that a consumer association, normally not focused on the interests of companies, will bring a separate action for small companies. It is expected that the landscape of QE in Germany will adapt to this new situation to make sure that all consumers, but also all small companies are granted access to justice.

3. Admissibility/Procedural Issues

In line with the principle of procedural autonomy, the RAD entrusts Member States with establishing rules on admissibility, evidence and the means of appeal. It is, for example, for Member States to decide on the required degree of similarity of individual claims or the minimum number of consumers concerned in order for the case to be admitted to be heard as a collective action.

  • Netherlands

Collective actions can be initiated before any of the eleven district courts, provided that the court has territorial jurisdiction. Representative organizations are required to register their claim in the public collective actions registry (“Centraal register voor collectieve vorderingen”) within two days of filing, after which the court stays proceedings for three months.[11] This allows other representative organizations to commence actions on the basis of the same harmful conduct. To be considered on the merits, a representative organization must convincingly demonstrate that it is more efficient and effective to bring collective proceedings than individual claims, with questions of fact and law being sufficiently common. In cases where multiple representative organizations initiate actions, the court designates one as the exclusive representative, which enables it to litigate on behalf of all the other organizations. Persons who fall within what is called the ’narrowly defined group’, which is the group of people on behalf of whom the collective action is brought, may at this point decide to communicate that they do not wish to be bound to the outcome of the proceedings. This is the first of two opt-out opportunities, the second of which will be discussed below.

Subsequent to the appointment of the exclusive representative, the court may set a period for parties to pursue a settlement, and, if talks are unsuccessful, proceedings continue on the merits to trial. Individual proceedings may be temporarily stayed while the collective action is being adjudicated.

  • Germany

To initiate a collective action the QE needs to show that at least 50 consumers might be affected by the outcome of the proceeding. For an action for damages (“Abhilfeklage”) those potential claims have to be “essentially similar” (“im Wesentlichen gleichartig”) (§ 15 para 1 VDuG). There are concerns that potential mass tort cases (and especially more complex cartel damages cases) could fail to meet this standard, even though the mitigation ("essentially"/ ”im Wesentlichen”) was introduced during the legislative process in order to avoid imposing an overly high standard for the homogeneity of claims.[12]

The proceeding has to be brought before the Higher Regional Court (out of 24) where the defendant is seated (§ 3 para 1 VDuG). If more than one association plans to file an action it is open to them to co-operate. Once the action is filed, other QEs cannot file a collective action for the same issue. In cross-border proceedings the Brussel Ia Regulations governs jurisdiction. Unfortunately the EU legislator has not adapted the regulation to give QEs a jurisdiction (e.g. at the place of their seat) different from the regular rules (in particular according to Art. 4 and 7 Regulation (EU) No 1215/2012).

Consumers can and must register for the collective action. There is no “opt-out” procedure available with regard to claims for damages. Registration is possible until three weeks after the final oral hearing (§ 46 para 1 VDuG). This is especially important since the collective action suspends the statute of limitations for all registered consumers regardless of when they registered their claim (as long as the collective action itself was brought on time by the QE). This also means that consumers – whose claim might be considered time-barred – can still join the collective action to “revive” their claim. Individual proceedings of consumers that have not registered may but do not have to be stayed while the collective action is being adjudicated. Individual proceedings of registered consumers have to be stayed (§ 11 VDuG).

There is a debate in Germany as to whether the fact that a collective action for damages only suspends the limitation period for claims of registered consumers constitutes a violation of Art. 16 para. 2 RAD.[13] This is because the directive obliges member states to interrupt the limitation period for all consumers “concerned” which – as is pointed out – should be understood to also include consumers who have the same legal issue but have not yet registered. Associations might try to counter this shortcoming by trying to additionally file an injunction against the respective defendant and thereby to suspend the limitation period for all consumers affected regardless of if they have or will register to join the action for damages. This should, at least in theory, be admissible since injunctions do not require consumers to register but are also understood to protect the interests of all consumers affected.

4. Funding

The RAD recognizes the importance of maintaining a balance between improving consumers’ access to justice and providing appropriate safeguards against abusive litigation. To that end, Member States should avoid the awarding of punitive damages and adhere to rules on the designation and funding of QE. The RAD expressly does not prohibit third-party funding, but compels QEs in Member States that allow for the funding of representative actions by third parties to mitigate conflicts of interest and to prevent funders from diverting the representative action away from the protection of the collective interests of consumers.

  • Netherlands

Litigation funding by commercial third parties is not only permissible under the WAMCA, but is in many ways essential to its functioning. So far, all WAMCA cases seeking damages involve commercial third-party litigation funding.[14]

Under the WAMCA, there are a number of pre-existing rules that govern litigation funding. The Dutch implementation of the RAD has only slightly expanded on these criteria, so as to prohibit collective actions against defendants that are a competitor of the funding provider or against defendants on which the funding provider is dependent (Article 10(2)(b) RAD). The RAD furthermore requires that QEs in cross-border representative actions include information on the source of funding of their activities on their website (Article 4(3)(f) RAD). The Minister is authorized to request supplementary information on these sources, insofar as they may be called into question.

Representative organizations have in several cases been ordered to disclose their funding agreements to the court as well as to the opposing party. In the latter case, however, organizations are permitted to redact the available budget for conducting the proceedings. The Explanatory Memorandum to the WAMCA emphasizes that it suffices for a representative organization to be able to demonstrate that it has or may have adequate funds for the proceedings.

  • Germany

The German VDuG expressly recognizes that collective actions may rely on litigation funding. This is not a given, since, in the past, litigation funding was sometimes (incorrectly) seen as a contradiction to the altruistic character of representative actions by consumer associations.[15]

Following this traditional skepticism towards third party funding in the area of representative actions, the German legislator has gone beyond the safeguard-requirements of Art. 10 RAD and provides for mandatory disclosure of the financing agreement and limits any success fee promised to the funder to 10 percent of the enforced claims (§ 4 para. 2, 3 VDuG). This disclosure obligation could prove to be an disadvantage to the detriment of the QE, particularly if the disclosure enables the defendant to draw conclusions about the intended handling of the planned proceedings.[16] In addition, the restriction to a 10 percent maximum contingency fee is likely to make it rather unattractive (if not impossible) to fund a collective consumer action unless the case in question requires exceptionally little effort and risk.[17]

It is also unclear how a third party funding of a collective action would take place in practice. This is because the legislator explicitly stated that the QE itself shall not promise the litigation funder a share of the proceeds.[18] As a consequence, the consumers themselves are in practice required to implement success fee commitments with the funder while the question how these commitments can be obtained from all registered consumers is left open. It will be interesting to see how the QEs will deal with this in practice.

5. Claim distributions and settlement

The RAD promotes collective settlements aimed at providing redress to affected consumers. Any settlement reached should be approved by the relevant court or administrative authority, unless the settlement would be contrary to mandatory provisions of national law. Once approved by the court, the settlement becomes binding on the QE, the defendant and the affected consumers. Member States are free to choose an opt-in or opt-out mechanism with regard to the binding effect of the settlement.   

  • Netherlands

As was previously mentioned, individual injured parties have a first opportunity to opt-out of the collective action once an exclusive representative has been appointed by the court. Following this, the court may set a period for the parties to attempt to reach a collective settlement. In the event of a successful settlement, it must be presented to the court in draft form for approval, and thereafter, injured parties residing in the Netherlands are given a second opportunity to opt-out. While Dutch law already had these opt-out mechanisms in place for Dutch injured parties, the RAD now provides for a mandatory opt-in mechanism for foreign consumers, binding them to the outcome of the collective action only if they expressly consent to be bound (Article 9(3) RAD).

If settlement negotiations prove unsuccessful, the proceedings continue on the merits. Under the WAMCA, the court – if necessary assisted by financial or medical experts, depending on the type of claim – is authorized to determine the final award of compensation. It can (but is not required to) do so on the basis of class action settlement proposals submitted by the parties. Where possible, the court is required to allocate the award of damages by category.

  • Germany

A settlement reached in court is subject to review by the court (§ 9 VDuG) and the defendants are given one month to reject the settlement and withdraw from the proceedings (§ 10 VDuG).

In the event that no settlement is reached, the legislator provides for the so-called implementation procedure (§§ 22 et seq. VDuG), in which the court first defines the criteria for the level of proof and calculation of the claim in a judgment and then hands over the actual distribution to a newly established administrator (which could be an attorney or a notary, for example). This seems to be a positive development since the German courts, which are notoriously under-resourced, have previously – when dealing with large claims, e.g. via the assignment model – expressed the fear that the calculation and examination of damages regarding each of thousands of claims would exceed their capacities. This problem seems to have been mitigated with the newly established implementation procedure in collective actions. If this type of procedure proves useful, it seems very possible that this could be extended to other large proceedings by the legislator as well – such as in large and bundled cartel damages proceedings based on the assignment model.

IV. First actions - Outlook

As was expected, the implementation of the RAD has not brought revolutionary change to either Germany or the Netherlands. The transposition process is thus exemplary of the character of European Union law, which tends to develop in an incremental manner and in doing so, step by step, continuously advances the acceptance of stronger and more effective private enforcement and, in particular, of collective redress. It is therefore unlikely that the implementation of the RAD will contribute to a large number of new proceedings. Nevertheless, it will be interesting to see to what extent the new features created in this context prove themselves in practice and stimulate new ideas for the future acceptance and development of collective proceedings in Europe.

  • Netherlands

As at 1 July 2023, there are 71 collective proceedings that have been registered in the public collective actions registry (since the inception of the WAMCA).[19] Approximately a quarter of those cases involve claims for damages: a considerably smaller number than was initially anticipated and – to some degree – feared, with critics warning that a more accessible collective redress mechanism might result in a pervasive compensation culture, or what they called ‘US style class action lawsuits.’ To mitigate against these concerns, the WAMCA introduced certain requirements that representative organizations must meet for their collective action to be admissible. The Implementation Act resulting from the RAD has only slightly supplemented these criteria, most notably with regard to cross-border representative actions. It is expected that with time, more representative organizations will apply to be designated QE in order to bring cross -border collective actions outside the Netherlands. 

  • Germany

As the new representative action has only been available in Germany since December 2023, it is not surprising that only one redress action has been filed so far. The first action was directed against a local district heating company (for increasing prices according to unlawful Terms and Conditions).[20] It was also made public that one QE has prepared an action against the online retailer Zalando for excessive reminder costs according to their Terms and Conditions (EUR 5.30 for the second reminder mail). In general, however, expectations for the new collective action regime are generally low. In particular, the narrow focus on traditional consumer associations as possible claimants, and uncertainties and restrictions in relation to the funding and admissibility (“essentially similar”) of the collective action, make it unlikely that it will be used in complex and particularly difficult cases. Whether consumers really decide to register even for negligible claims seems rather questionable. Nevertheless, the new redress action will likely prove to be an important first step towards advancing collective legal protection in Germany as has been seen in other Member States, such as the Netherlands. In this regard, the rather innovative step to establish an implementation procedure for mass cases could prove to be a very useful mechanism which has the potential to be transferred into other areas of German civil procedural law. The new representative action has therefore already further advanced the German debate on collective redress – but there is still much room for improvement.

Dr. Christopher Unseld is a Senior Associate in Berlin and Anne van den Bergh is an Associate in Amsterdam

Footnotes

[1]     Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC 
[2]     The WAMCA is an amending Act and has been incorporated into Articles 3:305a through 3:305d DCC and Title 14A DCCP since January 1, 2020.
[3]     For consumers the model declaratory action was called “Musterfeststellungsklage” and for financial disputes there is the investor model procedure (“Kapitalanleger-Musterverfahren”), for an overview see see Halfmeier, Collective Litigation in German Civil Procedure, in Fitzpatrick, B. & Thomas, R. S. (eds.), The Cambridge Handbook of Class Actions, Cambridge 2021, p. 233.
[4]     See https://www.hausfeld.com/en-gb/what-we-think/competition-bulletin/collective-redress-in-germany-for-cartel-damages-claims/.
[5]     Besluit van 10 juli 2023, houdende regels omtrent de aanwijzing van stichtingen of verenigingen als bevoegde instanties voor het instellen van grensoverschrijdende representatieve vorderingen voor consumenten (Besluit bevoegde instanties grensoverschrijdende representatieve vorderingen)
[6]     As laid down in Article 3:305a of the Dutch Civil Code.
[7]     See Article 3:305e of the Dutch Civil Code.
[8]     https://open.overheid.nl/documenten/ae41b0db-4ee5-4e48-a557-4e295e8428fb/file
[9]     The Digital Market Act (DMA) was added to Annex I.
[10]    See also Hornkohl, NZKart 2024, p. 2 (7).
[11]    https://www.rechtspraak.nl/Registers/centraal-register-voor-collectieve-vorderingen
[12]    See, e.g., Hamacher, WRP 2024, p. 19 (21).
[13]    See Röthemeyer, VuR 2023, p. 332 (334).
[14]    Utility, necessity, design and costs of a (revolving) litigation fund for collective actions, Report for the Research and Documentation Centre (WODC), 25 June 2023 (https://repository.wodc.nl/handle/20.500.12832/3294)
[15]    See, e.g., Federal Court of Justice, 13 September 2018, I ZR 26/17 – Prozessfinanzierer I.
[16]    See Gsell/Meller-Hannich/Stadler, JZ 2023, 989.
[17]    Cf. Stadler, VuR 2023, 321.
[18]    See explanatory notes of the legislator: BT-Drs. 20/7631, p. 107.
[19]    Drie-en-een-half jaar collectieve (schadevergoedings)acties, Karlijn van Doorn, NJB 12-01-2024, afl. 2, p. 86
[20]    See https://www.bundesjustizamt.de/DE/Themen/Verbraucherrechte/VerbandsklageregisterMusterfeststellungsklagenregister/Verbandsklagenregister/Verbandsklagen/Verbandsklagen_node.html

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