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Trends and climate

Trends

Have there been any recent changes to the cartel regime? If so, have they had a significant impact on enforcement activity?

On June 9 2017 the ninth amendment to the Act against Restraints of Competition entered into force. The changes primarily concern the transposition of the EU Cartel Damages Directive and hence will have a dramatic impact on private enforcement activity in Germany.

In relation to public enforcement, new rules now prevent cartel participants from avoiding fines through corporate restructuring. Under the new law, essentially all legal successors will be liable for fines attributable to the original undertaking involved in the cartel.

Are there any proposals to reform or amend the existing cartel regime?

No.

Have there been any recent key cases?

Germany is at the forefront of the ‘best price clause’ cases against online booking portals. In 2013 and 2015 the Federal Cartel Office (FCO) prohibited HRS and Booking.com from using these clauses. Proceedings against Expedia are still pending. The same cases have since been litigated before the Dusseldorf Higher Regional Court, which thus far has fully upheld the FCO’s decisions.

ASICS is another important case. In April 2017 the Dusseldorf Higher Regional Court upheld a 2015 FCO decision prohibiting certain clauses in vertical agreements between sportswear manufacturer ASICS and its dealers which prohibited the latter from selling ASICS products on certain online platforms. Both the FCO and the Dusseldorf Higher Regional Court found that these restrictions violated German and EU competition law. The FCO is more restrictive in its approach to the prohibition of internet sales in selective distribution systems. In Coty, the Frankfurt Higher Regional Court asked the European Court of Justice for a preliminary ruling on a prohibition against distributors selling or offering products on certain public platforms such as eBay and Amazon.

A third key case is Lottoblock II, in which the Federal Court of Justice further strengthened the rights of victims of anti-competitive conduct. In particular, the court held that it cannot be assumed that the effects of a cartel stop on the day on which the anti-competitive conduct ceases; rather, there is a legal presumption that the effects of the cartel will normally persist for some time. 

Legal framework

Legislation

Which legislation applies to cartels and what are the relevant substantive provisions?

The relevant provisions regarding the prohibition of cartels are contained in Sections 1 and 2 of the Act against Restraints of Competition.

Institutions

Which bodies are the relevant regulatory and prosecutory authorities and what are their specific roles?

The Act against Restraints of Competition is primarily enforced by the Federal Cartel Office (FCO), an independent higher federal authority assigned to the Federal Ministry of Economics and Technology (in practice, the local cartel offices in federal states play a minor role). The FCO is organised into 12 operative units ‒ so-called ‘decision divisions’. Three decision divisions deal exclusively with the cross-sector prosecution of cartels and hardcore restrictions. These are supported by a special unit for combating cartels whose main purpose is to assist during the investigative phase, particularly in the preparation and execution of dawn raids. FCO decisions finding the existence of a cartel (and, as the case may be, imposing a fine) are subject to full review by the Dusseldorf Higher Regional Court. Judgments of the Dusseldorf Higher Regional Court may be appealed on questions of law to the Federal Supreme Court.

Are there any sectoral regulators with concurrent powers?

Certain sectoral regulators are also responsible for maintaining effective competition and shielding end users from unfair conditions and excessive pricing. However, enforcement of the Act against Restraints of Competition is exclusively reserved to the FCO.

Application

Does the legislation apply to both formal agreements and informal practices?

The prohibitions laid down in Section 1 of the Act against Restraints of Competition apply to any restriction of competition, irrespective of whether this results from formal agreements or informal practices.

Does the legislation apply to individuals, companies or both?

The prohibitions laid down in Section 1 of the Act against Restraints of Competition apply only to ‘undertakings’. However, individuals can also qualify as undertakings within the meaning of Section 1. Also, individuals who participate or contribute to an infringement of Section 1 can be held personally liable. 

Does the legislation subject companies to civil liability, criminal liability or both?

Infringements of German competition law give rise to civil liability. Pursuant to Section 33a of the Act against Restraints of Competition, victims of anti-competitive conduct can claim full compensation from the undertakings that participated in the infringement. 

Competition law infringements committed by undertakings are prosecuted as administrative offences only; there is no criminal liability for undertakings.

Does the legislation subject individuals to civil liability, criminal liability or both?

Individuals can be held liable for damages caused as a result of their involvement in a competition law infringement.

Cartel law infringements constitute administrative rather than criminal offences. The only exception is bid rigging: collusion in public or private tender procedures is a criminal offence pursuant to Section 298 of the Criminal Code. Parties that participate in a bid-rigging agreement can be penalised by imprisonment of up to five years or by a fine. Only the Public Prosecution Office (not the FCO) is competent to investigate and prosecute cartel infringements that constitute criminal offences.

Where cartel conduct is punishable by both civil and criminal penalties, can the enforcement authority pursue both types of penalty? How does the authority decide which penalties to seek?

Cartel law infringements constitute administrative rather than criminal offences, so this is not applicable.

Are there any sector-specific offences or exemptions?

Cartel law infringements constitute administrative rather than criminal offences, so this is not applicable.

To what extent, if any, does the legislation apply to extraterritorial conduct?

The Act against Restraints of Competition applies to all agreements and concerted practices that have as their object or effect an appreciable restriction of competition in Germany. This implies that if the German market is affected, the act also covers anti-competitive conduct originating outside Germany ‒ that is, involving undertakings from different jurisdictions or multilateral companies operating worldwide.

Investigations

Initiating an investigation

Who can initiate an investigation of potential cartel conduct?

Investigations of potential cartel conduct are normally initiated ex officio, upon complaints by third parties (the Federal Cartel Office (FCO) operates an online whistleblowing system), or upon the filing of leniency applications.

If an investigation is initiated by complainants or third parties, what rights (if any) do they have?

Complainants have a right to the careful assessment of their complaint and the competent authority must take due care in deciding whether to initiate an investigation. Complainants also have a limited right to be heard and limited rights to access the file. 

What obligations does a company have on learning that an investigation has commenced?

No statutory obligations exist. In particular, there is no legal concept similar to obstruction of justice which would require companies to take certain precautionary measures and prevent the destruction of evidence. However, from a general compliance viewpoint ‒ and considering company management’s fiduciary duty ‒ companies may generally be considered obliged to conduct an internal investigation in order to position themselves appropriately in the proceedings. 

What obligations does a company have if it believes that an investigation is likely?

There are no obligations in this regard.

What are the potential consequences of failing to act or delaying action?

There are no potential consequences in this regard.

Formal stages of investigation

What are the formal stages of and approximate timeframe for investigations?

There are no formal procedural stages or approximate timeframes for investigations. According to the general principles applicable to any public investigation, the FCO must define the most suitable measures and steps in order to investigate all relevant facts and circumstances, while at the same time respecting the presumption of innocence, the affected parties’ procedural rights and the principle of proportionality. This results in different procedural structures and timeframes in each individual case.

Investigative powers

What investigative powers do the authorities have?

In order to investigate a suspected infringement, the FCO may take testimonies from witnesses and accused suspects, and address information requests to undertakings. However, witnesses can refuse to testify to the extent that they might possibly incriminate themselves. Accused suspects generally have the right to remain silent on the allegations that form the subject matter of the investigation and need not provide any assistance or information whatsoever to the FCO. If they do agree to be heard, they are not obliged to make accurate or complete statements. Interrogated witnesses and accused suspects must generally be instructed about their rights to remain silent and not incriminate themselves.

The FCO may also conduct dawn raids on offices and search private premises and objects. As a general rule, any such searches must be ordered by a judge. Only in urgent circumstances may the FCO conduct these searches without a judicial warrant. In addition, the FCO may seize objects that could be of importance as evidence in the investigation and make copies of any relevant documents. Again, a seizure order issued by a court is required if the material is not handed over voluntarily and only in urgent cases may the FCO itself order the seizure of objects or documents. The FCO’s investigative powers in respect of search and seizure also apply to electronic materials. Computers and company servers may be searched and relevant files may be copied. Private property such as residences, automobiles and briefcases, as well as persons, can also be searched. The FCO does not have the power to wiretap, bug or make use of electronic surveillance.

If necessary, the FCO may use the coercive force laid down in the Code of Criminal Procedure to enforce its investigative powers.

Only the Public Prosecution Office (not the FCO) is competent to investigate and prosecute cartel infringements that constitute criminal offences.

What is the geographic reach of public enforcement actions?

The geographic reach of public enforcement actions is limited to the German territory.

When is court approval required to invoke these powers?

As a general rule, dawn raids must be ordered by a judge. Only in urgent circumstances may the FCO conduct dawn raids without a judicial warrant. The same applies to seizures. 

Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?

The FCO may conduct dawn raids on offices and search private premises and objects.

While in theory, when conducting dawn raids and searches, FCO investigators need not await the arrival of defence counsel, in practice they will normally consent to wait up to one hour.

What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?

Only to a very limited extent are companies and individuals legally obliged to cooperate with the authorities. They virtually need only identify themselves and provide the most basic logistical support. As smooth execution of the dawn raid is in the interests of all parties involved, in practice companies would be well advised to provide passive support and in particular collaborate in the logistics (eg, by indicating where the server room is). Leniency applicants, by contrast, must fully cooperate with the FCO.

Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?

German law protects correspondence with defence counsel from seizure and review by the FCO. However, the law protects only correspondence between outside counsel and the client that directly relates to the investigation at hand and that was created after commencement of the proceedings. Correspondence dating from before commencement of the proceedinga is not protected; neither is correspondence between in-house counsel and the undertaking, regardless of when it was created.

Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?

The FCO must at all times respect the presumption of innocence, the affected parties’ procedural rights and the principle of proportionality. However, any procedural flaws will not normally have consequences and, in particular, will not automatically render the decision void.

What is the process for objecting to an authority’s exercise of its claimed powers?

A company that believes that the FCO or its investigators have exceeded the limits of their investigative powers can – depending on the circumstances – either file a complaint pursuant to Section 304 of the Code of Criminal Procedure or request a judicial review according to Section 98(2) of the Code of Criminal Procedure. 

Publicity and confidentiality

What information about investigations will be made publicly available and at which stage(s) of the process?

No strict rules exist that require the FCO to make public certain aspects of an investigation at a certain point in time. Rather, relevant information is mostly leaked by the affected companies themselves. As a general rule, when the FCO closes an important case, it will issue a press release, and it must also publish a more comprehensive case report on its website.

Is any information automatically confidential and is confidentiality available on request?

Business secrets are confidential and must not be disclosed by the FCO. In practice, affected companies and the FCO often have intensive discussions about what does and does not constitute a business secret. The names of individuals are not automatically considered confidential and thus exempt from publication. However, the FCO is restrictive and does not normally publish the names of individuals. 

International cooperation

Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?

Yes. Under the auspices of the European Competition Network and the International Competition Network, the FCO cooperates with all other relevant competition authorities across the European Union and worldwide. 

Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?

No.

Decisions

How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?

Unlike the European Commission, the FCO has not established formal rules on the settlement of cartel procedures. However, an informal practice has evolved in recent years that provides a possibility for entities which are subject to a cartel investigation to enter into a settlement with the FCO.

According to the FCO, certain principles govern settlement proceedings. The most important principle is the strict equal treatment of all undertakings concerned. The undertakings concerned usually waive the right to complete access to the file and an extensive statement of objections. In return, the FCO’s decision contains only a short summary of the relevant facts, which makes it more difficult for third parties to extract from the decision any information that may be relevant for the preparation of a case against the cartel member concerned. Settlements are always individual in character.

What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?

No established process exists. Normally, after investigating the case sufficiently, the FCO will approach the companies concerned and ask whether they are willing to settle the case. The subsequent procedure is then conducted in a flexible manner. 

If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?

If a settlement is not reached, the FCO is obliged to close the investigation within the context of an ordinary procedure (ie, to investigate and prove the case in its entirety). 

Which party must prove its case? What is the relevant standard of proof?

In theory, the FCO must prove the case in its entirety beyond any reasonable doubt. In practice, most cases are triggered or accompanied by a leniency application, which the FCO normally considers to constitute sufficient proof. However, in the absence of a leniency application, the FCO will often accept lower standards and it has sometimes based its prohibition decisions on ambiguous evidence.

Is there a hearing? If so, what is the process for submitting evidence and testimony?

No formal hearing takes place. However, if the companies so request, they will normally be given the opportunity to meet with the case team in person. 

What are the accused’s procedural rights?

Accused companies benefit from the presumption of innocence, as well as from the basic features that characterise a fair trial (eg, the right to be heard, the right to access to the file, the principle of proportionality). 

Appeal process

What is the appeal process?

FCO decisions can be appealed before the Dusseldorf Higher Regional Court. 

To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?

The Dusseldorf Higher Regional Court can review the FCO’s decision in its entirety; it can even increase the fine initially imposed by the FCO and has done so in the past.

Penalties

Penalties for companies

What are the potential penalties for companies involved in a cartel?

The FCO may impose fines on undertakings of up to 10% per cent of the worldwide turnover achieved by the corporate group to which the undertaking belongs in the most recent fiscal year. 

Are there guidelines in place for penalties? If not, how are penalties normally calculated?

The FCO published new fining guidelines in June 2013 under which the group-wide annual turnover of the undertaking, as well as the turnover it achieved in the relevant market during the infringement period, is considered when calculating the fine. Hence, the size of the undertaking and the affected volume of commerce, as well as the seriousness and duration of the infringement, are crucial factors in calculating the fine.

Do the authorities take into account any penalties imposed in other jurisdictions?

The FCO may also take into account fines imposed for similar infringements by other cartel authorities of the European Competition Network.

How can a company mitigate its exposure to fines?

A fine can be waived or reduced if the undertaking that participated in the infringement submits an application for leniency. A 10% reduction in the fine can also be granted in the case of an agreement to terminate the proceedings by settlement. An undertaking’s cooperation in the proceeding outside the leniency notice will also be taken into account by the FCO when calculating the fine.

Penalties for individuals

What are the potential penalties for individuals involved in a cartel?

Fines imposed on individuals for wilful participation in a cartel may not exceed €1 million. In case of negligent infringement, the maximum fine is €500,000. Only directors, officers and certain senior employees may be fined. However, if lower-ranking employees committed the cartel offence and cannot be held responsible, directors or officers can be fined for breaching their duty of supervision.

Do the authorities take into account any penalties imposed in other jurisdictions?

No case law exists in this regard. However, the FCO will likely take into account any penalties imposed in other jurisdictions when calculating a fine for an individual.

Is a company permitted to pay a penalty imposed on its employee?

In theory, the payment of a fine is a personal obligation which cannot be assumed by third parties. In practice, however, companies often reimburse (at least partially) the penalties imposed upon employees and directors, as long as they cooperate with the company during the cartel investigation. Any such reimbursement must be considered as income and hence is subject to the applicable income taxes. 

Is a company permitted to continue to employ an employee involved in cartel conduct?

Yes. However, where employees or officers have instigated or deliberately participated in a hardcore cartel, their employer will normally terminate their contracts or at least demote them. 

Private actions

Private damages actions

Can private actions for damages be brought in your jurisdiction? If so, who may assert such actions?

Yes. Anyone who has suffered financial loss as a consequence of the cartel can assert an action for damages.

What relief may be awarded to successful claimants (eg, damages, costs, injunctive relief or attorneys’ fees)?

Victims of anti-competitive conduct can claim full compensation (ie, compensation for damages plus interest, plus reimbursement of all legal fees and (appropriate) fees of economic experts). In case of damages actions, injunctive relief is not possible. 

How are the amounts of any damages, costs or attorneys’ fees calculated?

Court fees and attorneys’ fees are calculated on the basis of the statutory rules (depending in particular on the amounts in dispute). As regards the amount of damages, pursuant to Section 287 of the Code of Civil Procedure, the court can make an estimate, which must be based on objective facts to be proven by the claimant. 

Have there been any notable recent cases in which a private action was the subject of adjudication?

Yes. Over the last five years, more than 900 actions for cartel damages have been brought before the German courts. However, as many cases are settled out of court, there is relatively little case law in the public domain. 

Class actions

Can class actions be brought in your jurisdiction? If so, what is the procedure for such cases?

No class action system exists. However, it is possible to bundle claims through assignments or to combine several separate actions in the same case in one proceeding.

On February 18 2015 the Dusseldorf Higher Regional Court issued a key ruling concerning assignments to so-called ‘action vehicles’ ‒ that is, legal entities which are established for the sole purpose of serving as the claiming entity for a number of individual claims acquired from different undertakings that were potentially damaged by a cartel. The court found that the assignment of 36 damages claims to Belgian vehicle Cartel Damage Claims SA (CDC) was invalid due to breach of public policy, as CDC was not in a position to pay court and defence fees in case of defeat.

Immunity and leniency

Immunity and leniency programmes

Is an immunity and leniency programme available for companies? If so, how does it operate?

The FCO operates a leniency programme similar to that operated by the European Commission. The FCO’s leniency notice sets out the conditions for leniency applicants in cartel proceedings to benefit from immunity from fines or a reduction in fines. A leniency application filed by an undertaking also covers individuals who participated in the cartel as current or former employees of that undertaking.

Can the enforcement authority decline or withdraw leniency? If so, on what basis?

Leniency applicants are under a strict obligation to provide full information to the FCO and to cooperate unconditionally with the FCO during the investigation. If an undertaking fails to comply with these requirements, the FCO can decline or retroactively withdraw leniency discounts. 

Are there benefits for cooperators that do not qualify for immunity? If so, how are these benefits determined?

A cartel participant that does not qualify for full immunity may still benefit from a fine reduction of up to 50% if it provides the FCO with oral or written information and, where available, evidence that makes a significant contribution to proving the offence, and if it cooperates fully and continually with the FCO.

What benefits (if any) are available for employees and former employees of a company that seeks leniency?

In principle, both employees and former employees can benefit from the FCO’s leniency notice. In practice, however, there have been no cases in which an individual was the immunity applicant.

Is an immunity or leniency programme specifically available for individuals? If so, how does it operate?

No; the FCO’s general leniency programme applies.

Have there been any notable recent cases in which a leniency application was the subject of adjudication?

Most of the cartel cases that the FCO has investigated have been either initiated or accompanied by leniency applications filed by at least one of the cartel participants. 

Criminal liability

Is immunity from criminal prosecution available? If so, how and under what conditions is immunity granted?

No. In cases where the cartel conduct qualifies as a criminal offence (ie, those involving bid rigging pursuant to Section 298 of the Criminal Code), immunity under the FCO leniency programme is not available.

Application procedure

What is the procedure for a leniency application?

There is no formal procedure. The FCO’s leniency notice merely sets out standards regarding the content of the leniency application, which in particular must contain a detailed description of:

  • all relevant facts;
  • the products concerned;
  • the companies involved; and
  • the geographical scope of the infringement.

What is the typical timeframe for consideration of a leniency application?

There is no typical timeframe. Also, leniency applications are normally evaluated behind closed doors, so the leniency applicant is not normally involved in the process. However, the FCO might need to address additional factual questions to the leniency applicant after evaluating the application.

What information and evidence is required?

If the FCO has insufficient evidence to obtain a search warrant, it will grant full immunity to the first cartel participant that files a leniency application, provides the FCO with oral and written information and, where available, provides evidence that enables the FCO to obtain a search warrant.

What information and evidence is disclosed to subjects of the investigation other than the leniency applicant?

Pending the investigation, no information or evidence whatsoever is disclosed to the subjects of the investigation. An exception applies in the context of settlement negotiations. In particular, the subjects of the investigation are not provided with a copy of potential leniency applications.

What level of cooperation is required from applicants?

Leniency applicants must cooperate fully with the FCO.

What confidentiality protection is offered to applicants?

Within the limits set by the procedural rights of other undertakings that are subject to the investigation, as well as those of third parties, the FCO will endeavour to ensure the confidentiality of the proceedings and will seek to avoid revealing the identity of leniency applicants or granting access to applications.

Can the company apply for a marker? If so, under which conditions?

The FCO accepts markers from undertakings to qualify as the ‘first in’. The timing of placement of the marker determines the status of the application. The FCO promptly (usually within three to seven days) confirms in writing that a marker has been placed or that the application has been received, stating the date and time of receipt. A marker can be placed orally or in writing, in German or English. The FCO requests basic information on the cartel when the marker is placed, such as:

  • the type and duration of the infringement;
  • the product and geographic markets affected; and
  • the identity of those involved.

The FCO also seeks clarification as to whether leniency applications have been or will be filed with other competition authorities. Upon placement of the marker, the FCO grants a period of up to eight weeks within which a full leniency application must be submitted.