I ENFORCEMENT POLICIES AND GUIDANCE

i Snapshot of competition enforcement policies

Germany continues to be a relevant competition jurisdiction. The Act against Restraints of Competition (ARC) is primarily enforced by the Federal Cartel Office (FCO),2 which is considered to be a vigorous authority relying on significant human and financial resources (approximately 360 staff members, approximately 150 legal or economic experts and a budget of €30.5 million in 2018)3 when exercising its competences.4

The FCO has been actively contributing to the fostering of competition law enforcement in Germany, at EU level and even beyond European borders, especially in matters relating to the internet and data economy. The relatively new transaction value-based merger control threshold to capture acquisitions of low-turnover, competition-relevant targets,5 and the pioneering enforcement activities in the areas of abuse of dominance and anticompetitive vertical agreements – including investigations against two of the largest global tech companies, Facebook6 and Amazon7 – are receiving close attention by competition authorities, undertakings and practitioners worldwide. Whereas Amazon settled with the FCO, Facebook challenged the FCO's decision and was granted interim relief in the first instance.8

Enforcement figures9 and public statements of key officials10 stress the FCO's high priority of cartel prosecution. Cartel enforcement is expected to maintain an important role in the FCO's agenda for the future. The internet and data economy are progressively revealing new forms of collusive behaviour,11 and legislative developments are being proposed to strengthen cartel prosecution. For instance, the draft of the Tenth Amendment to the ARC12 released by the Federal Ministry for Economic Affairs and Energy is willing to reinforce the relevant cooperation of competition authorities within the EU, to expand the FCO's investigative and intervention powers, to strengthen the FCO's support in planned cooperation arrangements, and to codify both the leniency programme and the criteria for the calculation of fines.

Additionally, private litigation has a long tradition in Germany and is intended to complement the administrative enforcement of the FCO. Damages claims in the form of follow-on actions have been increasing at unprecedented levels as a by-product of legislative changes evoked by the Ninth Amendment to the ARC in June 2017. Selective legislative adjustments proposed in the draft of the Tenth Amendment to the ARC are also intended to further strengthen Germany's position as a relevant cartel damages jurisdiction in the EU.

ii Statutory framework for cartel enforcement by the FCO

Substantive basis

The primary basis for cartel enforcement is Section 1 of the ARC (ban on cartels). It establishes a general prohibition of all vertical and horizontal agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings having as their object or effect the prevention, restriction or distortion of competition. Since at least July 2005, Section 1 of the ARC largely corresponds to Article 101(1) of the Treaty on the Functioning of the European Union (TFEU).13 The German legislator has stressed that the application of Section 1 of the ARC shall closely follow EU precedents, practice, regulations14 and guidelines15 to build a coherent enforcement of EU and German competition law. Due to the system of parallel and decentralised enforcement introduced by Regulation (EC) No. 1/2003, the FCO may also apply Article 101(1) TFEU directly.

Intervention powers and enforcement proceedings

The ARC grants the FCO far-reaching powers of intervention to be exercised by means of two different proceedings against undertakings and associations of undertakings on the one hand, and, to a certain extent, against selective individuals on the other hand. In administrative proceedings (Sections 54 to 62, ARC), the FCO can issue prohibition and commitment decisions, impose structural and behavioural remedies, issue reimbursement orders, and determine the withdrawal from block exemptions and the withdrawal of benefits against undertakings and associations of undertakings. In administrative offence proceedings (Sections 81 to 86, ARC), the FCO imposes fines for administrative offences against undertakings, associations of undertakings and certain individuals.16 The FCO takes the Guidelines for the setting of fines in cartel administrative offence proceedings into account to calculate fines.17 Furthermore, there is an informal settlement procedure for extra fine reductions.

Tools to detect cartels

In 2000, the FCO introduced a leniency programme (FCO Leniency Programme), which was revised in 2006 to largely reflect the leniency programme of the European Commission (Commission).18 The principles and procedure of the FCO Leniency Programme are specified in Notice No. 9/2006 on the immunity from and reductions of fines in cartel cases of 7 March 2006 (FCO Leniency Notice).

Since 2002, there has also been a whistle-blowing hotline to receive insider information on potential violations of the ban on cartels, in writing or by phone, from whistle-blowers who reveal their identity and relationship (business or personal) to potential violations of the ARC. Furthermore, the FCO implemented an electronic whistle-blowing system to enable anonymous tip-offs in 2012. The system is accessible from the FCO website19 and guarantees the anonymity of whistle-blowers.

Investigative powers

The ARC provides the FCO with several investigative powers to enforce the ban on cartels (Section 57 et seq., ARC). These include, in particular, testimony of witnesses and experts; requests for the disclosure of market data and documents or information on the economic situation of undertakings, their affiliated undertakings and associations of undertakings; unannounced inspections at corporate and residential premises; examination of business documents; seizure of original documents; and copies and seizure of hard drives and data stored in electronic devices.

Further guidance

The FCO often releases further guidance and information materials on cartel prosecution. These include guidelines and notices (e.g., the de minimis notice of March 2007), guidance documents (e.g., 'Guidance note on the prohibition of vertical price fixing in the brick-and-mortar food retail sector' of July 2017), and information leaflets and documents (e.g., leaflet on the cooperation of small and medium-sized enterprises (SMEs) of March 2007, brochure on effective cartel prosecution of December 2016, annual reports and biannual activity reports), which are all available on the FCO website.20

iii Cartel enforcement in practice and figures

The FCO enforcement powers capture:

  1. classical price-fixing, output, territory or customer allocation, and bid rigging (hardcore cartels), including when facilitated by third parties;21
  2. exchanges of competitively sensitive information between competitors (e.g., current or future prices, volumes, business strategies, market behaviour),22 including when facilitated by third parties;23
  3. certain competitors' cooperation arrangements (e.g., joint purchase agreements,24 licensing agreements,25 supplier consortia);26 and
  4. vertical price-fixing (i.e., fixed and minimum resale price maintenance (RPM)).27

In November 2019, the FCO stressed that the ban on cartels may also cover market behaviour influenced by collusive algorithms.28 However, there are no FCO precedents in this area yet.

Enforcement figures29 show that the FCO actively pursues violations of the ban on cartels. The leniency programme and tip-offs via whistle-blowing tools continue to play an important role in the uncovering of violations of the ban on cartels. Nonetheless, there is a perceived decline in the number of leniency applications due to the increased risk of follow-on private litigation. In 2018, the FCO received 25 leniency applications in 20 proceedings, and approximately 550 anonymous tip-offs and 180 concrete tip-offs were registered in between 2017 and 2018. Additionally, the FCO is continuing to make wide use of the investigation tools provided by the ARC. For instance, in 2018 the FCO carried out unannounced inspections at 51 corporate premises and five residential premises in relation to seven cartel investigations. In the same year, the FCO imposed fines of approximately €376 million (approximately €374 million on undertakings or associations of undertakings) for violations of the ban on cartels. Fines were generally calculated based on 10 per cent of the turnover achieved from sales of the cartelised products or services in Germany during the existence of the cartel. In the vast majority of cases, the FCO also reduced initial fines due to both the active cooperation of the parties concerned and settlement agreements.30 Fines challenged in the Higher Regional Court of Düsseldorf are often increased as the appeals court bases fines on 10 per cent of the group's worldwide turnover.31

On the spectrum of private litigation, in Germany the number of follow-on damages claims arising from decisions issued either by the FCO or the Commission are continuing to increase. Although there are no official statistics on follow-on damages claims, it is estimated that 'over the last two years there were 640 new private litigation claims in Germany and most of the them – around 300 – were related to the Trucks cartel'.32

II COOPERATION WITH OTHER JURISDICTIONS

Section 50(b) of the ARC authorises the FCO to cooperate with the Commission, the national competition authorities (NCAs) of EU Member States, and competition authorities outside the EU. While cooperating with other authorities, the FCO shall, nevertheless, observe limitations on the exchange of confidential data, business secrets, and the like.

i Cooperation within the European Competition Network

The FCO, the Commission and NCAs form a network known as the European Competition Network (ECN), which broadly cooperates in the area of competition law and policy. In 2004, the FCO signed the statement regarding the Commission Notice on cooperation within the Network of Competition Authorities, and thereby agreed to collaborate within the ECN. The FCO's cooperation covers three main forms:

  1. joint works of a more general nature, such as the preparation of draft texts, comparison of national decision practices and discussions on best practices;
  2. mutual communication of new investigations and envisaged decisions; and
  3. mutual assistance in specific investigations, including the coordination of investigations, assistance in unannounced inspections carried out by the Commission, execution of unannounced inspections on behalf of NCAs, exchange of evidence and information, and discussions on proposed courses of action.

As there is no 'one-stop shop' leniency system in the EU, the ECN also provides for cooperation on this matter, which may include the sharing of information on leniency applications and related documents. However, there are limitations, including the requirement of obtaining the consent of leniency applicants to have information and documents transmitted to the Commission or to NCAs.

Directive (EU) 2019/1 (ECN+ Directive) empowers the competition authorities of the Member States to be more effective enforcers. It must be transposed into national law by all EU Member States by February 2021 and is expected to strengthen cooperation within the ECN. The German competition framework already contemplates most of the principles provided in the ECN+ Directive.

ii Cooperation outside the ECN

On a global level, the FCO actively participates in a number of multilateral competition-related organisations, such as the International Competition Network and the Organisation for Economic Cooperation and Development, to exchange views on broader policy and enforcement issues, and establish recommended practices.

Furthermore, the FCO also cooperates with competition authorities around the world on the basis of bilateral agreements. The cooperation varies between countries and may cover coordination of enforcement actions, sharing of information on investigations of mutual interest, discussions on competition policy issues and capacity building support. A relevant example is the cooperation with the US Department of Justice and Federal Trade Commission. On 23 June 1976, the US and German governments concluded an agreement on the mutual cooperation in the area of restrictive business practices. Based on this agreement, the FCO and the US agencies may exchange information and documents on anticompetitive practices that have an impact on trade in their jurisdictions, send information requests to undertakings based on the other authority's jurisdiction, and consultat on investigations relating to the same cartel activity having impact on both jurisdictions.

III JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS

i Jurisdictional limitations

The jurisdiction of the FCO is restricted to violations of the ban on cartels that have effects on the German territory. However, the FCO tends to interpret this rule broadly and hence asserts jurisdiction even in the case of indirect effects in Germany. Consequently, the FCO can – and often does – assert jurisdiction over violations of the ban on cartels taking place abroad and by undertakings, associations of undertakings and individuals domiciled outside Germany. On the other hand, the FCO may not assert jurisdiction over violations of the ban on cartels that take place in Germany but only have effects outside the German territory. Depending on the individual facts, however, export cartels can have potential effects in Germany and can, therefore, be subject to the FCO's scrutiny.

Despite its far-reaching investigation powers, today the FCO is not authorised to execute investigative measures outside of Germany. Rather, the FCO has to rely upon assistance from other competition authorities, especially within the ECN framework. In addition, the FCO is not entitled to enforce its fine decisions abroad. This will be resolved upon the EU-wide implementation of the ECN+ Directive (by February 2021). Thereafter, the FCO will be able to enforce payments of fines against infringing undertakings, associations of undertakings and certain individuals without presence in Germany by means of cooperation with other NCAs under the ECN framework.

ii Exemptions

Restrictions of competition can be exempted from the ban on cartels by:

  1. de minimis exemptions (i.e., limited effects on the market);33
  2. general exemptions under any of the EU block exemption regulations;34
  3. individual exemptions under Section 2 of the ARC (Article 101(3) TFEU);35
  4. SME exemption (i.e., agreements that foster the competitiveness of SMEs);36 and
  5. sector-specific exemptions (e.g., certain agreements in the agricultural37 and water supply sectors,38 RPM policies for books and printed media,39 publishing cooperation).40

Exemptions will often not apply to classical cartel practices (hardcore cartels). Moreover, the de minimis exemption, the SME exemption and the sector-specific exemptions are only applicable under German law, but not to violations of the ban on cartels with effects beyond the German territory.

IV LENIENCY PROGRAMMES

i Scope

The FCO Leniency Notice sets a narrow scope for the FCO Leniency Programme.

With regard to the conduct covered, the FCO Leniency Notice expressly refers to administrative fines linked to findings of illegal horizontal agreements or concerted practices among competitors. In practice, however, the FCO has accepted cooperation concerning anticompetitive vertical behaviour and granted significant fine reductions comparable to those under the FCO Leniency Notice.41 The Tenth Amendment to the ARC will formalise this current practice. This does not apply to potential criminal findings arising from the same conduct (bid rigging is considered both an administrative and a criminal offence in Germany). The FCO Leniency Notice stays silent on the cooperation between the FCO and criminal prosecutors, and the practice does not show a different approach. This often creates major issues for individuals in bid-rigging cases, as they may be criminally prosecuted even if they are granted full immunity by the FCO. The approach of criminal prosecutors is hard to anticipate and coordinate. Since jurisdiction does not lie with a single criminal prosecutor office in Germany, different local criminal prosecutors may decide to take up such cases.

With regard to the beneficiaries, the FCO Leniency Programme is available to undertakings, associations of undertakings and certain individuals.42 Leniency applications can cover more than one legal entity belonging to the same group insofar as all legal entities are duly named in the leniency application. Leniency applications by undertakings or associations of undertakings automatically cover current and former directors, officers and employees involved in the infringements, unless otherwise indicated. In contrast, the FCO leaves open the question of whether leniency applications by individuals also cover the undertakings or associations of undertakings to which they are related; it is generally assumed that this is not the case.

In contrast to other jurisdictions, the FCO Leniency Programme does not provide for the possibility of immunity plus, and the practice does not reveal a different approach.

ii Conditions and benefits

Full immunity will be granted to the first-in applicant if:

  1. the application enables the FCO to obtain a search warrant (even if the FCO was already aware of the infringements). If the FCO was already in a position to obtain a search warrant, the application must enable the FCO to prove the offence;
  2. the applicant ends involvement in the cartel immediately on request by the FCO;
  3. the applicant was not the only ringleader of the cartel;
  4. the applicant did not coerce other undertakings, associations of undertakings or individuals into participating in the cartel;
  5. the applicant agrees to cooperate fully and continuously with the FCO;
  6. the applicant maintains confidentiality over its cooperation with the FCO until explicitly relieved thereof; and
  7. the applicant names all directors, officers and employees involved in the cartel and ensures that they all adhere to the cooperation obligation.

The FCO Leniency Notice does not exclude the possibility of subsequent applicants moving into the position of the first-in applicant, if the latter is not eligible for full immunity. The idea of overtaking the position of the first-in applicant strengthens competition between leniency applicants to offer the most valuable contribution.

First-in applicants that are not eligible for full immunity and subsequent applicants that do not overtake the position of the first-in applicant may still receive a fine reduction of up to 50 per cent if:

  1. the application makes a significant contribution to proving the offence;
  2. the applicant ends involvement in the cartel immediately on request by the FCO;
  3. the applicant was not the only ringleader of the cartel;
  4. the applicant did not coerce other undertakings, associations of undertakings or individuals into participating in the cartel;
  5. the applicant agrees to cooperate fully and continuously with the FCO;
  6. the applicant maintains confidentiality over its cooperation with the FCO until explicitly relieved thereof; and
  7. the applicant names all directors, officers and employees involved in the cartel and ensures that they all adhere to the cooperation obligation.

The value of contributions is a key aspect in the final amount of fine reductions granted by the FCO.

iii Cooperation

The notion of cooperation is to be taken broadly. First-in applicants and subsequent applicants are expected to provide the FCO with all verbal and written information available to them for the entire duration of the FCO's proceedings (not only upon the filing of leniency applications), which means:

  1. the handover of documents and evidence relating to the cartel, along with relevant explanations and contextualisation;
  2. oral and written factual background of the cartel, including details of the illegal behaviour, time and venue of interactions (e.g., meetings, phone calls, emails) and the identity of other undertakings, associations of undertakings or individuals involved;
  3. the identity of all directors, officers and employees involved;
  4. the identity of all legal entities belonging to the same group that are expected to be covered by leniency applications; and
  5. information necessary for calculating fines.

iv Marker system and leniency proceedings

Leniency proceedings can be initiated until the FCO reaches final decisions on proceedings. In general, the later the applicants initiate leniency proceedings, the more information the FCO will have collected, the less significant their contribution will be considered, and the lower the fine reductions will be. However, the temporal order of leniency applications is not necessarily the main consideration determining the amount of fine reductions. Possibly, a later applicant is able to present a more valuable contribution than earlier applicants and thereby secure a more significant fine reduction.

Applicants initiate leniency proceedings by contacting the FCO: either the Special Unit for Combating Cartels or the chairperson of the competent decision division.

The FCO Leniency Notice allows the placing of markers (i.e., declarations of unreserved willingness to cooperate) prior to the filing of complete leniency applications. Markers are only required to contain a summary of the most important identifying features of the cartel, such as the identification of all legal entities of the group that will be covered by applications, the type and duration of cartels, the product and geographic market or markets affected, the identity of those involved in cartels, and the list of competition authorities to which leniency applications have been or are intended to be filed.

The FCO will confirm the placing of the marker and will set a time limit of not more than eight weeks for the filing of complete leniency applications containing all the necessary information and documents. In the case of first-in applicants (or subsequent applications that manage to overtake first-in applicants) that fulfil the criteria for full immunity, the FCO will issue an assurance during the course of the proceedings that the applicant will be granted full immunity. In the case of first-in applicants not eligible for full immunity and subsequent applicants, the FCO will only decide on the extent of the fine reduction when a final decision is adopted.

v Parallel leniency application to the Commission and simplified leniency application

There is no one-stop shop leniency system in the EU so that leniency applications filed in one EU jurisdiction would be valid in all other EU jurisdictions. However, if applicants have also applied or intend to apply for leniency to the Commission, and the latter is the best-placed authority to pick up the case pursuant to the criteria of the Commission Notice on cooperation within the Network of Competition Authorities, the FCO may exempt applicants that have placed markers from submitting a complete leniency application. This is conditional upon the Commission actually picking up the case. There is no similar provision for applications filed to other NCAs, and this will not change upon transposition of the ECN+ Directive into national laws.

vi Formalities of the leniency application

Leniency applications can be filed in written or verbal form, either in German or in English. Applications in English shall be accompanied by a German translation.

vii Development of leniency applications

The number of leniency applications has been constantly decreasing in recent years, from an all-time high of 76 applications in 201543 to 59 in 2016, 37 in 2017 and 25 in 2018.44 The reason for this development is not clear. A plausible explanation, among others, might be that undertakings are willing to invest more in the implementation of compliance systems in particular to avoid fines (see Section V) and follow-on damages claims (see Section VII).

V PENALTIES

i Administrative fines

Violations of the ARC may be subject to fines, both for undertakings and associations of undertakings, as well as for certain individuals.

For undertakings and associations of undertakings, fines range from €1 million to 10 per cent of the worldwide group turnover generated in the preceding business year.45 The FCO adopted formal guidelines on the calculation of fines in September 2006, which largely followed the Commission's methodology of setting fines. Specifically, the provision in Section 81(4) of the ARC (10 per cent of the worldwide group turnover) was interpreted as a cap for fines. However, as a consequence of the Grey Cement judgment of the Federal Court of Justice,46 the FCO's guidelines on the calculation of fines were amended in June 2013,47 and currently deviate from the Commission's approach. The 10 per cent worldwide group turnover is no longer considered as a cap, but rather as a maximum for a framework within which each fine must be calculated.

In cartel cases, the FCO usually adopts a three-prong methodology in calculating the fines for undertakings on the basis of the Guidelines for the setting of fines in cartel administrative offence proceedings:

  1. calculation of 10 per cent of the group turnover achieved from sales of the cartelised products or services in Germany during the existence of the cartel;48
  2. the established amount is multiplied by a factor dependent on the annual aggregate worldwide turnover of the undertaking concerned, ranging from two (annual aggregate worldwide turnover of up to €100 million) to six (annual aggregate worldwide turnover of more than €100 billion); and
  3. the amount is adjusted by aggravating and mitigating circumstances relating to the undertaking (e.g., level of involvement in the violations of the ban on cartels, market position in affected markets) and the infringements (e.g., effects on the affected markets, significance of the affected markets).

The Higher Regional Court of Düsseldorf does not apply the Guidelines for the setting of fines in cartel administrative offence proceedings. Instead, it applies the 10 per cent worldwide group turnover limit when calculating a fine. This often results in significant increases of the fines imposed by the FCO,49 leaving undertakings in the uncomfortable position of only challenging fines imposed by the FCO if they are willing to take the risk that the appeals court may increase the fines significantly. Concerning this matter, the draft of the Tenth Amendment to the ARC will create greater legal certainty by harmonising the criteria for calculating fines for anticompetitive infringements.

Although the Ninth Amendment to the ARC was not intended to affect the calculation of administrative fines for undertakings, it established the joint liability of parent companies for their subsidiaries. Therefore, the FCO is also able to collect the fines imposed from undertakings that have exercised, during the time of the infringement, a 'decisive influence' over the undertakings, associations of undertakings and individuals concerned in the investigation.50 Moreover, the FCO can collect the fines imposed from legal or economic successors.51

In the case of associations of undertakings, fines are calculated mostly based on the methodology used for undertakings. However, the fine calculation base is limited to the turnover recorded by associations of undertakings rather than the turnover of their members. Furthermore, there is no statutory obligation for members of associations of undertakings to contribute to the payment of fines imposed on the latter, and the FCO is not entitled to impose any form of secondary liability. If the FCO is willing to impose liability on members of associations of undertakings, it must prove their involvement in the offence.

Regarding individuals, administrative fines can only be imposed on legal representatives or individuals who are entitled to exercise managerial functions (i.e., directors, officers and certain senior employees), either for their active involvement in anticompetitive infringements or for failures of the duty to supervise low-ranking employees.52 Fines for individuals are capped at €1 million,53 while the exact amount will depend on their own misconduct. This is reflected by the significance of the offence, as well as the extent of their participation (active or failure to supervise) in the anticompetitive infringements and financial circumstances.54

Notwithstanding the above and in addition to fine reductions of up to 50 per cent from leniency applications, the FCO has adopted an informal settlement procedure to grant an extra reduction of up to 10 per cent on the fines imposed on undertakings, associations of undertakings and individuals for those who accept to confess their infringements and enter settlement agreements.55

Corporate compliance programmes are encouraged to prevent competition law offences or help to uncover them as early as possible, and applying for leniency is also encouraged. However, the FCO does not grant fine reductions for the mere existence of corporate compliance programmes, even if they are genuine and generally successful (this might change due to the Tenth Amendment to the ARC because, at the very least, the implementation of compliance programmes after the ban on cartels was violated has to be considered by the FCO when calculating the fine). Such programmes may exempt undertakings and associations of undertakings from supervisory liability for acts by ordinary employees, but they will not be useful once legal representatives or individuals who are entitled to exercise managerial functions (i.e., directors, officers and certain senior employees) commit a competition law offence. Regarding the calculation of fines, the German Federal Court of Justice has recently stated in a criminal case concerning tax evasion, the relevance of whether the undertaking in question has installed an effective compliance programme,56 and even instructed the trial court to take into account compliance efforts that were taken after the infringement occurred. It is currently much debated whether the ruling has any relevance for future competition law cases.

ii Exclusion from public tenders

Final decisions for anticompetitive infringements are facultative causes for the exclusion of undertakings and associations of undertakings from public award procedures for a period of three years following the relevant event.57 The Competition Register Act58 will lead the FCO to operate the Competition Register in 2020. The register will enable contracting authorities to consult bidders' past behaviour in a unified nationwide electronic system and to refrain from awarding contracts to firms previously engaged in cartel practices.

iii Criminal sanctions

Bid rigging is the only anticompetitive conduct that may also constitute a crime under the German Criminal Code (Sections 263 and 298). However, since corporate criminal liability does not exist in Germany, only individuals can commit these crimes (both representatives and employees). The FCO must refer proceedings against individuals to the public prosecutor office under Section 41 of the Administrative Offences Act. Although cooperation with the FCO may be relevant as a mitigating factor in criminal proceedings, cooperation generally does not preclude criminal proceedings or sanctions.

VI 'DAY ONE' RESPONSE

The ARC grants the FCO the power to carry out unannounced inspections (dawn raids), insofar as authorised by the competent judicial authorities. In the event of imminent danger, the FCO can conduct unannounced inspections without previous judicial authorisation.

Targets of unannounced inspections are either corporate premises or private premises and objects (e.g., private homes, cars, briefcases), and the FCO will be entitled to examine business documents, seize original documents, and make copies of entire hard drives and data stored in electronic devices (e.g., computers, laptops, tablets, smartphones).

In the event of an unannounced inspection, immediate action is required not only from external advisers, but mainly from undertakings or associations of undertakings and their employees. It is advisable for undertakings or associations of undertakings to have dawn raid guidelines in place and to train their personnel accordingly, so that employees are well aware of the steps that must be taken in the context of unannounced inspections. Some practical recommendations are:

  1. the legal department or legal representatives must be immediately informed;
  2. the legal department or legal representative shall review search warrants. Generic and broad search warrants shall not be authorised;
  3. employees must not interfere with any investigative activities. Although there are currently no fines for obstructing unannounced inspections, the FCO can take obstruction events into account as an aggravating factor when calculating fines;59
  4. retain copies of all documents seized. FCO officials often insist on seizing the originals, rather than copies;
  5. retain copies of electronic data seized and monitor the time spent by the FCO for reviewing such data. FCO officials often copy and seize electronic data for further review at the FCO's premises in Bonn. The FCO is, however, obliged to review the seized data within a reasonable period of two to three weeks to determine whether it might be useful for the respective investigations, as well as to return useless data to undertakings or associations of undertakings without delay; and
  6. the legal department or legal representatives shall have a debriefing meeting with FCO officials at the end of unannounced inspections and shall prepare the respective minutes of the meeting. FCO officials usually have a template available that can be used for this purpose.

Undertakings, associations of undertakings and individuals concerned in FCO investigations currently enjoy a high level of protection of their rights of defence in comparison to the EU legal framework. They shall not be compelled to confess to infringements of the ARC – although general questions on the circumstances of infringements from which it can be concluded by means of circumstantial evidence that infringements were committed are admissible. The Tenth Amendment to the ARC will reduce this higher level of protection and will considerably restrict the rights of defence in Germany. Parties involved in cartel investigations will have limited rights to remain silent, and will have no right to refuse the provision of information. In certain cases, individuals have to make self-incriminatory statements. Although such statements cannot be used against them in criminal or administrative offence proceedings, nevertheless they may be used against the undertakings or associations of undertakings to which they are related.

VII PRIVATE ENFORCEMENT

Germany is a relevant jurisdiction within the EU in the area of follow-on damages claims resulting from violations of the ban on cartels. Follow-on damages claims are facilitated in Germany due to the extensive experience of German courts in this area, as well as the changes brought about by the Ninth Amendment to the ARC in June 2017, which transposed the Damages Directive into German law. Many of the new provisions are being tested and interpreted in several ongoing damages claim proceedings, especially in the follow-on claims regarding the Trucks case. The Tenth Amendment to the ARC will also introduce selective legislative novelties, such as further provisions on the access of investigation files and the implementation of a refutable presumption that transactions with cartel members are affected by the cartel in the context of follow-on damages claims. However, the full effect of these legal amendments will only be seen for recent cartel activity, as new material provisions are not applied retroactively.

i Standing of indirect purchasers and passing-on defence

Both direct and indirect customers have standing and may claim damages for violations of the ban on cartels on the one hand. Defendants may benefit by raising the passing-on defence on the other hand. This was confirmed in the ORWI judgment of the German Federal Court of Justice in 2013.60 The Ninth Amendment to the ARC facilitated the position of indirect customers even further by introducing the rebuttable presumption that cartel overcharges have been passed on to them.61

ii Calculation of damages

Germany is supposed to be a claimant-friendly jurisdiction with respect to the calculation of damages. The Ninth Amendment to the ARC introduced a simplified form of a rebuttable presumption stating that violations of the ban on cartels caused damage.62 However, the presumption does not cover the amount of damages caused and whether the claimant was indeed affected by the cartel (for the latter, a rebuttable presumption is likely to be introduced by the Tenth Amendment to the ARC; see Section VIII). The Federal Court of Justice rendered a landmark decision at the end of 2018, limiting the scope of the presumption introduced by the Ninth Amendment to the ARC.63

iii Rules on disclosure of evidence

The Ninth Amendment to the ARC introduced detailed provisions on disclosure, which go beyond the Damages Directive:

  1. substantive claim for disclosure may be addressed to defendants (i.e., cartel members) as well as to third parties not involved in the infringements but possibly having substantial market knowledge;
  2. disclosure can be requested in proceedings prior to the filing of damages claims, including by means of preliminary injunctions.64 In a first decision in 2018, this rule has been interpreted narrowly.65 Recent practice shows that defendants use disclosure requests against claimants to gain access to information to substantiate passing-on defences;66 and
  3. the costs for information gathering has to be borne by the claimants.67 Although the ARC is silent in this regard, it is expected that costs for information gathering to substantiate passing-on defences are to be borne by the defendants.

iv Statute of limitations

With respect to the statute of limitations for follow-on damages claims, the Ninth Amendment to the ARC extended the statute of limitations from three to five years,68 confirmed the suspensory effects of ongoing investigations by the FCO, the Commission or another NCA, and introduced the suspensory effects of actions against the infringer for the disclosure of information or surrender of evidence.69

With respect to the statute of limitations for contribution claims among cartel members, the Ninth Amendment to the ARC changed the starting date to the actual payment of the damages by the defendant.70

Much discussion remains with respect to the detailed transition provisions introduced by the Ninth Amendment to the ARC,71 and German courts will be requested to provide further clarity in this area.

v Full immunity

The Ninth Amendment to the ARC grants privileges to recipients of full immunity. Their liability is limited to the claims of their direct or indirect purchases or providers, unlike the general joint liability rule among all cartel members.72 Accordingly, immunity recipients are only liable for claims of other direct or indirect purchasers or providers if full compensation cannot be obtained from any of the other cartel members.

VIII CURRENT DEVELOPMENTS

The Federal Ministry for Economic Affairs and Energy released the draft of the Tenth Amendment to the ARC in October 2019, which is expected to pass the German Parliament by early 2020. Among other measures, the Tenth Amendment to the ARC transposes the ECN+ Directive into German law and generally strengthens the enforcement of the ban on cartels by the FCO. Key changes in the area of cartel enforcement and follow-on damages claims are:

  1. the revision of the rules for access to files in administrative proceedings;73
  2. the expansion of the FCO's support in planned horizontal cooperation arrangements;74
  3. the expansion of the FCO's investigative powers;75
  4. the codification of the FCO Leniency Programme;76
  5. the codification of the criteria for calculating fines;77
  6. the introduction of a refutable presumption that transactions with cartel members are affected by the cartel in the context of follow-on damages claims; and
  7. the expansion of the cooperation within the ECN to the enforcement by the FCO of fine decisions issued by other NCAs.

Some of the changes proposed by the draft of the Tenth Amendment to the ARC are welcomed but do not go as far as would be desirable. This holds true for both codifications of the FCO Leniency Programme and of the criteria for calculating administrative fines. Although unavoidable due to the ECN+ Directive, other proposed changes are questionable and shall be carefully applied by the FCO and the German courts. This is mainly the case for the reduction of the previously higher level of protection of the rights of defence with regard to undertakings, associations of undertakings and individuals in Germany.


Footnotes

1 Fabian Badtke, Alexander Birnstiel and Karsten Metzlaff are partners at Noerr LLP.

2 An independent authority assigned to the Federal Ministry of Economic Affairs and Energy. Each of the 16 federal states has its own competition authority, but jurisdiction is limited to the respective federal states.

3 Annual Report 2018 available on the FCO website, at https://www.bundeskartellamt.de.

4 In addition to 'traditional' competition law competences, the FCO is also responsible for the review of award proceedings of the Federation (1999) and to initiate purely consumer rights-oriented sector inquiries (2017).

5 Introduced by the Ninth Amendment to the ARC in June 2017.

6 Case No. B6-22/16. Prohibition decision of 6 February 2019.

7 Case No. B2-88/18. Decision to close proceedings (commitments by Amazon) of 17 July 2019.

8 Higher Regional Court of Düsseldorf decision of 26 August 2019, ECLI:DE:OLGD:2019:0826.KART1.19V.00, Kart 1/19 (V) – Facebook I.

9 Annual Report 2018 available on the FCO website, at https://www.bundeskartellamt.de.

10 In a press release dated 26 June 2019, Andreas Mundt (president of the FCO) confirmed that '[c]artel prosecution remains one of the Bundeskartellamt's key tasks'.

11 On 6 November 2019, the FCO and the French competition authority released the working paper 'Algorithms and Competition' with the outcomes of a joint analysis of the challenges posed by algorithms.

12 The Tenth Amendment to the ARC is expected to pass the German Parliament in the first half of 2020.

13 Entry into force of the Seventh Amendment to the ARC.

14 Regulation (EU) No. 330/2010 (Vertical Block Exemption Regulation), Regulation (EU) No. 461/2010 (Motor Vehicle Block Exemption), Regulation (EU) No. 1217/2010 (Research and Development Block Exemption Regulation) and Regulation (EU) No. 1218/2010 (Specialisation Agreements Block Exemption).

15 'Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements' and 'Guidelines on Vertical Restraints'.

16 See Section V.

17 Information leaflet: 'Settlement procedure used by the Bundeskartellamt in fine proceedings', February 2016, available at on the FCO website, at https://www.bundeskartellamt.de.

18 Notice on immunity from fines and reduction of fines in cartel cases of 19 February 2002.

21 In September 2018, the FCO imposed fines of approximately €16 million on DuMont Mediengruppe GmbH & Co KG, one representative and a lawyer. DuMont and the representative were found to have concluded an illegal territorial allocation agreement with Bonner General-Anzeiger media group on the distribution of newspapers in the Bonn area from 2000 to 2016. The lawyer was fined for having advised DuMont during the entire period and being actively involved in the arrangements to secure the illegal territorial allocation (Case No. B7-185/17).

22 In January 2017, the Higher Regional Court of Düsseldorf confirmed the FCO's decision to fine manufacturers of confectionery products and the Association of the German Confectionery Industry approximately €19.6 million for exchanging the state of negotiations with retailer and intended list price increases (Case No. B11-11/08). The FCO had issued similar decisions in several other cases, but there has not yet been a judicial review on these.

23 There are not yet any FCO precedents on a 'classical' hub-and-spoke scenario. There are precedents on information exchanges facilitated by third parties; for example, in Case No. B11-11/08, the Association of the German Confectionery Industry was fined because its representatives encouraged an illegal information exchange.

24 Usually if the cooperation parties' combined market shares exceed 15 per cent. See the information leaflet on the possibilities of cooperation for SMEs of March 2007, available at www.bundeskartellamt.de.

25 Since October 2018, the FCO has been investigating a cooperation between Sky and DAZN on the broadcasting of the Champions League in Germany. In 2017, Sky acquired broadcasting rights for all matches between 2018 and 2021 in a tender conducted by UEFA. Sky subsequently licensed certain broadcasting rights to DAZN.

26 In December 2018, the FCO fined Gaul GmbH approximately €1.43 million for participating with competitors in supplier consortia for larger orders of rolled asphalt mixes, which resulted in price-fixing, and output, customer and territorial allocation (Cases Nos. B1-189/13 and B1-11/15).

27 In December 2018, the FCO fined ZEG Zweirad-Einkaufs-Genossenschaft eG and its representatives approximately €13.4 million for fixing retail prices with 47 retailers (Case No. B11-28/16). The FCO also conducted other proceedings and fined approximately €260.5 million to 27 food manufacturers and retailers with respect to RPM policies. The findings of these proceedings were included in the 'Guidance note on the prohibition of vertical price fixing in the brick-and-mortar food retail sector' of July 2017.

28 Working paper 'Algorithms and Competition' released by the FCO and the French Competition Authority on 6 November 2019.

29 2017/2018 Activity Report available on the FCO website, at www.bundeskartellamt.de.

30 For example, Case No. B9-44/14 (decision of June 2018; fines on three manufacturers of heat shields for price-fixing), Case No. B7-185/17 (decision of September 2018; fines on newspaper publisher for territorial allocation), Cases Nos. B1-189/13 and B1-11/15 (decision of December 2018; fines on bicycles wholesaler for vertical price-fixing) and Case No. B11-28/16 (decision of December 2018; fines on asphalt mixes producer for participating in supplier consortia).

31 Higher Regional Court of Düsseldorf decision of 12 October 2017, ECLI:DE:0LGD:2017:1012.2KART1.170WI.00 – Wallpaper cartel.

32 Konrad Ost (vice-president of the FCO), speech at Global Private Litigation, Berlin, June 2019.

33 The parties' combined market shares do not exceed 10 per cent in horizontal cases (i.e., between competitors) and 15 per cent in vertical cases (i.e., along the supply chain). See the de minimis notice of March 2007, available on the FCO website, at https://www.bundeskartellamt.de.

34 See footnote 14.

35 Conduct is exempted if it contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and that neither imposes on the undertakings concerned restrictions that are not indispensable to the attainment of these objectives, nor affords such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

36 Section 3, ARC.

37 Section 28(1) and (2), ARC.

38 Section 31(1), ARC.

39 Section 30(1), ARC.

40 Section 30(2b), ARC.

41 For example, in January 2016 the FCO fined LEGO only €130,000 for its RPM policies towards retailers with respect to 'highlight articles'. The FCO stressed that it considered LEGO's substantial cooperation and settlement agreement in imposing such a low fine.

42 See Section V.

43 FCO, Erfolgreiche Kartellverfolgung (2016), p. 20.

44 Andreas Mundt, 'Wir müssen an die Datenschätze heran', 16 September 2019, https://www.bundeskartellamt.de/SharedDocs/Interviews/DE/2019/190916_FAZ.html.

45 Section 81(4), ARC.

46 German Federal Court of Justice decision of 26 February 2013, KRB 20/12 – Grey Cement cartel.

47 Available on the FCO website, at https://www.bundeskartellamt.de.

48 The duration is set at a minimum of 12 months, even if it was, in fact, shorter.

49 Higher Regional Court of Düsseldorf decision of 12 October 2017, ECLI:DE:0LGD:2017:1012.2KART1.170WI.00 – Wallpaper cartel.

50 Section 81(3a), ARC.

51 Section 81(3b) and (3c), ARC. See ECJ decision of 14 March 2019, ECLI:EU:C:2019:204 – Skanska.

52 Section 130, Administrative Offences Act.

53 Section 81(4), No. 1, ARC.

54 Section 17(3), Administrative Offences Act.

55 See footnote ۱۷.

56 Federal Court of Justice decision of 9 May 2017, ECLI:DE:BGH:2017:090517U1STR265.16.0, WuW 2017, 456, 457 (DE).

57 Section 124, ARC.

58 Entered into force on 29 July 2017. The Act provides for the creation of a 'blacklist' of companies subject to compulsory facultative exclusion from public procurement proceedings due to past involvement in, among others, cartel practices (Competition Register) and obligates contracting authorities to retrieve information on bidders from the Competition Register before awarding contracts.

59 The Tenth Amendment to the ARC will introduce the duty to cooperate with unannounced inspections (as opposed to the current obligation to tolerate unannounced investigations), with fines being imposed in the case of non-compliance or obstruction.

60 German Federal Court of Justice decision of 28 June 2011, KZR 75/10 – ORWI.

61 Section 33c(2), ARC.

62 Section 33a(2), ARC.

63 German Federal Court of Justice decision of 11 December 2018, ECLI:DE:BGH:2018:111218UKZR26.17.0, KZR 26/17 – Rail cartel.

64 Section 89b(5), ARC.

65 Higher Regional Court of Düsseldorf decision of 3 April 2018, VI-W (Kart) 2/18, ECLI:DE:0LGD:2018:0403.VI.W.KART2.18.00 – Trucks cartel.

66 Hanover District Court decision of 18 December 2017, 18 0 8/17 – Trucks cartel.

67 Section 33g(7), ARC.

68 Section 33h(1), ARC.

69 Section 33h(6), ARC.

70 Section 33h(7), ARC.

71 Section 186(3), ARC.

72 Section 33e, ARC.

73 Third parties must show that they have a legitimate interest in the inspection, and access to substantiate damages claims shall be limited to the FCO's decisions.

74 Undertakings will be able to ask the FCO to assess and issue a formal decision that there are no grounds for actions against horizontal cooperation arrangements established between competitors.

75 See Section VI.

76 The FCO Leniency Programme will be binding and will include applications for vertical anticompetitive behaviour (e.g., RPM), which may be taken into account as a mitigating factor in the calculation of fines.

77 Codification of a non-exhaustive list of assessment criteria that has been applied previously.