Use the Lexology Getting The Deal Through tool to compare the answers in this article with those from other jurisdictions.
What is the general attitude of business and the authorities to competition compliance?
While especially larger companies already have compliance management systems (CMS) with (chief) compliance officers (CO) in place, smaller businesses make use of professional advice, eg by using seminars to train their employees or by involving external experts to provide specialised compliance guidelines for high-risk scenarios.
In addition, recent legislation and changes in the decisional practice of the Federal Court of Justice (FCJ) have resulted in considerable incentives to implement and maintain CMS.
The FCJ has, in a recent decision, recognised CMS as a possible mitigating factor when setting administrative fines. Although the decision refers to a breach of tax law, its reasoning applies to cartel infringement, too. It as been found that when CMS has been installed after the infringement this may still have a positive effect.
Also, cartel infringements may now be registered in a centralised register. The law allows companies to go through a process of ‘self-cleaning’ to achieve deletion of infringements before the ending of the regular period after which all entries are purged. Part of the ‘self-cleaning’ process are appropriate compliance measures. The legal framework has, therefore, further shifted towards a positive recognition of CMS.
Government compliance programmes
Is there a government-approved standard for compliance programmes in your jurisdiction?
As of now, there is no generally and officially approved standard for compliance programmes in Germany. Different ministries do, however, hand out guidelines relevant to specific aspects of compliance programmes. Besides these, there is the option of using existing ISO-Standards such as the CMS Standard ISO 19600. Also, various associations provide guidelines on compliance programmes to their members. While not officially endorsed or supported by the federal government, these standards may serve as a reference when designing and implementing a CMS.
Applicability of compliance programmes
Is the compliance guidance generally applicable or do best practice and obligations depend on a company’s size and the sector of the economy it operates in?
There is no de minimis rule when it comes to compliance or infringements of competition law. The scope of necessary compliance measures depends on the specific risk factors and the structure of a certain company rather than on its size. Nevertheless, it might be argued that a small or medium enterprise (SME) does not have the same resources at its disposal for compliance as a larger company.
If the company has a competition compliance programme in place, does it have any effect on sanctions?
The Federal Court of Justice, in October 2017, acknowledged that implementation of a CMS should be considered a factor when setting fines for anticompetitive behaviour. According to the decision, the presence of a (working) CMS may even be considered where such a system is introduced after an infringement. The Federal Cartel Office (FCO) mentions the usefulness of compliance programmes for possible whistle-blowing and as a sign for the effectiveness of enforcement. There have, however, not been any decisions by the FCO yet that take the introduction of a CMS into account when setting fines.
So far, CMS were predominantly important when it came to the question whether the management of companies may be held responsible for violation of organisational and supervisory duties. According to the leading case Neubürger, management has an obligation to implement and constantly supervise a working CMS in order to avoid liability for illicit behaviour and damages resulting thereof. With the addition of a likely mitigating effect, there is a significant additional incentive to introduce and manage a working CMS.
Implementing a competition compliance programme
Commitment to competition compliance
How does the company demonstrate its commitment to competition compliance?
Companies demonstrate their commitment externally by publishing own codes of conducts, implementing Compliance Officers, using supplier codes of conduct, by ISO 19600 certification or compliance audits. Another practice that has become increasingly common is to attempt to pass on compliance requirements to business partners or suppliers. Internally, companies use the ‘tone from the top’ approach to encourage employees to comply with the codex (eg, by issuing a letter from top management addressing competition compliance, holding regular compliance trainings and to provide best practice guidelines). Also, some companies reward employees for outstanding compliance achievements. In case of illicit behaviour, companies dismiss employees or even sue them to seek compensation for fines or damages the company has suffered because of infringements.
What are the key features of a compliance programme regarding risk identification?
The compliance programme must take notice of the specific risks a company is exposed to. These risks mainly depend on the business model of the company and the industry characteristics (eg, oligopolistic structure, high transparency, degree of product differentiation). In the first place, companies must identify the (typical) situations in which they get in touch with competitors (ie, at association meetings, due to joint ventures or consortia or even in the course of private events). Identified risks should then be categorised by likelihood of illicit behaviour occurring as well as by its estimated impact upon the company. Finally, it is necessary to identify the employees exposed to probable and severe risks to train their awareness and ability to identify risks in day-to-day business.
What are the key features of a compliance programme regarding risk assessment?
The initial risk assessment is conducted by the employee or company representative that has identified the risk. Of course, such risk assessment is of preliminary nature and must be reviewed by a compliance expert (eg, CO, external adviser). As a consequence, it is necessary to instruct and train employees how, when and to whom to communicate potential risks. Therefore, a good compliance programme provides communication channels and instructions for employees how to deal with identified or potential risks.
What are the key features of a compliance programme regarding risk mitigation?
Early identification and assessment of risks as described above are key features for risk mitigation in order to avoid illicit behaviour. As mentioned before, training and awareness of the key employees is crucial to avoid infringements. Also, risk-mitigation is important to reduce the negative impact in case an infringement has already occurred. Compliance programmes should, therefore, also feature measures and guidance on how to act in order to avoid or lower fines (eg, guidelines/trainings regarding ‘dawn raids’, leniency programmes, document hold rules) and reduce adverse reputational impact (eg, by guidance on communication or PR).
Compliance programme review
What are the key features of a compliance programme regarding review?
Review should be a firm part of any compliance programme. Key feature is the continuous adjustment of the programme to legal and economic developments, complaints by customers or other market participants, incidents within the company, or official investigations in the industry. In order to avoid ‘compliance fatigue’ and blind spots it is advisable to work with external experts (eg, for compliance trainings, ‘train the trainer’ concepts and guidelines for employees). Companies exposed to elevated risks, non-functional CMS or with plans to implement a CMS for the first time should initiate an external compliance audit to enable their compliance programme. Also, successful review requires the collection of accurate data and documentation of past events. It should be stressed that it may be prudent to store relevant information collected during the review with an external adviser benefiting from attorney-client privilege to avoid any possibility of coincidental discoveries.
Dealings with competitors
Arrangements to avoid
What types of arrangements should the company avoid entering into with its competitors?
Section 1 of the German Law against Restraints of Competition (ARC) is similar to article 101 TFEU, except for the inter-state clause. Therefore, any agreement restricting competition between companies by object or by effect is prohibited. Hardcore restrictions include price-fixing, quota cartels, customer allocation and market-sharing. Certain forms of cooperation between competitors may also be caught (eg, R&D and technology transfer agreements, consortia, joint ventures, etc) if not exempted or justified. Additionally, exchange or sharing of strategic information between competitors may be considered a violation of the ARC.
What precautions can be taken to manage competition law risk when the company enters into an arrangement with a competitor?
Risk identification and assessment regarding agreements with competitors should be part of any compliance programme. Employees involved should be trained and instructed in which cases they need to seek upfront advice from (legal) experts. In case of recurring agreements with competitors companies might provide sample contracts that are in line with competition law requirements. New developments in competition law (enforcement) should be monitored and agreements should be adjusted or even terminated on short notice if necessary. Also, company representatives should not exchange any strategic information with competitors in the event of negotiations without prior consent of the legal department or external advisors.
What form must behaviour take to constitute a cartel?
Like article 101 TFEU, section 1 ARC stipulates that any agreement, decisions by associations of undertakings and concerted practices restraining competition is prohibited. Thus, a concerted action is sufficient, a written agreement is not necessary. In a recent decision, the Higher Regional Court of Düsseldorf found that the mere exchange between suppliers of sweets regarding the content and status of negotiations with retailers points to a gentleman’s agreement and a common understanding of the participants in the sense of section 1 ARC.
If the prohibited behaviour is a restriction of competition by object, it is not necessary to show that the behaviour actually had an adverse impact on competition. However, a restriction by effect requires a robust test in order to show the negative effects.
Negligent infringements are caught by section 1 ARC, but, in general, mere attempts of collusion do not fall within the scope of section 1 ARC. However, the decisional practice endorses a rather broad approach. For example, the European Court of Justice ruled in a recent decision of 26 January 2017, Rs C-609/13 P, Badezimmerkartell Duravit that contacting a competitor and attempting to agree upon prices constituted a behaviour prohibited under article 101 TFEU. This approach is applicable to German competition law, too.
Moreover, section 21 ARC catches unilateral behaviour and stipulates that a company may not threaten or promise advantages to other undertakings in order to induce them to engage in conduct which is, inter alia, unlawful under section 1 ARC.
Under what circumstances can cartels be exempted from sanctions?
Until 2005, German competition law included a notification mechanism to initiate proceedings that made it possible for a cartel to be found legal. Nowadays, German competition law has changed towards a system of self-assessment. As a consequence, any cartel that is found to be illegal under section 1 ARC may be subject to sanctions. There is no exemption except for an application for leniency.
However, there are legal stipulations that exempt ‘cartels’ from being illicit. Section 2 paragraph 1 ARC matches article 101 para 3 TFEU and declares cartels as legal, if they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and as long as they do not impose restrictions on the companies concerned that are not indispensable to the attainment of these objectives, or allow eliminating competition in respect of a substantial part of the products in question. Also, section 2 paragraph 2 ARC makes all EU block exemptions applicable on national level (ie, block exemptions regarding vertical restraints, technology transfer, R&D, and the motor vehicle sector).
In addition, there is a specific German exemption for cartels formed by SMEs, section 3 ARC. It covers agreements between competing SMEs whose subject matter is the rationalisation of economic activities through cooperation, if the agreement does not have significant anticompetitive effects on the market and does increase the ability of SMEs to compete on the market. However, this exemption is applicable only in case the inter-state clause of article 101 paragraph 1 TFEU is not fulfilled.
Can the company exchange information with its competitors?
Exchange of strategic information between competitors is caught by section 1 ARC. In general, the assessment in Germany whether or not information is of strategic nature follows the guidance provided by the European Commission in its Horizontal Guidelines (Offical Journal 2011 C 11/01 paragraphs 86 et seq).
The decisional practice is very strict and also punishes unilateral flows of strategic information, if the receiving undertaking does not expressly reject the information. Also, in a recent decision, the Higher Regional Court of Düsseldorf found that the status and the subject of negotiations with grocery retailers are strategic information and, therefore, may not be exchanged by competing suppliers of sweets. Furthermore, the FCO prohibited suppliers of concrete from publishing general price lists, since this was considered as illegal price signalling. Instead, concrete suppliers committed themselves to submit specific price lists to individual customers.
Cartel leniency programmes
Is a leniency programme available to companies or individuals who participate in a cartel in your jurisdiction?
The FCO has a leniency programme in place that grants immunity from and reduction of fines to cooperating companies in cartel cases (see Notice No. 9/2006 of 7 March 2006).
The leniency programme is limited to horizontal agreements. The FCO has, however, applied the same principles and granted full leniency in cases of vertical resale price maintenance as well.
General requirement for leniency application is that the applicant is willing to fully cooperate on a continuous basis with the FCO, especially by providing verbal and written information and, where available, evidence that enables the FCO to prove the offence. Also, the applicant must neither be the only ringleader of the cartel nor have coerced others to participate in the cartel.
If these requirements are met, immunity from fines is granted if the applicant is the first participant in a cartel to contact the FCO before it has sufficient evidence to obtain a search warrant, or, in case the FCO already is in a position to obtain a search warrant, if the applicant is the first participant in the cartel to contact the FCO before it has sufficient evidence to prove the offence.
The FCO still may grant a reduction of the fine of up to 50 per cent for applicants that do not receive immunity, either because they are not the first applicant or because their application is submitted after the FCO has sufficient evidence to prove the offence. The percentage of reduction is based on the value of the contributions to uncovering the cartel and the sequence of applications.
The FCO does not disclose the identity of applicants to third parties for the duration of its proceedings. The FCO may, however, disclose the identity of leniency applicants to other cartel members in the course of its investigations. Also, the FCO issues press releases on its website regarding closed cartel proceedings in which the identity of the involved companies and possible leniency applications are usually made public.
Can the company apply for leniency for itself and its individual officers and employees?
Yes, leniency is granted to the company and all its individual officers and employees named in the leniency application. In practice, companies depend on their employees to provide information on the cartel to the FCO. In exchange, the company (and the FCO) grant immunity or reduction of fines also to the employees willing to cooperate.
Can the company reserve a place in line before a formal leniency application is ready?
Yes, the FCO’s marker system is part of its leniency programme described above. Since the sequence of applications is crucial to receive immunity or a high reduction of a fine, leniency applications start with setting a marker at the FCO. The timing of the placement of the marker is decisive for the status of the application.
Setting a marker requires an applicant to contact the head of the Special Unit for Combating Cartels or the chairman of the competent decision division and to declare his willingness to cooperate. The marker may even be set orally and in German or English language. The applicant must give details about the type and duration of the infringement, the product and geographic markets affected, the identity of those involved and with which other competition authorities’ applications have been or are intended to be filed.
After receiving a confirmation that the marker is set, the applicant has a total time frame of up to eight weeks to draft a complete leniency application. If the applicant fails to post the complete leniency application timely, the case handler may decide to allow other applicants to take over the marker.
If the company blows the whistle on other cartels, can it get any benefit?
There is no specific rule or even reward for blowing the whistle on other cartels than the ones the company is involved in.
Dealing with commercial partners (suppliers and customers)
What types of vertical arrangements between the company and its suppliers or customers are subject to competition enforcement?
Section 1 ARC catches any possible vertical agreement restraining competition, in particular resale price maintenance, exclusive distribution and non-compete obligations. The legal framework is very similar to the EU, since the vertical block exemption regulation (VBER) is fully applicable to German competition law pursuant to section 2 paragraph 2 ARC. As a consequence, the Vertical Guidelines of the European Commission provide important guidance on vertical restraints in Germany, too.
The FCO is very active in relation to vertical restraints. This is especially true with regards to resale price maintenance between suppliers and retailers. More recent cases include the request of a producer of outdoor jackets towards retailers not to reduce consumer prices and not to include the company’s products in any discount sales. In a similar case, manufacturers and retailers of furniture were fined by the FCO for illicit resale price maintenance. Additionally, the FCO recently issued guidelines on price maintenance and common negotiation practices in the food retail industry, providing an introduction to the FCO’s assessment of these practices.
The FCO is also very sceptical regarding ‘platform bans’ (ie, suppliers urging retailers not to distribute products via online platforms such as Amazon, eBay). A recent example is the ASICS decision. The FCO’s decisional practice on platform bans may not be fully in line with the ECJ’s Coty decision. Also, the Higher Regional Court of Frankfurt allowed premium backpack manufacturer Deuter to ban online platforms within its selective distribution system since Deuter’s aim was to signal a higher product quality.
In another vertical restraints case, the FCO found the practice to prohibit use of price comparison search engines or online marketing tools like AdWords to be anticompetitive. The decision was upheld by the Federal Court of Justice.
Furthermore, the FCO is of the opinion that the practice of online travel agencies (OTAs) prohibiting hotel operators from offering lower rates for rooms on their own websites than on the OTA’s platform is illicit. However, the Düsseldorf Higher Regional Court has recently found that the Vertical Block Exemptions Regulation (VBER) was applicable to parity clauses and that these clauses weren’t hardcore restrictions. As a consequence, parity clauses may be exempted where the company fulfils all other requirements, especially market share thresholds.
Would the regulatory authority consider the above vertical arrangements per se illegal? If not, how do they analyse and decide on these arrangements?
Other than for horizontal agreements, the distinction between ‘by object’ and ‘by effect’ is not very developed in relation to vertical arrangements. However, given the application of the VBER on German competition law the following general lines can be drawn: any vertical arrangement falling within the VBER exemption is ‘per se legal’. Any vertical arrangement caught by article 4 of the VBER (hardcore restriction) is ‘per se illegal’. Other vertical arrangements need to be examined very carefully. The EC’s Vertical Guidelines provide important guidance also for German competition law.
Under what circumstances can vertical arrangements be exempted from sanctions?
If a vertical agreement complies with the Metro criteria, the agreement is not considered to be anticompetitive and, thus, does not fall within the scope of article 101 para 1 TFEU. The Metro criteria are met, if the characteristics of the product require a selective distribution system, resellers are chosen on the basis of objective criteria of a qualitative nature which is determined uniformly for all potential resellers and applied in a non-discriminatory manner, and the restrictions do not go beyond what is necessary.
Also, vertical arrangements are not unlawful, if they fall within the scope of the VBER, or if the exemption for individual arrangements pursuant to section 2 para 1 ARC in conjunction with article 101 para 3 TFEU applies.
As regards leniency, the FCO has not issued a formal leniency programme for vertical restraints. However, it follows from its decisional practice that the FCO grants leniency to companies in cases of vertical restraints under the same conditions as for horizontal agreements.
How to behave as a market dominant player
Determining dominant market position
Which factors does your jurisdiction apply to determine if the company holds a dominant market position?
The most important factor to determine a dominant market position under German competition law is the company’s market share. Section 18 paragraph 4 ARC stipulates that an undertaking is presumed to be dominant if it has a market share of at least 40 per cent. While section 18 paragraph 3 ARC contains a non-exhaustive list of various other factors (eg financial strength, entry barriers, links with other undertakings) to determine a dominant market position, the market share assessment prevails. The newly introduced section 18 paragraph 3a ARC lists non-exhaustive factors (eg, networking effects, multi-homing, data access), which are used to assess a dominant market position on multi-sided markets and networks and thus, aims at digital markets.
As a precaution, companies with an estimated market share of 40 per cent or more on any relevant market should either conduct an in-depth analysis whether they hold a dominant market position or avoid any behaviour that may constitute abusive behaviour.
It is noteworthy that German competition law expands the scope of application regarding abusive behaviour to companies with relative market power (section 20 ARC). A company has relative market power if SMEs as suppliers or purchasers of a certain type of goods or commercial services depend on them in such a way that sufficient and reasonable possibilities of switching to other undertakings do not exist.
Abuse of dominance
If the company holds a dominant market position, what forms of behaviour constitute abuse of market dominance? Describe any recent cases.
Section 19 ARC prohibits any abuse of a dominant market position. Section 19 paragraph 2 ARC contains a non-exhaustive list of examples of abusive behaviour (eg unfair impediment, discrimination, essential facilities doctrine, etc), similar to article 102 TFEU. More importantly, the decisional practice shaped case groups for abusive behaviour (eg predatory pricing, unfair rebate schemes, margin squeeze, refusal to supply).
Recent cases of the FCO include abusive use of exclusivity clauses by a dominant ticketing-agency and abusive price-setting by district-heating companies. In early 2018, the FCJ confirmed an earlier decision of the FCO in which the FCO had considered certain demands for rebates, inter alia, merger-related rebates (marriage rebates) an abuse of market power. The above-mentioned (see question 19) guidelines on certain forms of conduct in the food retail industry apply in situations of market dominance, too.
Under what circumstances can abusing market dominance be exempted from sanctions or excluded from enforcement?
Objective justification of certain behaviour of a dominant company is an integral part of the assessment under section 19 ARC. The ‘justification test’ is, in its very essence, close to the rule-of-reason test known and practiced in other jurisdictions. The court (or the relevant competition authority) will, on this level, weigh any legitimate interests against each other based on the basic principle that the main goal of the ARC is to maintain competition and keep markets open.
If the ‘justification test’ is negative, no further legal exemption from enforcement or sanction is available. However, it is in the FCO’s discretion whether it investigates or even fines certain behaviour. Most investigations of the FCO regarding abusing market dominance are closed by an order to end the infringement. Thus, the FCO will impose fines for abusing market dominance only if the company involved does not follow the order or in very clear cases of severe exploitive abuses.
Competition compliance in mergers and acquisitions
Competition authority approval
Does the company need to obtain approval from the competition authority for mergers and acquisitions? Is it mandatory or voluntary to obtain approval before completion?
Mergers and acquisitions require mandatory approval before completion, if:
- the transaction constitutes a concentration within the meaning of section 37 para 1 ARC;
- all companies involved together had a global turnover exceeding €500 million, one company involved a domestic turnover of more than €25 million and another company had a domestic turnover of more than €5 million in the last closed financial year before the decision of the FCO (section 35 paragraph 1 ARC); and
- the transaction is not subject to EU merger control.
The ninth amendment of the ARC, which came into in force on 9 June 2017, introduced a new size-of-transaction-test. The new test aims at catching transactions in digital markets that feature the acquisition of companies with high market relevance and purchase prices, but low (domestic) turnover (eg, acquisition of WhatsApp by Facebook). Under the new test, mergers also require mandatory approval if:
- the transaction constitutes a merger within the meaning of section 37 paragraph 1 ARC;
- the total turnover of all companies involved exceeded €500 million;
- one of the parties to the merger has exceeded domestic turnover of €25 million;
- neither the target nor any other further party (except for the seller!) to the merger has exceeded a domestic turnover of €5 million;
- the value of the consideration for the merger exceeded €400 million; and
- the target has significant business activity in Germany. As a result, the size-of-transaction-test is not met if the target’s turnover exceeds €25 million and the seller’s turnover exceeds €5 million.
All parties to the merger are responsible to notify the transaction to the FCO including the seller in cases where assets or shares are sold.
How long does it normally take to obtain approval?
In the first phase the FCO has to take a decision within a one month period from receipt of the complete notification. If the FCO does not take any decision within this period the merger is automatically cleared. If the FCO needs to further examine the transaction it may initiate a second phase with a total period of four months from receipt of the complete notification. The parties to the merger and the FCO may agree to extend the decision period beyond four months. A fast track procedure is not available. However, depending on the work load of the decision division and the arguments of the parties the FCO may clear cases on short notice.
If the company obtains approval, does it mean the authority has confirmed the terms in the documents will be considered compliant with competition law?
The effect of merger clearance by the FCO is limited to merger control stipulations and does not cover other possible compliance concerns. In fact, the FCO usually does not look into any documents containing the terms of the merger in further detail than already included in the application as such (eg, MOU, SPA, etc). As a consequence, the FCO may open investigations, either simultaneously to merger proceedings or at a later stage, to address competition concerns that go beyond the mere concentration process triggered by the merger. For example, the FCO recently analysed a series of regional joint ventures (JVs) between competitors in the German asphalt industry, albeit the fact that a lot of them were cleared by the FCO in merger proceedings in the past. However, since the FCO found some of these JVs to infringe the prohibition of restraining competition pursuant to section 1 ARC it ordered these JVs to be dissolved.
Failure to file
What are the consequences for failure to file, delay in filing and incomplete filing? Have there been any recent cases?
In case of a failure to notify the FCO may impose a fine on the responsible companies. Any transactions or agreements that aim to implement the concentration before clearance are considered legally void. A company may, in particular, be fined for not notifying at all, but also for implementing a merger after applying but before obtaining clearance by the FCO (gun jumping). The FCO usually does not impose fines in case of incomplete filings. However, incomplete filings lead to extended procedures as the clock does not start to run until the filing is complete.
In the case Druck- und Verlagshaus Frankfurt/M the publishing house Druck- und Verlagshaus Frankfurt/M (DuV) acquired its competitor Frankfurter Stadtanzeiger GmbH. The FCO found that DuV had intentionally refused to notify and that the merger could not be cleared under the ARC because of its material adverse effects on competition. DuV was fined €4.13 million and the merger was found illegal.
A more recent example is Marienhaus/Barmherzige Brüder. The case is particularly interesting because the parties - both owners of numerous hospitals and social centres - completed multiple mergers that triggered an obligation to notify. The parties founded an association with only few members owning a hospital for the purpose of restructuring. Owing to changes in membership control over the association and over the hospital changed repeatedly. The FCO discovered these events coincidentally as part of different merger control proceedings. Although the FCO did not fine the companies, as a result of negotiations, the parties agreed to significant structural and unbundling measures.
Investigation and settlement
Under which circumstances would the company and its officers or employees need separate legal representation? Do the authorities require separate legal representation during certain types of investigations?
Companies and their officers or employees need separate legal representation if the FCO not only accuses the company of having violated competition law but also certain representatives. Employees which are not listed as suspects do not necessarily require separate legal representation, for example, if they ‘speak for the company’ as part of a leniency application. However, in case of any conflict of interests between the company and employees providing information to the FCO separate legal representation is indicated.
For what types of infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?
Dawn raids are usually used in cartel investigations in order to avoid that companies involved make documents unavailable that may prove tacit collusion with competitors (eg, agendas, travel expense reports, correspondence). The FCO will search any premises in which such information may be available. This includes, in particular, offices and cars of the company’s management and sales representatives. In rare cases, the FCO may also search accommodations of employees, if the authority assumes that sensitive documents have been stored in private rooms.
While the FCO may as well conduct dawn raids to investigate any other infringement under the ARC, in these cases the authority tends to issue requests for information in order to collect the necessary information from the companies involved.
The procedural rules for dawn raids conducted by the FCO are identical to those for searches by any other criminal investigation body in Germany as set forth in the German Code of Criminal Procedure. In particular, the FCO requires a specific search warrant issued by a court.
What are the company’s rights and obligations during a dawn raid?
The company may ask to check the FCO’s search warrant and have a company’s representative as well as attorneys present during the entire dawn raid. The FCO is required by law to hand over a protocol and a list of all objects seized. Companies may ask to copy (certain) documents seized by the FCO.
Undertakings and their employees are obliged to comply with basic requests (eg, stop blocking doorways, not to hinder the movement of the FCO’s personnel) but are not obliged to support the authorities. Employees being suspects in the investigations have the right to remain silent. Other employees that are interviewed or asked questions as witnesses have the right to be assisted or represented by an attorney.
Is there any mechanism to settle, or to make commitments to regulators, during an investigation?
It is at the discretion of the FCO whether it initiates administrative or fine proceeding. The former are usually closed by an order to end (possible) illicit behaviour, the latter by imposing a fine. The FCO may switch from one to another in the course of the proceedings at its own discretion.
In the course of an administrative procedure a company may offer remedies to avoid a final order. Remedies must be appropriate to resolve the competition concerns of the FCO.
Apart from leniency applications, fine proceedings may be closed by reaching a settlement. Settlement talks can be initiated by the FCO or by the undertakings investigated. If both, the FCO and the company, agree, the FCO will outline the relevant conduct that is the basis of the investigation and provide a range of the potential fine as well as information about other possible measures. If both sides agree on the fine the FCO will issue a settlement decision, which is a ‘shortened infringement decision’ containing only limited information as regards the facts of the case and the assessment of the infringement.
What weight will the authorities place on companies implementing or amending a compliance programme in settlement negotiations?
The FCO may recognise (future) compliance programmes as a mitigating factor when setting a fine. A recent decision by the Federal Court of Justice suggest that establishing a (functioning) CMS may be considered a mitigating factor when determining fines. However, it cannot be derived from the decisional practice of the FCO that such announcements by companies have led to (considerably) lower cartel fines yet.
Are corporate monitorships used in your jurisdiction?
No, corporate monitorships are not used.
Statements of facts
Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class actions or representative claims?
Claimants may use such statements in case they are available to them. Moreover, in civil damage claim proceedings courts are bound by a finding that an infringement has occurred to the extent that such finding was made in a final and non-appealable decision by the competition authority. The shortened fine notice issued by the FCO to close settlement proceedings is such a final and, after the period of appeal has expired, non-appealable decision. Therefore, the agreed statements are crucial for claimants. However, the FCO does not publish settlement decisions. Therefore, claimants either have to apply for access to the files or demand a copy from the defendants.
Invoking legal privilege
Can the company or an individual invoke legal privilege or privilege against self-incrimination in an investigation?
The privilege against self-incrimination fully applies in fine proceedings (ie, employees and company representatives treated as suspects have the right to remain silent). Correspondence with external legal advisors is privileged only to the extent to which the correspondence specifically serves to defend the client against criminal accusations. Other correspondence with external attorneys can be seized if it is found in the custody of the suspect or third parties. Correspondence of the company with in-house legal staff is, in general, not privileged.
What confidentiality protection is afforded to the company or individual involved in competition investigations?
Within few days after dawn raids in cartel cases the FCO may publish a press release stating the date of the dawn raids as well as the affected branch and the alleged infringement. However, the FCO will not disclose the names of the involved companies during its investigations. If the FCO finds a breach of antitrust law, it is obliged, once the investigation has been closed, to publish information via its website regarding the facts of the case, the nature and the time period of the infringement, the companies involved in the infringement and the affected goods or services. This newly introduced obligation serves to help potential cartel damage claimants.
In order to obtain more information, eg to seek damages, third parties must apply for access to the files. The FCO will release documents from the file in redacted form only, ie usually any business secrets and personal information is redacted.
Refusal to cooperate
What are the penalties for refusing to cooperate with the authorities in an investigation?
In fine proceedings the mere non-cooperation is not punishable by any means as far as the privilege against self-incrimination applies. Where the privilege does not apply, the FCO may issue a formal request for information in order to make companies disclose certain information. A company that fails to answer the request for information properly (ie, correctly, completely and in time) may be fined with up to €100,000.
Is there a duty to notify the regulator of competition infringements?
No, neither companies or individuals involved in infringements nor third parties are obliged to notify infringements they are aware of.
What are the limitation periods for competition infringements?
The limitation period for infringements regarding the prohibition of agreements restraining competition and abusive behaviour of dominant market positions is five years. Other infringements (eg, failure to properly answer a request for information) have a limitation period of three years. Continued violations are considered as single infringements. Therefore, for example, the limitation period for a continued cartel does not start before the cartel has been expressly abandoned. As a consequence, a failure to notify a merger never becomes time-barred.
Are there any other regulated anticompetitive practices not mentioned above? Provide details.
German competition law contains special provisions in relation to unilateral behaviour restraining competition. For example, section 20 ARC expands the scope of the prohibition of abusive behaviour to market participants that do not have a dominant, but a strong market position. Under these provisions the FCO found it to be unlawful that a German grocery retailer with an overall market share of approximately 25 per cent asked its suppliers to pay one-offs and to accept less favourable conditions after the retailer acquired a competitor without offering suppliers adequate consideration in exchange.
Are there any proposals for competition law reform in your jurisdiction? If yes, what effects will it have on the company’s compliance?
There are no concrete proposals pending at this time. However, the political parties that have formed the next majority coalition in the parliament have recently addressed a number of competition-policy related topics in their agenda for the upcoming four-year term. According to the document, they intend to modernise antitrust law, to speed up proceedings and to increase market monitoring. Another goal is the creation of a digitalisation-friendly environment; however, plans are still quite vague in that respect.
Updates and trends
Updates and trends
Updates and trends
The FCO considers itself a leading competition authority as regards digital markets. It continues its investigations in that respect with the recent announcement of a sector inquiry into online advertising, raising the question of whether some advertisers were implementing closed systems (‘walled gardens’) that may harm competition. Furthermore, the president of the FCO recently stated that the FCO intends to safeguard open markets necessary for smaller online stores to compete. The FCO has also announced an investigation into price-comparison websites and data collection by smart TVs. The FCO, in December 2017, published its preliminary assessment in the Facebook case, dealing with connections between privacy and market power. Proceedings are, however, still ongoing.
The ninth amendment of the ARC included the introduction of changes to the ARC required by the Directive on Antitrust Damages Actions (2014/104/EU). The changes, inter alia, strengthen the position of claimants in and before civil court proceedings for cartel damages significantly. In 2017, a significant increase in cartel damage claims brought to German civil courts could be observed. It is to be expected that this trend will continue in 2018. The FCJ has not yet decided on two significant issues concerning the calculation of the limitation period relevant for cartel damages. These decisions can be expected for 2018 and may very well lead to a further increase in actions for damages, if the position of claimants is further strengthened. It is likely that companies will increase their compliance efforts to deal with the increasing risks posed by a higher probability of successful damage claims after an infringement.
On 29 July 2017, the law establishing a central competition register (Wettbewerbsregister) came into force. According to German antitrust law, companies involved in agreements restraining competition may be temporarily debarred from public procurements at the discretion of the public contractor. Companies that have committed certain offences, inter alia, cartel infringements, are registered as offenders in a centralised digital register. The information may be obtained from the register hosted at the FCO by any public contracting body and must be obtained above a contract value of €30,000. A specific registration will be deleted after five years at the latest.
In order to avoid debarment, a company may undergo a ‘self-cleaning’ process that includes the obligation to proactively cooperate with the investigating authorities and the public contractor in order to comprehensively clarify the facts and circumstances relating to the infringement and the damages caused thereof. The company must pay damages for any harm done by its illegal behaviour. In addition, it is necessary to take concrete technical, organisational and personnel-related measures that must be appropriate to prevent any further infringements. Such measures will, in most cases, include creation or improvement of a CMS. Hence it is likely that the introduction and the management of CMS will become a common follow-up measure after infringements - at least in industries where public contracting is of some importance.