On April 15 2013 the Dusseldorf Higher Regional Court ruled on an appeal against a Federal Cartel Office (FCO)(1) fine decision. The court increased the original fines imposed by the FCO(2) by 33% in total and by up to 85% for individual companies.
In 2005 the FCO raided various companies active in the supply of liquefied gas in small tanks (up to 5.6 tons) or bottled gas to private and commercial customers. Among the companies involved were the German subsidiaries of suppliers of liquefied gas and mineral oil active in many European countries.
The FCO investigation revealed that the leading liquefied gas suppliers - especially members of the German Liquefied Gas Association - had agreed, at least since 1997 and until 2005, not to poach the customers of rival companies participating in the cartel. Customers wishing to switch supplier were quoted either an excessive 'deterrent price' or no price at all. The cartel agreement with regard to gas in small tanks was secured by a system of information exchange, and compensation was offered mutually in the event of a successful change in supplier. This was coordinated through a transport company which was operated jointly by several cartel participants. The FCO found that the cartel members accounted for approximately 50% of the German market. Further, the FCO found that the prices of the companies participating in the agreement exceeded the prices of smaller independent suppliers by up to 100%.
The cartel occurred before the current guidelines on the setting of fines came into effect. Consequently, the FCO calculated the fines based on the old system, which required it first to determine the 'additional proceeds' and then impose a fine of up to three times the amount of the additional proceeds. The FCO calculated the additional proceeds by comparing the prices of the independent suppliers with the prices of the cartel members.
When assessing FCO fine decisions, the court is not limited to an appraisal of errors in law. The court can reinvestigate the facts fully. In the present case, the court reinvestigated the facts thoroughly and new evidence was taken extensively. On this basis, the court not only concluded that the findings of the FCO should be essentially confirmed, but it also found that the cartel covered small tanks up to 2.9 tons. The court found new evidence which allowed it to reach a different conclusion from the FCO when evaluating both the duration and gravity of the infringement.
As a result, the court not only confirmed the fines but increased them for most appellants. The FCO's original fines against the five appellants amounted to approximately €180 million. The court has now increased these fines to a total of €244 million. For individual appellants, the fines were increased by up to 85%.
When companies appeal fine decisions, they usually expect only two possible outcomes: either the appeal will fail and the fine will remain unchanged or, more likely, at least a small reduction in the fine will be achieved. To err is human, and given the complexity of cartel cases, the FCO will almost inevitably err at some stage in the proceedings, thereby giving leeway to fine reductions.
However, the present case clearly shows that appeal proceedings are not a one-way street – courts can also increase fines in appeal proceedings. Companies should always bear in mind that the reinvestigation of a case can bring to light facts which may aggravate the infringement and ultimately lead to higher fines.
This does not mean that companies should not appeal fine decisions if they believe that the FCO was wrong. However, before doing so, they should resist the temptation to close their eyes to circumstances which the FCO may have overlooked and which might ultimately justify even higher fines.
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