I ENFORCEMENT POLICIES AND GUIDANCE
The German Federal Cartel Office (FCO) continues to be one of the most active competition authorities in Europe. Apart from hard-core cartels, the FCO focuses on vertical restrictions. Online issues also continue to play a major role in the FCO’s enforcement practice, as reflected by an investigation against Facebook and decisions relating to the online booking portals HRS and Booking.com as well as proceedings concerning selective distribution systems (e.g., Asics, Adidas) and concerning resale price maintenance (e.g., Lego). The FCO’s president, Andreas Mundt, has also repeatedly stressed that the authority wants to play a major role with regard to new topics such as the internet economy. It is currently being discussed as to whether the FCO shall become responsible for consumer and data protection issues, which would enable it to act more like the US Federal Trade Commission.
When enforcing its policies, the FCO can make use of its huge resources (approximately 330 employees and several specialised enforcement units). The FCO also has far-reaching powers when it comes to dawn raids. The Special Unit for Combating Cartels (SKK) has the task of assisting the relevant decision-making divisions in the FCO, which are competent for all antitrust and merger cases relating to specific industrial sectors, in uncovering cartel agreements by deploying specialised personnel.
German competition law corresponds to EU competition law as far as collusive agreements are concerned. The interpretation of the German Act against Restraints on Competition (ARC) must, in general, be in accordance with EU competition law.
The wilful or negligent violation of Section 1 ARC (as well as of Article 101 of the Treaty for the Functioning of the European Union (TFEU)) can be fined as an administrative offence. The fine may amount to up to €1 million,2 but for each undertaking and association of undertakings participating in the infringement the fine may not exceed 10 per cent of total turnover in the preceding business year.3 Section 1 ARC is addressed to undertakings and associations of undertakings. These entities are subject to the ARC and can be fined for competition law infringements under Section 81 ARC. German law also provides for the possibility of fining certain natural persons (a legal representative or other person in a comparable position) if such person has personally contributed to the infringement or has not taken appropriate measures to prevent such anticompetitive conduct.4
The FCO adopted formal guidelines on the calculation of fines on 15 September 2006, which, as a consequence of the Grauzement judgment of the Federal Supreme Court,5 were amended on 25 June 2013.6 In terms of policy and methodology, the initial notice followed the European Commission’s guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No. 1/2003, while the amended notice, as a consequence of the Federal Supreme Court’s Grauzement judgment, slightly deviates from this approach.
In addition, the FCO adopted a notice containing leniency regulations on 7 March 2006 (the Leniency Notice).7 The Leniency Notice is available in German, English and French on the FCO website,8 as are all official legal texts and documents on German competition law. The Leniency Notice takes account of both EU leniency policy and the model leniency programme developed by the European Competition Network (ECN). According to its wording, it only covers cartels. However, in practice, the FCO is prepared to take into account the cooperation of a participant in anticompetitive vertical behaviour and to grant significant reductions comparable to those under the Leniency Notice. This will most probably also be true for potential hub-and-spoke cases (but no case law exists at present).
2015 was the first year in which the FCO imposed a fine on a cartel (related to car parts), which initially came to light through a tip-off via its whistle-blower hotline that was established in 2012 and that complements its leniency programme. Thanks to this hotline, interested parties may submit their information on an anonymous basis. According to the FCO, this whistle-blower hotline has proven very effective. This is one of the reasons why the FCO claims that it is less affected by the recent decline in leniency applications that is currently felt at European level. Another reason is the fact that many investigations of the FCO were started because of complaints from competitors and customers and the FCO’s own initiative. According to the FCO’s statistics available on its website, only around 50 per cent of their cases were started because of leniency applications.
II COOPERATION WITH OTHER JURISDICTIONS
The FCO has signed the Statement regarding the Commission Notice on Co-operation within the Network of Competition Authorities. It has thereby agreed to the exchange of information, mutual consultation, coordination of investigations, inspections on behalf of other competition authorities and discussions on the proposed course of action among the European competition authorities. Specifically, the FCO is obliged to inform and liaise with both the European Commission as well as with the other national competition authorities (NCAs) within the ECN. Regarding leniency applications, the FCO is only obliged to pass on leniency applications and related documents to other authorities of the ECN in the cases specified in the Commission Notice. The most important case in this respect is where the applicant has consented to the information being passed on to another authority.
The Leniency Notice allows for the fact that an applicant for leniency might also file an application to the European Commission. In order to be informed of such potentially concurrent proceedings, the Leniency Notice obliges the applicant to state whether and to which other competition authority an application for leniency has been, or will be, filed besides the application to the FCO. If the applicant has also applied, or intends to apply, to the European Commission, and if the European Commission is the best-placed authority according to the criteria of the European Commission notice on cooperation within the network of competition authorities, then the FCO may exempt an undertaking that has placed a marker (see below) from submitting a complete application. Whether the FCO grants this exemption depends on whether the Commission actually picks up the case. This merely confirms that the FCO respects the priority of proceedings at EU level in accordance with Article 11(6) Regulation 1/2003.
The Leniency Notice contains no indication that the application in another EU Member State will have an effect on the applicant’s position in the proceedings in Germany, nor in what other way the FCO will interpret the relationship between the German and the other proceedings. An applicant will therefore have to file its application in any Member State in which it can expect to be liable to a fine. The FCO can be expected to apply the Commission Notice on Co-operation within the Network of Competition Authorities in that respect.
The applicant must expect the FCO to share the information contained in the application with other competition authorities; it will, however, treat the identity of the applicant and its trade and business secrets as confidential, but only until a statement of objections has been issued to a cartel participant.
Besides the cooperation within the ECN, the US and German governments concluded an agreement relating to mutual cooperation regarding restrictive business practices on 23 June 1976. On the basis of such agreement, the FCO, the US Department of Justice and the FTC may exchange information, encompassing documents, memoranda and other materials, with regard to anticompetitive practices that have an effect on trade in the respective authority’s jurisdiction. What is more, the cooperation encompasses the right to send requests for information by one authority to undertakings domiciled within the other authority’s jurisdiction. Most importantly, the authorities will consult each other with respect to investigations relating to the same cartel activity having effects in both jurisdictions.
It must be stressed that pursuant to Section 50(b) ARC, the FCO is generally entitled to cooperate with NCAs of the other Member States of the EU, as well as with other competition authorities outside the EU; however, the FCO has to observe certain limitations on the exchange of information containing confidential data, business secrets, etc.
III JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
The FCO is entitled to investigate any agreement or conduct that raises concerns as to its compatibility with German and EU competition rules.9 As a consequence, companies that are domiciled outside Germany may be investigated if they have engaged in anticompetitive behaviour that might have an effect on the German market.
The FCO’s investigative powers are fairly broad, but it is not authorised to execute investigative measures outside Germany; rather, the FCO has to rely upon legal and administrative assistance from other authorities, particularly within the framework of the ECN. In this context, the FCO might not be regarded as the best-placed authority to investigate a matter on the basis of joint conclusions among the ECN authorities as to the allocation of cases among the competition authorities within the ECN (see Section II, supra).
However, during dawn raids the FCO feels competent to look into and to ask for IT data that are located on servers outside Germany as long as the dawn-raided company, the servers of which are based abroad, can access these data.
IV LENIENCY PROGRAMMES
According to the FCO’s Leniency Notice, cartel members can receive (complete) immunity from fines or a reduction in fines of up to 50 per cent. As mentioned in Section II, supra, according to the wording of the Leniency Notice, this only applies to cartels but not to vertical infringements or cases of unilateral abuse of market power. And yet, in practice, the FCO is prepared to take into account the cooperation of a participant in anticompetitive vertical behaviour and to grant significant reductions comparable to those under the Leniency Notice. For example, in the Lego case, the cooperation with the FCO was one of the reasons for Lego’s small fine (only €130,000). A similar approach will most probably also be taken in potential hub-and-spoke cases (which have not yet been explicitly fined, but more often declared to be vertical cases) and in unilateral conduct cases. There are, however, no formal, specified rules in that respect, but only the FCO’s statement on its website according to which a cooperation may be taken into account when assessing the fine even though the Leniency Notice only apply in cases of horizontal agreements and concerted practices among competitors. The question of whether a leniency applicant qualifies for one of these options is particularly dependent upon the timing of the leniency application, the role the applicant played in the cartel and the extent and nature of its contribution during the infringement proceedings.
Full immunity will be granted only to the first-in applicant and only under certain circumstances. The first applicant may be granted full immunity even after the FCO has learned of the cartel infringement and even if it was already in a position to obtain a search warrant. Subsequent applicants, or applicants not fulfilling the preconditions for full immunity, may receive a reduction of up to 50 per cent. If the applicant played a decisive role in the cartel, it cannot receive full immunity but is not generally excluded from being granted a reduction in the fine. As a further important condition, cooperation with the enforcement authority must be continuous and without reservation.
The Leniency Notice provides for the possibility of placing a marker (i.e., a cartel member’s declaration of its willingness to cooperate). The FCO will acknowledge receipt of the marker, but will generally not decide on the extent of the reduction in the fine until the final decision is adopted. Only if the marker refers to an application for complete immunity will the FCO issue an assurance in the course of the proceedings that the applicant will be granted full immunity, provided that it was not the only ringleader of the cartel and did not coerce other undertakings into participating in the cartel.
There are no clear-cut requirements for a successful leniency application. The Leniency Notice requires any applicant to cooperate fully and on a continuous basis. The applicant is expected to provide all verbal and written information available to it, including documents and evidence relating to the cartel. In particular, all information necessary for calculating the fine must be handed over. Furthermore, the identity of all employees involved in the cartel agreement must be revealed. If the application is intended to be filed for more than one legal entity belonging to the same group, the respective affiliated companies must be named in the application. The duty to hand over information in whatever form does not end with filing the application but continues throughout the proceedings. The FCO will not consider the cooperation as fulfilling the above requirements if the leniency applicant merely submits information or documents without any further explanation. In particular, the cooperation requires an oral or written description of the relevant cartel behaviour, including the time and place of meetings, details of the illegal behaviour and the identity of the companies involved.
To receive full immunity, the leniency application must enable the FCO to initiate further investigatory measures. Full immunity will only be granted if the application enables the FCO to obtain a search warrant. If the FCO has already been able to obtain a search warrant due to information available to it, the applicant will be granted full immunity only if the information in the application enables the FCO to prove the offence. Consequently, the leniency applicant is required to gather and present the documents and the factual background of the relevant cartel behaviour to increase its chances of meeting these thresholds.
On the basis of the Leniency Notice, the conditions for full immunity depend on whether the FCO already has sufficient evidence to obtain a search warrant. If, at the time the application is filed, this is not the case, the applicant will automatically receive full immunity if it:
- a is the first participant in a cartel to contact the FCO before it has obtained sufficient evidence to obtain a search warrant;
- b provides the FCO with verbal and written information and, where available, evidence that enables it to obtain a search warrant;
- c ends its involvement in the cartel immediately on request by the FCO;
- d was not the only ringleader of the cartel and did not coerce others into participating in the cartel; and
- e cooperates fully and on a continuous basis with the FCO.
If, at the time the application is filed, the FCO is already able to obtain a search warrant, full immunity will, as a rule, be granted if the applicant:
- a is the first participant in the cartel to contact the FCO before it has sufficient evidence to prove the offence;
- b provides the FCO with verbal and written information and, where available, evidence that enables it to prove the offence;
- c ends its involvement in the cartel immediately on request by the FCO;
- d was not the only ringleader of the cartel and did not coerce others into participating in the cartel;
- e cooperates fully and on a continuous basis with the FCO; and
- f no cartel participant has been granted immunity before this applicant.
A sole ringleader of a cartel or an undertaking that has coerced other undertakings into participating in a cartel will under no circumstances be eligible for full immunity. The Leniency Notice requires that the applicant cease its participation in the cartel on request by the FCO.
With regard to the reduction in the fine, the Leniency Notice requires the applicant to hand over all the information and evidence available to the applicant that makes a significant contribution to proving the offence. The value of the contributions to uncovering the illegal agreement will be one decisive aspect in the amount of reduction granted to the applicant. This provision proves problematic in practice. Companies that do not have particularly incriminating documents or information may be provoked into exaggerating the information in their possession and the facts that can be proved thereby.
Leniency applicants subsequent to the first-in or not qualifying for full immunity under the first-in rule, may receive reduced fines. The maximum reduction that can be granted is 50 per cent. Applicants may receive full immunity even if they are not the first-in. The Leniency Notice does not exclude the possibility of the second applicant moving into the position of the first applicant. This might be the case if the first applicant is the sole ringleader or does not fulfil its obligation to cooperate. The prospect of overtaking the first applicant intensifies competition between applicants to offer the most value.
To qualify for a reduction, the applicant must adhere to the following obligations:
- a it must cooperate fully and on a continuous basis for the entire duration of the proceedings;
- b it must hand over all the information and evidence available to it that is likely to make a significant contribution;10
- c it must end its involvement in the cartel immediately on request by the FCO;
- d it must maintain confidentiality regarding its cooperation with the FCO until explicitly relieved thereof; and
- e it must name all employees involved in the cartel and ensure that they all adhere to the cooperation obligation.
Provided that the applicant fulfils these obligations, the FCO will determine the reduction in the fine on the basis of the value of the contribution and the order of applications.
No rules exist as to immunity plus or amnesty plus. In addition, no rules exist as regards the cooperation with the criminal prosecutors. In bid-rigging cases for which criminal sanctions apply,11 this can create major issues for natural persons. They may be prosecuted even if they are granted full immunity by the FCO. In addition, the approach of the criminal prosecutors is hard to predict since there is not just one criminal prosecution office in Germany responsible for these kinds of offences, but each competent local criminal prosecutor may take up such cases.
An application can be made as long as the FCO has not concluded the proceedings by way of a formal decision. In particular, a reduction is not excluded because the initiation of the investigation has become known; the later the applicant decides to file an application, however, and the more information the FCO has already collected, the less significant the applicant’s information will be. On the other hand, the order of applications as such is not the exclusive determining factor for the amount by which the fine is reduced. If an early applicant is not able to present valuable information, then a later applicant will be able to achieve a more significant reduction by presenting data of higher value.
The applicant may initiate the leniency proceedings by contacting the special unit for combating cartels or the chairman of the competent decision-making division of the FCO.12
The applicant, as already mentioned, may place a marker by announcing its unreserved willingness to cooperate with the FCO. Placing the marker does not require the undertaking to submit a complete application; it only has to contain a summary of the most important identifying features of the cartel, including details on the type and duration of the infringement, the product and geographic market affected, the identity of those involved and the other competition authorities to which applications have been, or are intended to be, filed. If the marker is intended to be placed for more than one legal entity belonging to the same group, the respective affiliated companies must be included in the marker. The marker may be placed verbally or in writing, and may be in English or in German.
The FCO will then confirm that a marker has been placed and will set a time limit of not more than eight weeks for filing the complete application for leniency containing all the necessary information. The application may be filed in written or verbal form and either in German or in English. In the latter case, a written German translation must also be provided. An application submitted by an undertaking will also be treated by the FCO as an application for its current and former employees, unless otherwise indicated. The FCO may exempt the applicant from filing a complete application if the European Commission is the best-placed authority to decide on the case and if the applicant intends to file, or has already filed, an application to the European Commission.
Generally speaking, the FCO is an authority with a pragmatic and not very formalistic approach. This is also true when it comes to cooperation under the Leniency Notice.
A violation of ARC provisions is not in itself a criminal offence, but if the antitrust behaviour includes criminal offences such as bid rigging, the FCO must refer proceedings against any natural person to the public prosecutor under Section 41 Administrative Offences Act. As mentioned in Section IV, supra, cooperation with the FCO may be relevant as a mitigating factor in any criminal proceedings, but generally does not prevent them.
If the FCO establishes an infringement of Section 1 ARC (or Article 101 TFEU), it might impose administrative fines both against the acting employees and against the undertaking. The fine might amount to as much as €1 million or up to 10 per cent of the total turnover generated by the undertaking and its affiliates on a worldwide basis in the preceding business year. As mentioned in Section I, supra, the FCO calculates the fines to be imposed on the basis of guidelines that were initially adopted in 2006 and amended as a consequence of the Federal Supreme Court’s Grauzement decision. The FCO’s method for calculating a fine is somewhat different from the approach taken by the European Commission. First, it is important to note that the FCO, pursuant to the Federal Supreme Court’s Grauzement decision, does not treat the 10 per cent threshold regarding the cartelist’s worldwide group turnover as a cap, but rather as the maximum of a framework within which the fine must be calculated on an individual basis. Generally, the FCO takes account of 10 per cent of the turnover achieved from sales of the cartelised products or services during the existence of the cartel. The established amount will be multiplied by a factor that is dependent on the total turnover of the undertaking belonging to the investigated cartel. The factor ranges between two (for undertakings with an annual aggregate worldwide turnover of up to €100 million) and six (for undertakings with an annual aggregate worldwide turnover of more than €100 billion). This amount will be adjusted by specific circumstances relating either to the undertaking (level of activity in the cartel infringement, market position in the affected market, etc.) or to the specific character of the cartel infringement (effects on the market, significance of the market, organisation of the cartel, etc.). Thus, the FCO must take into account both aggravating as well as mitigating factors.
In the case of a leniency application, the exact amount of the reduction will ultimately be decided in the FCO’s final decision. Generally, after receiving a leniency application, the FCO will only confirm receipt of the complete application; it will not decide whether and to what extent immunity or a reduction will be granted. The FCO will only state how the applicant is ranked and whether it fulfils its cooperation duties. Only if the undertaking fulfils the conditions for automatic full immunity (i.e., it applies for leniency before the FCO has sufficient information to obtain a search warrant), will the FCO ‘assure the applicant in writing that it will be granted immunity from the fine subject to the condition that it was neither the only ringleader of the cartel nor coerced others into participating in the cartel and fulfils its obligations to cooperate’.
As to the sanctioning of individuals, it is important to distinguish between employees entitled to represent the undertaking or to exercise managerial functions on the one hand, and those who are not entitled to do so on the other. If the latter engage in antitrust behaviour, they do not violate ARC provisions as their actions cannot be attributed directly to their employer. If, however, their behaviour is facilitated by lack of internal supervision, the people entitled to represent the undertaking or to exercise managerial functions will have violated their duty to supervise the undertaking within the meaning of Section 130 Administrative Offences Act, and can therefore be fined. The violation of this duty is an administrative offence that is imputed to the relevant undertaking under Section 30 Administrative Offences Act, which may then also lead to fines.
The Leniency Notice explicitly states that a leniency application filed on behalf of an undertaking will also be rated by the FCO as made on behalf of the natural persons participating in the cartel as former or current employees of the undertaking in question. The undertakings may, however, declare that the application shall not be treated as representing the employees. The FCO leaves the question open of whether an application by a natural person on his or her own behalf will also be treated as representing the undertaking in question. It is generally assumed that this is not the case.
If the undertakings that are the subject of a fine have agreed to settle with the FCO, the FCO generally grants an extra bonus of 10 per cent of the initially established fine.
VI ‘DAY ONE’ RESPONSE
The FCO, comparable to the European Commission, is entitled to conduct inspections (dawn raids) not only on the premises of an undertaking, but also with regard to private homes, automobiles, etc. In the case of a dawn raid, immediate action is required. It is advisable for an undertaking to have dawn raid guidelines in place and properly implemented. It is of utmost importance that an undertaking’s personnel are well aware of the steps that must be taken immediately after the FCO requests access to the premises.
First, it is crucial that the legal department and the responsible board members are informed immediately. Second, the legal representative should carefully review the search warrant that must be disclosed by the FCO’s acting officials. Third, the undertaking’s employees must not interfere with any investigative activities; otherwise the undertaking runs the risk that obstruction might be taken into account as an aggravating factor for the purposes of calculating the fine. Fourth, it is important to obtain copies of the documents seized by the FCO officials. While the European Commission usually obtains copies of the original documents, the FCO usually insists on seizing the originals. It is therefore essential that the undertaking is in possession of copies of such documents to prepare a meaningful defence. The FCO is also authorised to seize electronic data, etc.; it is, however, obliged to review the seized data within a reasonable period of two to three weeks to determine whether such data might be used as evidence for the purposes of the investigation. If such data is not to be used for that purpose, it must be returned to the undertaking without delay. Finally, it is important to have a debriefing meeting with FCO officials and advisable to have minutes taken directly at this meeting. Usually the FCO officials have a template available that can be used for this purpose.
If the FCO does not conduct a dawn raid but instead sends out a request for information, it is important to answer such request within the set time frame (subject to a potential extension of the deadline) and to respond correctly and comprehensively; otherwise the undertaking runs the risk of being fined for non-compliance with the FCO’s investigation.
VII PRIVATE ENFORCEMENT
Germany is one of the jurisdictions within Europe where many follow-on damage actions are filed. Many legal issues relating to damage claims have already been clarified by the German courts (such as the standing of indirect customers, the possibility of the pass-on defence, etc.). In addition, many topics of the EU Directive on actions for damages for competition law infringements (the Directive) have already been part of German law since the sixth amendment to the Act against Restraints on Competition in 2005. The implementation of the Directive will nevertheless lead to significant changes in German law. Its implementation has, however, been delayed. It is currently expected to come into force only in the first or second quarter of 2017. Owing to this delay, the wording of the new provisions in the Act against Restraints on Competition is not yet final. However, the government bill of 28 September 2016 (the ARC-Draft) already gives a good overview of the main changes to come, as outlined below.
i Standing of indirect purchasers and passing-on defence
Currently, customers of cartel members can claim damages pursuant to Section 33(3) ARC and Section 823 Civil Code. Pursuant to Section 33(3) ARC, both direct as well as indirect customers have standing and may claim damages. The German Federal Court of Justice in Civil Cases confirmed indirect purchasers’ right to claim damages because of anticompetitive conduct in the ORWI judgment of 2013.13 Likewise, it was confirmed in this judgment that the defendants may raise the passing-on defence.
Once the Directive is implemented, indirect purchasers (but not the cartel members) will benefit from the rebuttable presumption that cartel overcharges are at least partially passed on to indirect purchasers (Section 33c ARC-Draft).
ii Calculation of damages
The current Section 33 ARC is particularly plaintiff-friendly with respect to the calculation of damages. A judge might invoke Section 287 Code of Civil Procedure, thereby estimating the exact amount of the damage to be awarded. This provision is widely used by German courts and was also confirmed in the ORWI judgment. The German Federal Court of Justice in Civil Cases decided only recently in the Lottoblock II judgment that Section 287 Code of Civil Procedure may also help to establish whether damages exist at all.14
After the implementation of the Directive, the rebuttable presumption will be introduced, which states that a cartel causes harm (see Section 33a ARC-Draft). However, the presumption does not cover the amount of damages caused and whether the plaintiff was affected by the cartel.
iii Rules on access to file
The rules on access to file will also significantly change.
Currently, any undertaking (including damaged third parties) has the right of access to file, provided that it can show a legitimate interest (Section 406e Code of Criminal Procedure). These provisions give the FCO discretionary powers to decide on the extent of this right. In the Leniency Notice, the FCO states that it will use these discretionary powers to refuse applications by private third parties for file inspection or the supply of information ‘insofar as the leniency application and the evidence provided by the applicant are concerned’. The FCO takes a very restrictive approach to applications by plaintiffs requesting access to the FCO’s file, in particular to leniency documents. Generally, the FCO rejects such requests, as confirmed by the German courts on the basis of the Court of Justice of the European Union’s Pfleiderer judgment.15 However, plaintiffs may request a modestly redacted version of the FCO’s decision imposing a fine on the cartelists, as confirmed by the Court of Appeals in Düsseldorf in the Kaffeeröster judgment.16
A somewhat different approach was adopted by the Court of Appeals in Hamm17 with respect to the specific rules applicable to criminal proceedings, particularly to Sections 477 and 478 Code of Criminal Procedure – it balanced the interests involved in the matter differently from the other German courts to date and concluded that the plaintiffs’ interest should prevail. The Court therefore ordered that access to the file, including the leniency applications, should be granted.
After the implementation of the Directive, access to the file of the FCO will still be possible (if the requested information cannot be obtained from third parties), but leniency statements and settlement submissions will be fully protected from being disclosed or used in damage actions (see Section 33g(4) ARC-Draft). In this regard, the ninth amendment strictly implements the Directive.
iv Rules on disclosure
One of the most significant changes to German law because of the Directive results from the new rules on disclosure, which go beyond the requirements of the Directive.
German civil procedure law does not currently provide for rules comparable to those in the United States or the United Kingdom that enable a court to issue discovery or disclosure orders that oblige a party to disclose certain documents or a certain category of documents for use in civil proceedings. Although some commentators have claimed that Section 142 Code of Civil Procedure offers similar options, its scope is limited and this provision has not often been used.
Because of the Directive, the principles governing disclosure will change considerably. The current plan of the legislative is to include very detailed provisions on disclosure in the ARC, thereby introducing a completely new approach and going beyond the Directive.
For example, the ARC-Draft foresees a new substantive claim for disclosure. Such claim may be addressed to the defendants (i.e., the cartel members). However, it may also be addressed to third parties that were not involved in the cartel, but that may have substantial market knowledge. In addition, the new rules do not restrict this new claim to damages resulting from cartels, but they may also be used in other competition law cases, such as those relating to potential vertical restraints or abuse cases. In addition, disclosure can be requested in proceedings before damage claims were filed. The ARC-Draft even foresees the possibility to use preliminary injunctions to get access to the requested information (see Section 89b(5) ARC-Draft) – a plan that is especially criticised by the defendant side. Potential plaintiffs, however, mainly criticise the provision according to which the costs for such information gathering need to be borne by the plaintiffs’ side (see Section 33g(7) ARC-Draft). They argue that such provision violates the Directive since it may impose an enormous hurdle for plaintiffs especially where e-searching tools are used for the information gathering.
v Statute of limitations
Another topic that is currently being hotly debated is the statute of limitations owing to the lack of transitional provisions in the sixth amendment of 2005. The Federal Court of Justice still needs to decide whether the provisions on suspension that were included in the sixth amendment to the Act against Restraints on Competition also apply to ‘old’ damage cases (i.e., damage cases where the infringement had been terminated before the sixth amendment came into force).
The implementation of the Directive will mainly lead to an extension of the statute of limitations from three to five years (see Section 33h(1) ARC-Draft). The suspensive effect of an ongoing investigation by the European Commission, the FCO or another national authority will be reconfirmed (see Section 33h(6) ARC-Draft). In addition, the statute of limitations for contribution claims among cartel members will be changed: it shall only start to run when the plaintiff has been paid damages (see Section 33h(7) ARC-Draft). Currently, contribution claims may be time-barred even before damage proceedings have been started.
vi Other relevant topics
Another topic with particular importance for proceedings in Germany relates to statutory lawyers’ fees in case of interventions. Under current case law, the cost risk increases by every intervening party that decides to join the proceedings. As a result, a plaintiff needs to reimburse the costs not only of the defendant, but of all intervening parties if the plaintiff loses the proceedings. Under the new rules (Section 89a(3) ARC-Draft), this cost risk is being limited: regardless of the number of intervening parties, the legal fees to be reimbursed may not be higher than the legal fees that need to be reimbursed to the defendant.
The transitional provisions in the ARC-Draft still raise many questions. It is not yet fully clear which provisions apply to proceedings that are already ongoing and which will only apply to proceedings initiated after the ninth amendment of the Act against Restraints on Competition came into force.
Many of the new provisions will be tested and interpreted in the numerous damage claim proceedings that are ongoing or that have been announced to be started in Germany (such as the follow-on claims in the Sugar cartel or the Truck cartel). It is to be expected that Germany will remain one of the hot spots for damage claims.
VIII CURRENT DEVELOPMENTS
While the main purpose of the ninth amendment to the Act against Restraints on Competition is to implement the provisions of the Directive, the new Act will also change some other issues of German competition law. In particular, when it comes to fine proceedings, the amended Act will define ‘undertaking’ more or less in the same way as under EU competition law (i.e., the FCO will also be able to fine the controlling parent companies for violations committed by a subsidiary). Currently, imposing fines on the parent company is only possible where a representative of the parent company has committed a competition law violation or where the management of the parent company has been unable to supervise the actions of its subsidiaries sufficiently. However, the legislative refrained from including a provision according to which parent companies may be faced with damage claims because of competition law violation committed by their subsidiaries. It shall be up to the courts to decide upon this hotly debated question.
1 Petra Linsmeier and Matthias Karl are partners at Gleiss Lutz.
2 Section 81(4)1 ARC.
3 Section 81(4)2 ARC.
4 Sections 130 and 30 Administrative Offences Act.
5 Federal Court for Civil Cases, decision of 26 February 2013, KRB 20/12 – Grauzementkartell.
6 Notice 38/2006 and Notice on calculation of fines in cartel cases, as amended on 25 June 2013.
7 Notice 9/2006 on the immunity from and reduction of fines in cartel cases (the Leniency Notice).
9 Section 130(2) ARC.
10 There is no explicit definition of significant contribution in the Leniency Notice. The FCO has a very broad discretion as to whether it grants any reduction at all.
11 Section 298 of the Criminal Code.
12 The contact details are: Bundeskartellamt, Dr Katharina Krauß, Kaiser-Friedrich-Strasse 16, 53113 Bonn, Germany; Tel: +49 228 9499 386; Fax: +49 228 94 99 560.
13 German Federal Court of Justice in Civil Cases, decision of 28 June 2011, KZR 75/10 – ORWI.
14 German Federal Court of Justice in Civil Cases, decision of 12 July 2016, KZR 25/14 – Lottoblock II.
15 Case C-360/09, Judgment of the Court (Grand Chamber) of 14 June 2011, Pfleiderer AG v. Bundeskartellamt.
16 Court of Appeals Düsseldorf, decision of 22 August 2012, V-4 Kart 5 + 6/11 (OWI) – Kaffeeröster.
17 Court of Appeals Hamm, decision of 26 November 2013, 1 VAs 116/13 – Elevators.