This article is an extract from GTDT Market Intelligence Cartles 2023. Click here for the full guide.
Robert Wagner is a partner and member of Wolf Theiss’s competition and antitrust practice group and joined Wolf Theiss in 2009. Robert’s practice includes cartel investigations (including leniency applications), abuse of dominance issues, advice on distribution and cooperation agreements, compliance work, private enforcement of competition law and merger control. He regularly advises clients from various industry sectors on all areas of competition law and represents clients before the European Commission and the Austrian competition authorities. In addition to his Austrian law degree, Robert holds an LLM degree from the College of Europe, Bruges.
Stefan Wartinger is a counsel and member of Wolf Theiss’s competition and antitrust practice group. He gained extensive experience in cartel matters including the coordination of leniency applications at a national and EU level. Most recently, he represented one of the most heavily involved companies in the largest dawn raid operations and cartel proceedings ever carried out in competition law matters in Austria. In addition to his expertise in merger control proceedings, Stefan gained profound expertise in the foreign direct investment space and successfully managed multiple (Phase I and Phase II) proceedings in Austria and the CEE/SEE region over recent years.
1 What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?
The Austrian Federal Competition Authority (FCA), Austria’s investigating authority, had a focus on bid rigging conducts in recent years. These conducts are associated with particular complexity as bid rigging is also a criminal offence under Austrian law and therefore involve a complex interplay between competition law and criminal law. Tensions in particular arise concerning questions of access to file (especially in relation to leniency statements) and the granting of immunity, as the FCA is not authorised to grant immunity from criminal prosecution to individuals or undertakings.
Important sectors affected included waste management, submetering and wood pellets. In addition, the construction industry remained under particular scrutiny in Austria over the past year. The construction industry is (still) subject to the largest competition law investigation in the history of Austria, which dates all the way back to 2017. The behaviour is alleged to have involved price coordination, market sharing and bid rigging. While the Cartel Court already imposed its highest fines in history (both individually and collectively) on several companies in the industry, investigations against several other companies are still ongoing. It is expected that the FCA requests the Cartel Court to impose fines on other companies in the near future. Several criminal proceedings are ongoing in parallel to the cartel proceedings, both against companies and individuals.
In addition, the FCA was very active in carrying out sector inquires over recent years. In 2022, the FCA conducted or concluded sector inquiries into the Austrian fuel sector and into the electric mobility market. The FCA confirmed that it had not found evidence of collusive behaviour in the fuel sector but that it would continue to monitor the market. In its final report on the inquiry into the electric mobility market, the authority expressed general concerns about the non-transparent cost and pricing structures and the potentially concentrated nature of the charging stations infrastructure sector. While the FCA did not identify any concrete concerns, the sector inquiry demonstrates the FCA’s willingness to prevent negative market developments in future markets from the very outset. Previous sector inquiries concerned the supply of medicine and the taxi market and the FCA just recently announced the launch of an inquiry into online food delivery platforms.
2 What do recent investigations in your jurisdiction teach us?
The FCA’s investigations may be initiated ex officio, by a complaint, by leniency application or by (anonymous) whistle-blowers. While leniency applications are declining worldwide, Austria is an exception in this respect. One of the reasons for the steady in-flow of leniency applications is that the leniency programme not only applies to horizontal but also covers vertical infringements.
Besides leniency applications, complaints by customers or consumers continue to be a powerful detection tool for the FCA. Figures for 2022 have not been published yet, but 78 whistle-blowing reports were submitted in 2021 alone. While not all of those complaints led to investigations, the most recent dawn raid in the wood pellets market was, inter alia, based on ‘numerous justified complaints from customers, which cannot be regarded as mere speculation’ according to the Austrian Appellate Cartel Court. In addition, the FCA’s investigation into suspected vertical price fixing against a manufacturer and distributors of school bags was also triggered by complaints from consumers.
In many cases, the FCA starts investigations with unannounced inspections (dawn raids). The FCA recently published new guidelines on dawn raids on its website, which brought a tightening of sanctions in the event of breach of seal or lack of cooperation but at the same time, a (very) welcome clarification that the FCA recognises attorney-client privilege (in accordance with the case law of the European courts). After the FCA conducted only three dawn raids in 2020 due to covid-19, its activities picked up again in 2021 and 2022, with dawn raids in the waste disposal and in the wood pellets sector in particular.
3 How is the leniency system developing, and which factors should clients consider before applying for leniency?
A leniency programme has been in force in Austria since 1 January 2006. In 2021, a Leniency Regulation was issued, which comprises detailed information on the application of the leniency programme in Austria. Furthermore, the FCA recently published an updated version of the leniency handbook on its website. The leniency programme is administered exclusively by the FCA and largely mirrors the ECN Model Leniency Programme.
If companies decide to apply for leniency in the specific area of bid-rigging, particular caution is required. As the FCA is not authorised to grant immunity from criminal prosecution to individuals or undertakings, a separate leniency status must be ensured with the public prosecutor. The Federal Cartel Prosecutor (the second so-called official party responsible for enforcing competition law in Austria) shall inform the public prosecutor about the cooperation, whereupon the public prosecutor may discontinue to prosecute employees if a criminal prosecution against the individual would be disproportionate concerning the weight of the undertaking’s contribution to the investigation and the active participation of the individual employees therein. Individuals as well as undertakings may also benefit from immunity in the criminal proceedings if they approach the criminal prosecutor or the police voluntarily and disclose substantial information about their cartel behaviour.
In addition, leniency statements might not be protected in the same manner in the case of parallel competition and criminal law proceedings. In general, all leniency information is kept confidential in the competition law investigation and proceedings. The most recent amendment to the Austrian Cartel Act explicitly determines that leniency statements and settlement submissions enjoy absolute protection from disclosure. The same might, however, not be true with respect to leniency information contained in the public prosecutor’s file. The Austrian legal system does not provide for permanent and general restrictions on access to documents in criminal proceedings – regardless of whether they are directed against individuals or companies; private parties pursuing civil claims also have access. During the course of the investigation into the construction industry, for example, the public prosecutor requested transmission of all files of the FCA and the Cartel Court by way of administrative assistance in summer 2021. Following this request, the Cartel Court provided the public prosecutor with these files between August 2021 and January 2022, and the FCA also made documents accessible in autumn 2021. The companies concerned took action against this approach, requesting that the public prosecutor must not include the leniency statements and settlement submissions in its files as the protection of leniency statements and settlement submissions from disclosure would otherwise be breached. Ultimately, the competent court decided to refer the case to the Court of Justice of the European Union (CJEU) requesting it to clarify to which extent leniency statements and settlement submissions are also protected from access via the public prosecutor’s office in criminal proceedings. The preliminary ruling is currently still pending before the CJEU – the outcome may have massive consequences for the future success of the FCA’s leniency programme.
4 What means exist in your jurisdiction to speed up or streamline the authority’s decision-making (eg, settlement procedure), and what are your experiences in this regard?
The main tool enabling the FCA to accelerate the decision-making process is the settlement procedure. While the details of the settlement procedure are not laid down by law, the FCA has published a notice setting out the requirements and key principles of the settlement procedure. We understand that this notice is currently under review by the FCA.
The settlement procedure is available in investigations concerning anticompetitive agreements as well as abuse of dominance. Settlement discussions can be initiated by the FCA or by the undertaking concerned. If the FCA is generally prepared to apply the settlement procedure, it informs the undertaking of the main facts of the infringement, their legal qualification, the underlying pieces of evidence, and the maximum level of the fine to be imposed. An undertaking opting for the settlement procedure needs to acknowledge the facts underlying the infringement and the legal qualification made by the FCA and needs to accept the maximum level of the fine proposed. On the basis of this acknowledgment, the FCA asks the Cartel Court to impose a fine that does not exceed the level of the fine previously indicated (the FCA itself does not have the power to impose fines for competition law infringements).
The acknowledgment can lead to a reduction of the fine by up to 20 per cent. If an undertaking also benefits from a fine reduction under the leniency regime, the reduction under the settlement procedure is cumulative with the reduction of the fine under the leniency regime.
The strategic decision for clients on whether to enter into settlement discussions depends on a number of points. Important factors include the strength of the evidence available to the FCA and the likelihood that the FCA will be able to establish the alleged infringement in an ordinary procedure in front of the Cartel Court. The main advantages of the settlement procedure from the point of view of clients are the reduction of the fine and the early termination of the proceedings. Furthermore, with regard to potential follow-on damages claims, it is relevant that settlement decisions are usually more succinct than decisions issued in the ordinary procedure and settlement submissions generally enjoy absolute protection from disclosure.
In certain situations, it may be strategically preferable for undertakings to cooperate with the FCA but without engaging in a settlement. Such cooperation is possible and may also help speed up the FCA’s decision-making process. The FCA has discretion to reward such cooperation by a reduction of the fine.
5 Tell us about the authority’s most important decisions over the year. What made them so significant?
The Cartel Court issued fining decisions in relation to the construction industry, the submetering sector, the joinery sector and the market for school bags in 2022.
As mentioned, the FCA’s investigation of the construction industry is the largest competition law investigation in Austria and has already resulted in fines totalling €134 million by the end of 2022. The conduct is alleged to have involved price coordination, market sharing, exchange of competitively sensitive information, and bid rigging. It is in the context of the investigation of the construction industry that one of the most interesting developments occurred in the past year. In July 2022, the FCA requested the Cartel Court to overturn a final decision that had imposed a fine on one construction company that had been reduced due to the company’s cooperation under the leniency programme. In the course of the parallel criminal investigation, however, the FCA had become aware – by way of administrative assistance – that the leniency applicant may have withheld certain evidence and may therefore have breached its duty to cooperate with the FCA under the leniency programme. While the FCA’s request to overturn the decision was rejected by the Cartel Court on procedural grounds, an appeal against this rejection decision is currently pending before the Appellate Cartel Court.
The Cartel Court also imposed fines for behaviour in the submetering industry, allegedly involving the exchange of information and collusive arrangements between competitors on prices and terms and conditions. Furthermore, fines were imposed on several undertakings active in the joinery sector for alleged bid rigging. The investigation had been triggered by information that the court of auditors of the City of Vienna had shared with the FCA.
As regards the investigation in the market for school bags, the Cartel Court imposed fines for alleged vertical price fixing on both the manufacturer of the school bags and its retailers. In the course of the investigation, the German Federal Cartel Office had carried out a dawn raid on behalf of the FCA at the German premises of the manufacturer. The FCA’s investigation ultimately also led to investigations in Germany, as a result of which the German Federal Cartel Office fined the same undertaking for similar behaviour in Germany.
6 What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?
The Austrian competition law enforcement system is a dual system insofar as the FCA is an independent authority empowered to investigate infringements of competition law but has no powers to issue binding decisions in substantive matters. It needs to initiate court proceedings before the Cartel Court and to request the Cartel Court to issue a decision. The type of decisions that can be taken by the Cartel Court include decisions finding an infringement, decisions ordering an undertaking to bring an infringement to an end, commitment decisions, interim measures and fining decisions. Certain investigation measures of the FCA, such as dawn raids, also need to be approved by the Cartel Court.
In addition to the FCA, the Federal Cartel Prosecutor, which is subject to instructions from the Federal Minister of Justice, may also initiate proceedings before the Cartel Court.
The Cartel Court is a section of the Higher Regional Court of Vienna. Cases before the Cartel Court are heard and decided by senates composed of two professional judges and two expert lay judges. The expert lay judges in the Cartel Court’s senates are normally nominated by the Federal Chamber of Labour and the Chamber of Commerce.
Decisions of the Cartel Court can be appealed to the Supreme Court acting as Appellate Cartel Court for procedural errors and for errors of law. An appeal for errors of fact is only possible under very limited circumstances.
The most notable decision of the Supreme Court rendered in 2022 is probably its decision on an appeal brought by the FCA against the first-instance decision of the Cartel Court issued in relation to an alleged sugar cartel. In this case, the Cartel Court had dismissed the FCA’s request to impose a fine on the ground, in particular, that the unlawful agreement at issue had already been referred to in a final fining decision of the German Federal Cartel Office and that a further fine imposed by the Austrian Cartel Court for this agreement would be contrary to the prohibition of double jeopardy (also known as the ne bis in idem principle). After having referred the matter to the CJEU for a preliminary ruling, the Supreme Court found that the ne bis in idem principle did not prevent the Cartel Court from imposing a fine in the present case as the German competition authority, while having referred to the agreement at hand, had not found an anticompetitive object or effect of the agreement in the territory of Austria in its decision. The Supreme Court, therefore, annulled the Cartel Court’s decision and referred the case back to the Cartel Court.
7 How is private cartel enforcement developing in your jurisdiction?
While the number of private damages claims based on infringements of competition law is not as high as in other jurisdictions in the EU (eg, Germany), the number has certainly increased in recent years. As in other jurisdictions, stand-alone private damages claims remain the exception in Austria. The rise in private damages claims is largely related to the increased number of decisions by the Cartel Court (ie, follow-on-litigation). Several large damages cases following up on decisions by the Cartel Court are (still) pending, including the Elevators and Escalators cartel and the payment cards case. Another large private damages complex in Austria is the litigation following the imposition of fines against certain European truck manufacturers by the European Commission.
Access to file remains a hot topic in Austria. While the implementation of the EU Damages Directive in Austria now enables parties to submit a reasoned application for disclosure of evidence to the civil court either with or after having lodged an action for damages, it is important to note that leniency statements and settlement submissions are not themselves subject to disclosure. As mentioned before, however, there is an ongoing dispute whether these restrictions also apply with respect to parallel criminal investigations (which may be initiated in case of bid rigging) if leniency statements and settlement submissions have also become part of the public prosecutor’s file. As private parties pursuing civil claims also have access to the public prosecutor’s file, the protection of leniency statements and settlement submissions from disclosure would be circumvented if they were granted unrestricted access to this file. It is hoped the pending preliminary ruling before the CJEU will bring some clarity in this respect.
8 What developments do you see in antitrust compliance?
In the past, antitrust compliance did not play a major role in Austria in determining the level of fines. The fact that competition law infringements occurred despite the existence of a compliance programme was rather considered proof for its ineffectiveness and therefore not taken into account as a mitigating factor.
However, more recently, a more positive view in respect of compliance measures is developing: In contrast to its previous views, the FCA and the Cartel Court now take into account whether an effective compliance system is in place or improvements have at least been made to prevent comparable future infringements. This is in line with the developments in other EU member states. In contrast to Germany, however, Austrian law still does not formally foresee the possibility of reducing fines for preventive and subsequently implemented compliance measures.
9 What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?
In light of the high level of inflation in Austria and in Europe in general, the FCA has launched sector inquiries in the fuel sector, the gas and electricity sectors and the food sector. As the FCA has been invited from various stakeholders to monitor these markets, these sectors are currently in the authority’s focus. These sector inquiries may not only result in reports and recommendations to policymakers but could also result in enforcement activities against individual undertakings active in these sectors.
As mentioned above, we understand that the FCA intends to revise its notice on the settlement procedure during this year but there is yet no information in the public domain on the amendments planned.
10 How has the covid-19 pandemic affected cartel enforcement in your jurisdiction?
The covid-19 pandemic had a significant impact on cartel enforcement in the first year of the pandemic insofar as the FCA had stopped conducting dawn raids – which are a key investigation tool of the authority in cartel cases – for a while in 2020. However, already in 2021, the FCA started carrying out dawn raids again. Cartel enforcement in Austria has come back to normal again by now.
The Inside Track
What was the most interesting case you worked on recently?
The most challenging cartel case we recently handled concerned our representation of one of the largest and most heavily involved companies in the construction industry. The case started with the largest dawn raid operations ever carried out in competition law matters in Austria. The case involved a complex interplay between competition law and criminal law. Both in terms of the scope of the proceedings and the legal issues to be resolved, this case is not comparable to any previous cartel investigation in Austria. After an investigation over a period of nearly four years, Wolf Theiss managed to secure a settlement with the FCA last year.
If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?
The leniency programme should be made more attractive by ensuring that leniency statements enjoy absolute protection from disclosure in Austria, including in the case of parallel criminal investigations. We see a significant risk that the potential disclosure of leniency statements via parallel criminal investigations creates a substantial disincentive for undertakings to make use of the leniency programme.
