In what appears to be yet another classic case of illicit bid rigging, on February 10 2011 the Federal Cartel Office (FCO) imposed fines totalling €20.5 million on three manufacturers of fire-fighting vehicles, several staff members and an external accountant. Proceedings are still pending against a fourth manufacturer. The FCO found that the parties had engaged in bid rigging activities since 2001. The manufacturers allegedly implemented price-fixing and quota agreements, thereby dividing up the German market for fire-fighting vehicles between themselves.

According to the FCO press release and case summary, the alleged cartel members agreed that each manufacturer would be allowed to exploit a certain share of the market unchallenged. The companies regularly notified their order intake to an external accountant based in Switzerland. The latter compiled lists which were used to monitor adherence to the agreed quotas at regular meetings. Regular meetings were also held at sales manager level, where invitations to tender received from municipalities for orders of fire-fighting vehicles were divided up among the alleged cartel members. According to the FCO, the companies also agreed on price increases.

If these allegations are true – the fines are not final and may be appealed at the Dusseldorf Higher Regional Court – the practices follow the pattern typically followed by cartels with regard to bid rigging, market allocation and price fixing.

The decision is a powerful reminder to all market participants that such activities are illegal and that the FCO will harshly prosecute both the undertakings and the individuals involved. Several details of the FCO's decision are of further significance:

  • Unlike most cases from the recent past, the FCO procedure was not triggered by a leniency application, since the FCO became aware of the agreements through an anonymous tip-off. It then carried out four searches between May 2009 and July 2010. The Austrian competition authority assisted with two of these investigations. Thus, cross-border cooperation between national competition authorities appears to be working.
  • The fines imposed by the FCO were part of a settlement agreement. Today, most cartel cases in Germany are brought to an end by way of such settlements. Through these agreements – the framework for which was set out in the FCO's last activity report and its summary of the December 18 2009 case on fine proceedings against coffee roasters – parties may have fine reduced by usually 10%, have the opportunity to discuss the scope of the infringement and the fine calculation with the FCO, and have only a brief fine decision issued.
  • The FCO did not fine just the three companies involved in the alleged cartel. Since bid rigging in public tenders is a criminal offence in Germany, the proceedings against the sales managers, chief executive officers and directors involved have been referred to the competent public prosecutor's offices for examination under criminal law. This demonstrates once more the considerable personal risks involved in engaging in anti-competitive practices, in particular with respect to public tendering.
  • The personal risks lie not only with the individuals acting for the colluding companies. In the present case, an external accountant was also fined for his collaboration in the cartel. He allegedly compiled lists on the basis of information received from the participating undertakings, which were then used to monitor adherence to the agreed quotas. Even though the amount of the fine was not made public, the FCO obviously considered the accountant's activities to be an integral part of the alleged cartel. The FCO's approach seems to be in line with the conditions laid down by the General Court in its Treuhand decision of July 8 2008 (Rs T99/04).
  • The fine decision is likely to be followed by cartel damages claims from customers. Even though – unlike the European Commission – the FCO does not explicitly state in its press releases that any person or firm affected by anti-competitive behaviour may seek damages, it is a common feature of German antitrust law that customers try to obtain compensation for excessive prices that they have had to pay during the period of a cartel's activity. Customers in the present case will have a strong incentive to do so, since most of the fire-fighting vehicles in question were bought by public entities. In view of the widespread media coverage that this case has received in Germany, there is little doubt that the fined manufacturers will soon be confronted with damages claims. For them, the term 'fire-fighting' is about to take on a whole new meaning.

For further information on this topic please contact Roland Wiring at CMS Hasche Sigle by telephone (+49 40 37 63 00), fax (+49 40 37 63 040 600) or email ([email protected]).