An extract from The Cartels and Leniency Review, 8th Edition
Enforcement policies and guidancei Snapshot of competition enforcement policies
Germany continues to be a relevant competition jurisdiction. The Act against Restraints of Competition (ARC) is primarily enforced by the Federal Cartel Office (FCO), which is considered to be a vigorous authority relying on significant human and financial resources (approximately 360 staff members, approximately 150 legal or economic experts and a budget of €30.5 million in 2018) when exercising its competences.
The FCO has been actively contributing to the fostering of competition law enforcement in Germany, at EU level and even beyond European borders, especially in matters relating to the internet and data economy. The relatively new transaction value-based merger control threshold to capture acquisitions of low-turnover, competition-relevant targets, and the pioneering enforcement activities in the areas of abuse of dominance and anticompetitive vertical agreements – including investigations against two of the largest global tech companies, Facebook and Amazon – are receiving close attention by competition authorities, undertakings and practitioners worldwide. Whereas Amazon settled with the FCO, Facebook challenged the FCO's decision and was granted interim relief in the first instance.
Enforcement figures and public statements of key officials stress the FCO's high priority of cartel prosecution. Cartel enforcement is expected to maintain an important role in the FCO's agenda for the future. The internet and data economy are progressively revealing new forms of collusive behaviour, and legislative developments are being proposed to strengthen cartel prosecution. For instance, the draft of the Tenth Amendment to the ARC released by the Federal Ministry for Economic Affairs and Energy is willing to reinforce the relevant cooperation of competition authorities within the EU, to expand the FCO's investigative and intervention powers, to strengthen the FCO's support in planned cooperation arrangements, and to codify both the leniency programme and the criteria for the calculation of fines.
Additionally, private litigation has a long tradition in Germany and is intended to complement the administrative enforcement of the FCO. Damages claims in the form of follow-on actions have been increasing at unprecedented levels as a by-product of legislative changes evoked by the Ninth Amendment to the ARC in June 2017. Selective legislative adjustments proposed in the draft of the Tenth Amendment to the ARC are also intended to further strengthen Germany's position as a relevant cartel damages jurisdiction in the EU.ii Statutory framework for cartel enforcement by the FCOSubstantive basis
The primary basis for cartel enforcement is Section 1 of the ARC (ban on cartels). It establishes a general prohibition of all vertical and horizontal agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings having as their object or effect the prevention, restriction or distortion of competition. Since at least July 2005, Section 1 of the ARC largely corresponds to Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). The German legislator has stressed that the application of Section 1 of the ARC shall closely follow EU precedents, practice, regulations and guidelines to build a coherent enforcement of EU and German competition law. Due to the system of parallel and decentralised enforcement introduced by Regulation (EC) No. 1/2003, the FCO may also apply Article 101(1) TFEU directly.Intervention powers and enforcement proceedings
The ARC grants the FCO far-reaching powers of intervention to be exercised by means of two different proceedings against undertakings and associations of undertakings on the one hand, and, to a certain extent, against selective individuals on the other hand. In administrative proceedings (Sections 54 to 62, ARC), the FCO can issue prohibition and commitment decisions, impose structural and behavioural remedies, issue reimbursement orders, and determine the withdrawal from block exemptions and the withdrawal of benefits against undertakings and associations of undertakings. In administrative offence proceedings (Sections 81 to 86, ARC), the FCO imposes fines for administrative offences against undertakings, associations of undertakings and certain individuals. The FCO takes the Guidelines for the setting of fines in cartel administrative offence proceedings into account to calculate fines. Furthermore, there is an informal settlement procedure for extra fine reductions.Tools to detect cartels
In 2000, the FCO introduced a leniency programme (FCO Leniency Programme), which was revised in 2006 to largely reflect the leniency programme of the European Commission (Commission). The principles and procedure of the FCO Leniency Programme are specified in Notice No. 9/2006 on the immunity from and reductions of fines in cartel cases of 7 March 2006 (FCO Leniency Notice).
Since 2002, there has also been a whistle-blowing hotline to receive insider information on potential violations of the ban on cartels, in writing or by phone, from whistle-blowers who reveal their identity and relationship (business or personal) to potential violations of the ARC. Furthermore, the FCO implemented an electronic whistle-blowing system to enable anonymous tip-offs in 2012. The system is accessible from the FCO website and guarantees the anonymity of whistle-blowers.Investigative powers
The ARC provides the FCO with several investigative powers to enforce the ban on cartels (Section 57 et seq., ARC). These include, in particular, testimony of witnesses and experts; requests for the disclosure of market data and documents or information on the economic situation of undertakings, their affiliated undertakings and associations of undertakings; unannounced inspections at corporate and residential premises; examination of business documents; seizure of original documents; and copies and seizure of hard drives and data stored in electronic devices.Further guidance
The FCO often releases further guidance and information materials on cartel prosecution. These include guidelines and notices (e.g., the de minimis notice of March 2007), guidance documents (e.g., 'Guidance note on the prohibition of vertical price fixing in the brick-and-mortar food retail sector' of July 2017), and information leaflets and documents (e.g., leaflet on the cooperation of small and medium-sized enterprises (SMEs) of March 2007, brochure on effective cartel prosecution of December 2016, annual reports and biannual activity reports), which are all available on the FCO website.iii Cartel enforcement in practice and figures
The FCO enforcement powers capture:
- classical price-fixing, output, territory or customer allocation, and bid rigging (hardcore cartels), including when facilitated by third parties;
- exchanges of competitively sensitive information between competitors (e.g., current or future prices, volumes, business strategies, market behaviour), including when facilitated by third parties;
- certain competitors' cooperation arrangements (e.g., joint purchase agreements, licensing agreements, supplier consortia); and
- vertical price-fixing (i.e., fixed and minimum resale price maintenance (RPM)).
In November 2019, the FCO stressed that the ban on cartels may also cover market behaviour influenced by collusive algorithms. However, there are no FCO precedents in this area yet.
Enforcement figures show that the FCO actively pursues violations of the ban on cartels. The leniency programme and tip-offs via whistle-blowing tools continue to play an important role in the uncovering of violations of the ban on cartels. Nonetheless, there is a perceived decline in the number of leniency applications due to the increased risk of follow-on private litigation. In 2018, the FCO received 25 leniency applications in 20 proceedings, and approximately 550 anonymous tip-offs and 180 concrete tip-offs were registered in between 2017 and 2018. Additionally, the FCO is continuing to make wide use of the investigation tools provided by the ARC. For instance, in 2018 the FCO carried out unannounced inspections at 51 corporate premises and five residential premises in relation to seven cartel investigations. In the same year, the FCO imposed fines of approximately €376 million (approximately €374 million on undertakings or associations of undertakings) for violations of the ban on cartels. Fines were generally calculated based on 10 per cent of the turnover achieved from sales of the cartelised products or services in Germany during the existence of the cartel. In the vast majority of cases, the FCO also reduced initial fines due to both the active cooperation of the parties concerned and settlement agreements. Fines challenged in the Higher Regional Court of Düsseldorf are often increased as the appeals court bases fines on 10 per cent of the group's worldwide turnover.
On the spectrum of private litigation, in Germany the number of follow-on damages claims arising from decisions issued either by the FCO or the Commission are continuing to increase. Although there are no official statistics on follow-on damages claims, it is estimated that 'over the last two years there were 640 new private litigation claims in Germany and most of the them – around 300 – were related to the Trucks cartel'.