ECJ endorses a flexible definition of 'place where damage occurred' for jurisdiction in collective actions in digital markets: Stichting v Apple

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Two foundations representing the interests of Dutch mobile app users, the Stichting Right to Consumer Justice and the Stichting App Store Claims (together: ‘the Foundations’), filed opt-out collective actions against Apple Inc. and its European subsidiary Apple Distribution International Ltd. (‘Apple Ireland’) under the Dutch collective action regime ‘WAMCA’ on behalf of an unidentified (but identifiable) group of Dutch consumers that purchased apps in the App Store NL.

On Apple iOS devices, apps can be purchased exclusively from the Apple App Store. For each individual country, the Apple App Store has a separate store front and users are directed to a country’s Apple App Store based on their ‘Apple ID’ account. That means that if a user with a Dutch account purchases something from the App Store, they are automatically redirected to App Store NL.

The foundations, inter alia, argue that Apple has a dominant position in the market for distribution of apps running on iOS and in the payment system for those apps, and is abusing that dominant position under Article 102 TFEU. The alleged abuses include charging excessive commissions, through its payment system, on the sale price received for apps in the App Store NL. As a result of those excessive commissions, Dutch consumers suffered harm.

The collective actions were brought before the Amsterdam District Court. The foundations based the jurisdiction of the court on Article 7(2) Brussels I bis, which enables a person domiciled in a Member State to be sued in another Member State, ‘in matters of tort, delict or quasi-delict, in courts for the place where the harmful event occurred or may occur’.

Apple argued that the Amsterdam court did not have jurisdiction over the dispute because the alleged harmful event – i.e. the anticompetitive conduct – did not occur in the Netherlands but in the US and/or Ireland having regard to the corporate seat of the defendant Apple companies. Moreover, where it is impossible to determine, for each alleged victim of anticompetitive conduct, the precise place where the damage occurred, the special rule in Article 7(2) Brussels I bis should not apply. In such circumstances, jurisdiction should be determined based on the general criterion of jurisdiction in Article 4(1) Brussels I bis (i.e., the defendant’s domicile, which is outside of the Netherlands). Alternatively, Apple argued that the court’s jurisdiction should extend only to those users who are domiciled in the Amsterdam court’s district or who made purchases in that district via App Store NL.

The Amsterdam court concluded that it had international jurisdiction over the claim because the causal acts carried out by Apple had taken place in the Dutch territory. The court referred to the facts that App Store NL was specifically aimed at the Netherlands market and used the Dutch language. Moreover, most of the affected users were resident or established in the Netherlands and had paid from Dutch bank accounts. Therefore, the market affected by Apple’s conduct was seen as the Netherlands market and the place where the damage occurred was found to be the Netherlands.

On the other hand, the court had doubts about whether it enjoyed territorial jurisdiction over actions brought on behalf of Dutch users whose domicile or registered office was outside of Amsterdam. First, there is no clear place within the Netherlands where Apple’s actions occurred (Handlungsort), as the sales via the App Store took place in the whole territory of the Netherlands. Second, the place where the Dutch consumers suffered harm (Erfolgsort) cannot be established, and the court wonders whether the place of the seat of the consumer is in this situation the only relevant criterion. Third, the court inquires whether the fact that it concerns a collective action by representative organization for Dutch consumers who have their seat in different parts of the Netherlands is a relevant factor. Fourth, the court has doubts whether Brussels I bis in this situation prohibits the concentration of cases before one court in the Netherlands via the internal reference procedure under Dutch procedural law. These questions have not been answered in previous case-law of the ECJ.

The ECJ disagreed with the Advocate General and interpreted Article 7(2) flexibly for collective actions in digital markets

The Court began by recalling its case law that, in damages claims for collusive conduct, the place where the alleged damage occurred can be the place where goods affected by the collusive conduct were purchased or, where purchases were made by a person in several places, the place where the person is domiciled. Those criteria, however, did not fit well with the current situation, where digital products were purchased on an online platform by an indefinite number of persons who were unidentified when the action was brought.

That tension was evident in Advocate General Campos Sánchez-Bordona’s opinion (see our insights here). He had suggested the ECJ adopt a ‘location fiction’ according to which jurisdiction under Article 7(2) Brussels I bis would be determined based on users’ place of residence or establishment. Such an approach would require the foundations to file a collective action in every individual court district – a very complicated and inefficient way to resolve collective actions.

The ECJ came to a different conclusion. It ruled that the referring court was not required to determine for each individual victim the precise place where the damage occurred, since the victims are not identified individually at the time courts determine their jurisdiction. Rather, Article 7(2) Brussels I bis had to be interpreted in light of its objectives (namely, proximity, predictability of the rules governing jurisdiction, and the sound administration of justice). Since the App Store NL was designed for and operated throughout the Netherlands without distinction (i.e., it was designed specifically for that market, uses Dutch to offer apps for sale to users with an Apple ID associated with the Netherlands, and offers some apps that were created specifically for that market), the place where the damage occurred corresponds to the ‘virtual space’ in the entire territory of the Netherlands in which purchases were made. That means that any court in the Netherlands having substantive jurisdiction over collective claims has international and territorial jurisdiction as the place where the damage occurred under Article 7(2) Brussels I bis.

The ECJ concluded with some considerations about centralization of jurisdiction in collective actions. The ECJ noted that in competition law cases, the grouping of individual claims together is likely to facilitate both the exercise of the right to compensation by the injured persons and the task incumbent on the court seized, in particular where actions relate to the conduct of digital platforms. The ECJ clarified that Article 7(2) Brussels I bis does not preclude the application of national rules aimed at ensuring such centralisation.

Consequences for opt-out collective actions in the digital market

The ECJ’s conclusion provides an effective solution to the challenges of digital markets, and is good news for the Dutch opt-out collective action regime. If the advice of the Advocate General Campos Sánchez-Bordona had been followed, this would have led to the result that, when jurisdiction is based on the place where the damage occurred, representative organizations would have to file collective actions in every individual court district or, alternatively, claim damages suffered by Dutch consumers outside the Netherlands (in this case: the US and/or Ireland, following the place of residence of the defendants). This would have been highly unpractical and inefficient. The ECJ’s ruling provides a more pragmatic approach, which balances effective private enforcement in opt-out collective actions with defendants’ need to foresee where they can be sued.