Enforcement

Complaints procedure for private parties

Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?

The GWB does not provide for any formal complaint procedure for third parties with regard to vertical restraints. Any undertaking or person may, however, approach the FCO with information on possible infringements of the antitrust laws through vertical restraints. The decision to open formal proceedings is at the FCO’s discretion.

Regulatory enforcement

How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?

As the vertical block exemption is also applicable to purely German cases by virtue of section 2(2) GWB, most vertical restraints apart from hardcore restraints are permitted, up to market shares of 30 per cent (with the possibility of an individual exemption above this market share pursuant to section 2(1) GWB and article 101(3) TFEU). In recent years, the FCO has been active specifically with regard to legal or contractual or indirect resale price maintenance and the restriction of internet sales. In this respect, the FCO handed down a number of decisions regarding internet sales (see questions 32 and 33 for an overview of the FCO’s enforcement activities in the field of internet sales), most-favoured nation clauses (see question 24), exclusivity agreements and resale price maintenance.

In January 2010, the FCO started proceedings against a number of retailers and producers of branded products in the areas of coffee, confectionery and pet food, suspecting maintenance of artificially high prices for these products through vertical arrangements. In the course of these proceedings the FCO extended the investigations to other product areas, particularly the areas of beer, baby food, baby care and personal hygiene. Meanwhile, the investigation has finished with a considerable number of fines against both food retailers and producers of branded products.

In 2015 and 2016, the FCO imposed fines on several retailers for resale price maintenance in the beer business that amounted to €112 million in total. The FCO also imposed fines that amounted to more than €60 million on six food retailers and Haribo, a producer of confectionery, for their participation in a hub-and-spoke price maintenance system. A price maintenance system was also identified in relation to the coffee roaster, Melitta, which had already been fined for horizontal infringements with other coffee roasters in 2010. In addition, the FCO imposed total fines of about €50 million on five food retailers for participating in a hub-and-spoke cartel with Melitta. In 2016, the FCO finally imposed a fine in the amount of €5.25 million against Rossmann - for resale price maintenance of Melitta coffee products - that ultimately, in early 2018, was increased by more than 450 per cent to €30 million by the Düsseldorf Higher Regional Court in the course of Rossmann’s appeal against the FCO’s decision. Thus, the investigations in the consumer goods sector, which were initiated in 2010, resulted in total fines of €285.25 million.

See also question 21 regarding fines made against manufacturers and retailers in various sectors in 2014, 2015 and 2017. In 2016, the FCO fined the toy manufacturer Lego €130,000 for enforcing vertical resale price maintenance by threatening retailers with a reduction of, or refusal to, supply. In another case in 2016, five brand manufacturers of furniture were fined a total of €4.43 million for vertical price fixing in proceedings that were initiated because of complaints by retailers.

In ‘Restrictions of Competition in the Field of Internet Distribution after Coty and Asics’, the FCO describes a ‘renaissance of vertical price fixing and alternative restrictions of online sales’. Against this background, online sales restrictions and resale price maintenance continue to be an enforcement priority of the FCO.

What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?

Agreements that are contrary to section 1 GWB and are not exempted on the basis of section 2 GWB are prohibited by law and therefore, according to section 134 of the German Civil Code (BGB), null and void. According to section 139 BGB, the invalidity of one part of the agreement is usually regarded as an indication of the invalidity of the whole agreement. Section 139 BGB further provides, however, that the invalidity of the whole agreement will not be presumed if there is evidence that the agreement would also have been concluded without the invalid part. Whether this condition is fulfilled has to be assessed on a case-by-case basis. Where the invalid part is separable from the whole agreement and the agreement contains a severability clause, a presumption applies that the remaining parts shall remain valid.

May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?

The FCO may issue a cease-and-desist order according to section 32 GWB, requiring the undertakings to bring to an end the infringement of section 1 GWB, any other provision of the GWB or article 101 TFEU. Furthermore, according to sections 81 and 82 GWB, the FCO or the respective regional competition authorities have the power to impose administrative fines. The FCO or the regional cartel authorities are also competent to order the skimming-off of economic benefits gained through the intentional or negligent violation of section 1 GWB or article 101 TFEU through vertical restraints (section 34 GWB) to the extent to which this economic benefit has not already been skimmed off by the imposition of a fine. The administrative fine may be as high as €1 million and if imposed on undertakings as high as 10 per cent of the undertaking’s turnover in the business year preceding the administrative decision. The undertaking’s turnover comprises the worldwide turnover of all natural and legal persons acting as one economic entity. In 2013, the FCO issued updated guidelines on the setting of fines, an English version of which can be found on the FCO’s website at www.bundeskartellamt.de.

A trend that can be identified is the FCO’s focus on restrictions of online sales (eg, via platforms or price comparison websites). Some cases were also linked to resale price maintenance (see questions 21 and 50). With regard to ‘pure’ restrictions of online sales that do not concern resale price maintenance (such as platform bans, double pricing systems and most-favoured nation clauses imposed by sales platforms), no fines have yet been imposed, although the FCO has handed down cease-and-desist orders. However, with the FCO’s position in the field of online sales restrictions to be clarified and consolidated, it might be expected that fines will be imposed for such restrictions in the future.

Investigative powers of the authority

What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?

The cartel authority may conduct any investigations and collect any evidence required. The FCO may request the disclosure of information by way of an informal or a formal information request from the parties themselves or third parties, search business premises based on orders of the Local Court of Bonn, seize documents and interrogate witnesses or experts.

Private enforcement

To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?

Intentional or negligent infringements of section 1 GWB may lead to liability for the damage caused by these infringements. The EU’s Directive 2014/104/EU on antitrust damage actions in order to facilitate antitrust damage claims has been implemented into German law by the 9th amendment of the GWB, which came into effect on 9 June 2017. The new rules for private damage claims in section 33 to 33h GWB contain, inter alia, a refutable presumption that cartels lead to damages. Companies engaging in vertical restraints that infringe section 1 GWB are obliged to compensate other undertakings that suffered economic damage from the respective anticompetitive behaviour (section 33a(1) GWB). Further, they may be ordered to terminate anticompetitive conduct (section 33(1) GWB).

Claimants must be affected by the infringement (section 33(3) GWB). In the case of a vertical restraint, they will usually be members of the opposite market side; for example, suppliers or customers. Typical cases may involve distributors that are in a position to argue that the vertical restraint has been imposed on them by the other party owing to a weak negotiation position. The party winning the lawsuit can expect to be compensated for legal costs and to receive interest on the damages. If the FCO investigates a case, the parties suffering loss through vertical restraints may prefer to wait for the FCO decision before claiming private damages as the outcome of the decision establishes with binding effect whether the behaviour in question can be qualified as an anticompetitive vertical restraint (section 33b GWB). For instance, in 2013, the Düsseldorf Higher Regional Court awarded damages in the amount of approximately €800,000 to an online dealer of sanitary equipment (the further claim regarding additional €1.6 million was dismissed). In addition, the court held a manager to be liable for the payment of damages as well. These damages claims were preceded by a decision by the FCO in 2011.

However, there is also standalone private enforcement. This is illustrated by a judgment by the Federal Supreme Court that ordered a producer of branded school bags to abstain from inducing a member of its selective distribution system to raise its resale prices. The buyer had applied for a cease-and-desist order with the competent civil court. In 2013 and 2014, different courts handed down judgments in the context of selective distribution systems (regarding branded school bags and digital cameras). Also in this context, restrictions of online sales are playing an increasing role. Damages proceedings will normally take months, if not years.

In addition, section 33(4) GWB provides for the possibility of industry associations and consumer associations to bring lawsuits if they meet certain institutional criteria and represent a significant number of member undertakings that offer products or services competing with those of the defendant.