The German competition authority (Bundeskartellamt) published this week new guidelines for the calculation of fines for antitrust infringements, which will be applicable with immediate effect.
These changes introduce less predictability and potentially larger fines for antitrust infringement in Germany.
Reasons behind the change
Under German law, fines imposed on a company involved in an antitrust infringement can be set as high as 10 % of annual group worldwide turnover. Under its former fining guidelines, the Bundeskartellamt set fines primarily as a percentage of the turnover a company had achieved in the cartel-affected market during the cartel period. Where the resulting amount exceeded 10 % of annual group worldwide turnover, the Bundeskartellamt capped the final amount of fine at that level. This approach mirrored that taken by the European Commission in its fine setting practice.
In a 26 February judgment concerning a cement cartel, the Federal Supreme Court found this practice unlawful, and held that the 10% maximum fine does not constitute a cap but the upper limit of the fining range. The Court held that the Bundeskartellamt may only impose fines up to the 10% ceiling for the worst conceivable antitrust infringements (e.g. price fixing over a long period of time).
Fines under the new guidelines
The new fining guidelines provide for a new three-step method to determine antitrust fines. As a first step, an amount of 10 % of the turnover achieved in the cartel-affected market during the cartel period will serve as the basis for the calculation. As a second step, that amount is multiplied by a factor between two (for small companies with an annual group turnover up to € 100 m) and six or higher (for companies with an annual group turnover of more than € 100 bn). Results below the statutory 10 % ceiling will serve as the upper limit for the fine, whereas if a result exceeds the statutory ceiling, 10 % of the company's annual group turnover will serve as the upper limit for the fine. In a third step, the authority will set a fine it considers adequate on the available scale up to the upper ceiling determined before. As part of this step, the authority will take into account both infringement-related criteria (e.g., the nature and duration of the infringement, the significance of the affected market and the degree of organisation among the cartel members) and offender-related criteria (e.g. the role a company played in the cartel, the degree of intent or negligence, or preceding infringements).
Principal changes to the system
Under the old rules it was clear that the basic amount of a fine (albeit subject to adjustment for aggravating or mitigating circumstances) could not exceed 30 % of the turnover achieved during and from the antitrust infringement. The exact percentage, which the authority applied, already took into account the nature, gravity and duration of the infringement. Furthermore, it was clear that the determined basic amount could not be more than doubled for reasons of deterrence. By contrast, under the new guidelines, an amount of between 20 % and 60 % (depending on company group size) of the turnover achieved during and from the antitrust infringement will serve as the fine ceiling before nature, gravity and duration of the infringement are allowed for. Any individual infringement-related or offender-related circumstance of the case will be applied as the third step of the calculation, and, unlike before, there will be no explicit limit to a deterrence increase to 100 % of the fine.
The Bundeskartellamt is of the view that, although general fining levels will not change significantly, fines upon smaller companies with one major product will decrease, while higher fines may in the future apply to multi-business companies active in several markets and engaging in cartels relating to only one specific product. Our assessment is that this may prove correct in a majority of cases. It is, however, conceivable that for an antitrust infringement of the same nature, gravity and duration, a one-product company with an overall low turnover may be fined significantly more than a multi-business company involved in a cartel with only one product generating relatively little income. This may give rise to appeals on grounds of discrimination. It is striking that in the new fining guidelines, the Bundeskartellamt takes the view that an adequate fine may be determined without looking at the precise effects which the infringement had on the market. It is a fundamental principle under German law that the effects of conduct be taken into account in determining the level of fine. In that respect, we doubt that the Bundeskartellamt's general statement, according to which extra profits resulting from a cartel may be completely disregarded for the quantification of an adequate fine, can endure.
The new fining guidelines make an attempt to respect the statutory constraints of fine setting as interpreted by the Federal Supreme Court. They do this, however, at the price of less predictability for antitrust fines in individual cases going forward.