Cartelsi Significant cases
In 2018 the FCO imposed fines of around €376 million on 22 companies and trade associations as well as 20 individuals. The cases concerned a number of different sectors, in detail:
- In July 2018, the FCO imposed fines totalling approximately €205 million on six special steel companies, a trade association and 10 individuals for concluding price-fixing agreements and exchanging competitively sensitive information. The proceedings were initiated in November 2015 with a sector-wide dawn raid triggered by a leniency application. The leniency applicant escaped a fine. The companies fined admitted to the accusations and agreed to a settlement. Moreover, four of the companies had also cooperated with the FCO during the investigation, which was taken into account in the calculation of the fine. Investigations into four other companies and a trade association are still ongoing. The special steel products that were the subject of the agreements were generally sold based on a price model which essentially consisted of a so-called base price and surcharges for certain inputs, especially scrap and alloys. According to the findings of the authority, the steel producers had jointly agreed on and implemented a uniform method for calculating the scrap and alloy surcharges. There was also a basic agreement between the companies that the surcharges were supposed to be passed on to the customers on a 1:1 basis. The agreements were in place at least from 2004 until at the latest the dawn raid in November 2015. The FCO found that trade associations played a decisive role in the agreements: association meetings were used as a platform for implementing the cartel. Moreover, they also played an active role by processing and providing the companies involved with data for coordinating the scrap and alloy surcharges.
- In February 2018, the FCO imposed another fine on a harbour towage service provider for agreeing on quota cartels for several German ports. Other cartelists had already been fined at the end of 2017. In total, the FCO imposed fines of approximately €17.5 million on four companies and their representatives. All companies had agreed on a settlement. Furthermore, three of the fined companies had cooperated with the FCO. The leniency applicant was not fined.
- Also in February 2018, the FCO imposed a fine on another wholesaler for sanitary equipment – thereby concluding its investigation as regards a coordination with respect to the calculation of gross price lists and sales prices by wholesalers of sanitary, heating and air conditioning products over several years. Nine other companies had already been fined in 2015 and 2016. The fines imposed on the 10 companies and one individual amounted to approximately €23 million.
- Fines amounting to a total of €16 million were imposed on the newspaper publishing company DuMont, an individual responsible as well as – a rather unusual occurrence – a lawyer. In late 2000, DuMont and another newspaper publishing company agreed not to attack the other party's market shares. The agreement was flanked by a plan to establish cross-holdings between the two company groups as well as purchase and pre-emption rights for DuMont. The parties assumed that the cross-holdings would ensure that they would not 'ruin the markets' for each other. In order to 'formalise' this arrangement, the parties entered into an agreement that also included an allocation of circulation areas. This agreement was concluded at a notary in Switzerland in December 2000. As the parties were aware that the agreement would not be legally binding, they entered into a similar contract – only covering the proposed cross-holdings and pre-emption right but excluding the market allocation – at a notary in Germany at the same time. In March 2004, the parties notified the FCO of the proposed acquisition of 18 per cent of the shares by DuMont in the other publishing company. Owing to concerns raised by the FCO, the percentage of shares to be acquired was reduced to 9 per cent during the proceedings. Moreover, the parties also abandoned the pre-emption right that had originally been agreed upon. Nonetheless, the FCO prohibited the proposed acquisition. The parties challenged the prohibition decision before the Higher Regional Court in Düsseldorf. The court reversed the FCO's decision – in particular taking into consideration that the parties had abandoned the proposed pre-emption right. Following the decision of the court, DuMont acquired 9 per cent of the shares in its 'rival'. Shortly thereafter, the parties again agreed on a new pre-emption right for DuMont. The contract was again concluded at a notary in Switzerland and – not surprisingly – without informing the FCO. Moreover, a couple of months later DuMont increased its shareholding to the originally planned 18 per cent. The increase was discussed with the FCO – however, again without disclosing the pre-emption right. The contractual arrangements as well as the communication with the FCO were effected via a lawyer who advised DuMont group during the entire period and was actively involved in the operations. The parties eventually terminated their agreements in December 2016 and one of the companies filed a leniency application with the FCO. The authority conducted a dawn raid at DuMont's head offices and also at the law firm in which the lawyer involved is active. The leniency applicant in the case was not fined. Moreover, DuMont group and the individual responsible agreed to a settlement. In its press release as well as in the case summary, the FCO stressed the fact that the cooperation between DuMont and the other party to the agreement were not covered by the exemption for the press sector in Section 30(2b) of the German Act against Restraints of Competition (ARC) that was introduced in summer 2017. While this provision allows for cooperations between publishers to strengthen their economic basis for intermedia competition, the provision does not apply to price-fixing, territorial and customer allocation agreements.
- Fines of €13.2 million in total were imposed on two potato and onion packaging companies for fixing prices as regards their supplies to the Metro group. The proceedings against the two companies were initiated in May 2013 with a sector-wide dawn raid following a leniency application. According to the findings of the FCO, at least since early 2003 until the start of the proceedings, persons responsible at the companies involved had been in regular telephone contact with one another, especially in the run-up to the weekly offer for packed potatoes and onions. In their calls the company representatives informed one another of their purchase prices for potatoes and onions and agreed to use the same raw product price as the basis for their internal calculation of offer prices as well as the same or approximately the same amounts for other cost items.
- The last fining decision of 2018 concerned asphalt. The FCO imposed a fine of €1.43 million on a manufacturer of asphalt mixes for participating in a cartel involving prices, sales areas, customers and quotas for the supply of construction companies in the Rhine-Main area between 2005 and 2013. The cartel took the form of supplier consortia. The proceedings were initiated by a leniency application and the leniency applicant escaped a fine. The proceedings against another company – or rather its legal successor – were discontinued as the company had taken restructuring measures in order to make use of the so-called 'sausage gap'. The FCO pointed out that the companies involved in the cartel had been forming supplier consortia for years even though in most cases one company could have met the demand alone. Thus, the consortia mostly served to steady the market (i.e., to avoid competition for prices and bids among the participating undertakings). The fined manufacturer admitted to the accusations and agreed to a settlement.
As in previous years, the track record of the FCO in 2018 illustrates the importance of leniency applications and other tip-offs to uncover competition law infringements. Furthermore, the trend of reaching settlements with the undertakings involved in a cartel remains unbroken. However, there is a significant downward trend when it comes to leniency applications: from 59 in 2016 to 37 in 2017 to only 21 in 2018. Whether this is due to a reduction in cartel activity – as a result of greater awareness of such issues and increased compliance activities in many companies – or based on the ever-increasing risk and impact of follow-on damage claims remains to be seen.
Another noteworthy development in the area of cartel enforcement concerned the investigation into metal packaging manufacturers. The FCO had initiated cartel proceedings against the manufacturers in spring 2015 on the basis of an anonymous tip-off. However, in April 2018 the authority referred the ongoing proceedings to the European Commission. While the FCO explained that it had uncovered evidence that the alleged offences were not limited to Germany but affected a number of other EU member states as well, there seems to have been another and more important motive for the referral: during the proceedings of the FCO, some of the companies under investigation carried out corporate restructuring measures as a result of which the FCO might not have been able to impose a fine on such companies owing to the 'sausage gap'. The European Commission faces no such difficulties. The FCO had warned companies for years that it might refer cases to the European Commission to make sure that the cartel members would not profit from the loophole in German law. With this referral the FCO demonstrated that the warnings were indeed not only empty threats.iii Outlook
Irrespective of the downward trend in terms of leniency applications, uncovering and investigating cartels was again a key area of the FCO's activity throughout 2018 and can be expected to remain so in years to come. However, the FCO may have to resort to other tools and techniques in order to detect cartels outside of its leniency programme.