On June 25 2013 the Federal Cartel Office published new guidelines for setting fines and also notes with additional guidance. The new guidelines replace the previous guidelines which were published in 2006.

The Federal Court of Justice decision in Grauzementkartell (February 26 2013) made it necessary to produce the new guidelines. In Grauzementkartell the court confirmed the constitutionality of Section 81(4)(2) of the Act against Restraints of Competition, a central German provision regarding the calculation of fines for competition law infringements. However, the court pointed out that the limitation of the fine to 10% of the turnover of the respective undertaking should not be regarded as a capping threshold, as under European competition law, but as a maximum value within a range of possible fines. It went on to confirm that within this framework, the administrative fine can be determined in accordance with general calculation criteria in each individual case. As the previous administrative fine guidelines issued by the Federal Cartel Office were still based on an interpretation of the 10% threshold as a capping threshold, an amendment became necessary.

According to the new guidelines, the Federal Cartel Office will apply a two-step procedure to calculate the exact fine. First, the office will determine a fine framework for the specific calculation of the fine. The administrative fine will then be determined in a second step within this framework. The Federal Cartel Office will determine a calculation range within which to categorise the gravity of the infringement, based on an overall consideration of any aggravating and extenuating circumstances.

In the first step the lower limit in the statutory administrative fine range is €5 (Section 17(1) of the Administrative Offences Act). The maximum value is 10% of the total turnover of the undertaking achieved in the financial year before the authority makes its decision (Section 81(4)(2) of the Act against Restraints of Competition). In the case of infringements which are negligent only, this limit is reduced to 5% of the total turnover (Section 17(2) of the Administrative Offences Act).

In the second step the Federal Cartel Office will determine a calculation range in each individual case in which a fine is set, taking into account potential for profit and damage and the total turnover of the undertaking concerned.

In principle, 10% of the turnover achieved from the infringement is assumed in determining the potential for profit and damage under the new guidelines. This concerns the domestic turnover of the undertaking achieved with the products and services connected with the infringement during the period in question. The Federal Cartel Office considers that it is sufficient to make 10% of the turnover achieved from the infringement the starting point for further calculations. However, if it is too low in an individual case, the calculation range can be expanded upwards as an exception.

The Federal Cartel Office will then go on to apply a multiplication factor to the potential for profit and damage determined, depending on the size of each undertaking involved.

In order to determine total turnover, the guidelines use the total turnover of the undertaking as a basis (Section 81(4)(2)). The key factor is the turnover of the economic unit concerned, which can consist of several legal persons or groups of persons, or natural persons if appropriate.

If the value determined in this way is lower than the statutory maximum value of 10% of the total turnover, this value forms the upper limit for the further administrative fine calculation. Otherwise, the maximum value of 10% of the total turnover is decisive.

In addition, the infringement must be categorised in accordance with the statutory calculation criteria for further calculation of the fine. An overall consideration of all aggravating and extenuating circumstances must be made here. Offence-related criteria under the fining guidelines include:

  • the type and duration of the infringement;
  • the effect of infringement;
  • the significance of markets affected; and
  • the degree of coordination between the parties involved.

Offender-related criteria include:

  • the role of the undertaking in the cartel;
  • the position of the undertaking on the market affected;
  • special features of greater added value; and
  • the degree of intent and any previous breaches.

Positive conduct after the offence - such as leniency applications or mutual settlement – shall also continue to be taken into consideration.

In a June 25 2013 press release with regard to the effect of the new guidelines, the president of the Federal Cartel Office stated that on the whole, the level of fines will not change significantly. On balance, the fines for small undertakings which mainly sell only one product will be lower in future. The amended system of setting fines could further lead to higher amounts for companies which are active in several markets and whose agreements concerned only a specific product of their products portfolio.

Unfortunately, under the amended system it remains difficult to predict the amount of future fines with any accuracy. With regard to the determination of the calculation range, the guidelines are closely linked to turnover and do not adequately take into consideration the fact that turnover cannot be equated to profit. This applies both to the determination of the potential for profit and damage and to the multiplication factors dependent upon company turnover. In the end, appropriate fines will depend on the evaluation in each individual case.

For further information on this topic please contact Markus Schöner at CMS Hasche Sigle by telephone (+49 40 37 63 00), fax (+49 40 37 63 040 600) or email (markus.schoener@cms-hs.com).

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