Contributed By SZA Schilling, Zutt & Anschütz
The statutory basis for challenging cartel behaviour/effects is the German Act against Restraints of Competition (ARC) (Gesetz gegen Wettbewerbsbeschränkungen, GWB). Section 1 prohibits cartel behaviour (see 1.4 Definition of "Cartel Conduct"). Article 101 of the TFEU applies in parallel and is equally subject to the Federal Cartel Office′s (FCO) (Bundeskartellamt) enforcement (unless the case falls into the European Commission′s jurisdiction). Sections 32 – 32e of the ARC confer certain administrative powers on the FCO, inter alia, to issue cease-and-desist orders.
Section 81 et seq of the ARC provides for the possibility of imposing administrative fines on cartel members (both natural and legal persons). These provisions have been enhanced and detailed by the tenth amendment to the ARC that entered into force on 19 January 2021. Further provisions on fines, particularly on the procedural aspects of fining proceedings, are contained in the German Act on Regulatory Offences (Ordnungswidrigkeitengesetz, OWiG), modified by the special provisions of the ARC to a certain extent. In addition, certain cartel conduct can fall under the Criminal Code, eg, bid rigging.
The provisions of the Criminal Code are only directly applicable to natural persons. Legal persons involved in criminal behaviour, such as bid rigging, may become subject to the provisions of the Associations Sanctions Act (Verbandssanktionengesetz), which was under discussion under the previous government. The current government is also planning to adopt a similar act, but the precise scope of such legislation is still unclear.
The most important public enforcer in the field of cartels in Germany is the FCO. If the conduct in question also amounts to a criminal offence (eg, in bid-rigging cases), the public prosecutor will also be in charge of the proceedings against the natural persons involved, while the FCO remains in charge of the fining proceedings against the legal entity. Section 48 of the ARC lists the Federal Minister of Economic Affairs and Energy and the Federal States′ Competition Authorities as Competition Authorities in the meaning of the ARC, but they only play a limited practical role. While the former only has specific powers in the field of merger control, the latter′s powers are restricted to cases with a regional scope.
Regarding the scope of liabilities within public enforcement, the most drastic sanction for legal entities is the possibility of administrative fines, which can amount to 10% of the undertaking′s annual turnover (Section 81c(2) of the ARC). For individuals, the fine can be up to EUR1 million, but fines for individuals are usually approximately equal to one yearly gross salary.
The tenth amendment to the ARC includes incorporating of the main parameters used for determining fines. The FCO thus revised its fining guidelines in October 2021 that still serve as rules for the FCO’s internal administrative practice. Section 81d of the ARC now contains a non-exhaustive codification of criteria that specify the overarching references to gravity and duration of the infringement, eg:
It is noteworthy that the FCO is now explicitly required to consider compliance efforts as a separate fining parameter. This concerns compliance efforts implemented before and after an infringement. The FCO has so far generally not considered such efforts as a mitigating factor and has only rather reluctantly accepted such efforts in the course of settlement negotiations.
In the revised fining guidelines, the calculation method was rendered somewhat more flexible, but the FCO does not expect the fine level to change significantly. In addition, the guidelines now codify for the first time the possibility of taking account of pre-cartel compliance measures as a mitigating factor (see 4.6 Relevance of “Effective Compliance Programmes”).
The FCO must also take a company′s financial capacity into account.
The Higher Regional Court of Düsseldorf, which has jurisdiction over appeals against the FCO′s fining decisions, is not bound by the FCO′s assessment of these fining parameters. It is also not bound by the FCO′s fundamentally different interpretation of the upper fine limit of 10% of the undertaking's total turnover. As a result, there has already been a series of cases where an appeal effectively led to a reformatio in peius with substantially higher fines. Since the tenth amendment to the ARC is silent on this aspect, further considerable discrepancies between the fines imposed by the FCO and the Court are expected.
Since 2017, the ARC has provided for liability of controlling entities triggered if a fine cannot effectively be recovered from the undertaking either because it ceased to exist following the start of the investigation or because important assets were removed from the undertaking in question.
The FCO can issue cease-and-desist orders (Section 32 of the ARC) or impose interim measures (Section 32a of the ARC). In administrative proceedings, the parties can also offer commitments that can be declared binding by the FCO (Section 32b of the ARC).
According to Section 34 of the ARC, the FCO may order the disgorgement of the economic benefit of the anti-competitive conduct and require the undertaking to pay a corresponding sum. This possibility exists irrespective of whether the FCO imposes an administrative fine or not (but is not very common in practice).
Contractual agreements which violate Article 1 of the ARC are automatically null and void by law, even absent any declaratory order by a competition authority.
Any person affected by cartel behaviour can claim damages arising from the infringement (Section 33a of the ARC). In addition, Section 33 of the ARC provides for the possibility of claiming for injunctive relief and rectification. These rights exist irrespective of whether a competition authority has previously investigated the case and issued a decision (follow-on claims) or not (standalone claims).
In a cartel damage claim, the factual findings of a binding decision by the FCO, the European Commission or national competition authorities from other EU member states are binding and cannot be rebutted by the defendants (see 5.1 Private Right of Action).
The law on cartel damage actions is one of the most dynamic fields of antitrust law in Germany, both in case and statutory law. In 2017, new provisions to overcome alleged hurdles to damage claims were introduced into the ARC (also in light of the EU damages directive). In the course of the tenth amendment to the ARC in early 2021, further amendments have followed.
In practice, however, most cases currently dealt with before the courts are not yet subject to these claimant-friendly provisions – these provisions only apply to damages that have occurred after 27 December 2017. The law applicable to older damages is less claimant-friendly, in particular regarding the burden of proof of damages and the causal link between the cartel behaviour in question and the specific damage.
Section 1 of the ARC prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices that have as their object or effect the prevention, restriction or distortion of competition. The definition is the same under Article 101 of the TFEU, with the additional requirement of an EU dimension.
According to the FCO′s Leniency Notice, cartels are “in particular agreements on the fixing of prices or sales quotas, market sharing and bid-rigging‟.
Section 33a (2) of the ARC explicitly contains a legal definition of the notion of a cartel. According to this provision, a cartel is an agreement or concerted practice between two or more competitors aimed at co-ordinating their competitive behaviour on the market or influencing the relevant parameters of competition. Such agreements or concerted practices include:
This narrower definition, which does not include any form of vertical agreements, covers important examples of prohibited cartel behaviour, but it is somewhat misleading in the general context of antitrust enforcement. It is limited in its scope of application as it only refers to the provisions on cartel damage claims and, in particular, to the burden of proof.
For the public and private enforcement of anti-competitive behaviour, only the broader definition of Section 1 of the ARC is relevant; other conduct, such as the exchange of competition sensitive information, can be classified as cartel behaviour and can entail significant fines.
Efficiency Defence and Exemptions
As with EU law, anti-competitive agreements or concerted practices can be exempt from the prohibition if they generate efficiencies, which are being passed on to consumers (Section 2 of the ARC). For small- and medium-sized enterprises, the conditions precedent for such an exemption are lower (Section 3 of the ARC). The assessment of whether or not a practice is exempt from Section 1 of the ARC lies in the responsibility of the undertakings (so-called self-assessment).
The FCO can issue no-action letters (Section 32c of the ARC) but is generally not obliged to do so. The tenth amendment has introduced an obligation to reply within six months to a request for a no-action letter in certain cases with significant legal and economic interest. Further details have been added as part of the tenth amendment.
In this regard, the FCO has recently been dealing with an increased number of co-operations and initiatives focusing on sustainability. In this regard, the FCO has emphasised its willingness to take sustainability goals into account when assessing co-operative arrangements between competitors. There are some general exemptions from the prohibition of cartels under Section 1 of the ARC for agricultural producers (Section 28 of the ARC), publishers (Section 30 of the ARC) and public water suppliers (Section 31 of the ARC).
The limitation period for the imposition of administrative fines for cartel conduct is five years from the termination of the infringement (Section 81 g ARC and Section 31 (3) of the OWiG). However, investigations by the FCO or other competition authorities, including the European Commission, lead to an interruption of the limitation period, ie, the five years start afresh after the termination of the investigative measures. The maximum limitation period in the case of an interruption is ten years.
The tenth amendment to the ARC specifies that the limitation period can be interrupted in case of certain requests for information. More importantly, the maximum limit of ten years can be extended by the time of court proceedings in the appeal of a fine. Thus, if court proceedings begin within ten years after the termination of the infringement and if the statutory limitation period has not yet expired, the imposition of fines will no longer be statute-barred, even if court proceedings take several years (which is not uncommon).
Private enforcement is subject to special limitation periods set out in Section 33h of the ARC. They are significantly longer than other civil law claims. The standard limitation period is five years, starting at the end of the year in which the injured party obtained knowledge of the circumstances giving rise to the claim (or would have obtained such knowledge absent gross negligence).
In addition, the infringement must have ended to trigger the limitation period, which is particularly important in the case of single and continuous infringements. Irrespective of such knowledge, claims become time-barred ten years after they arise and the infringement has ended.
Statute of Limitations
The statute of limitations for damages before 27 December 2017 provides for significantly shorter limitation periods. For these claims, the standard limitation period is only three years, irrespective of whether the infringement has ended or not.
The FCO′s powers follow an effects doctrine. According to Section 185 (2) of the ARC, the rules of the ARC can also extend to conduct that occurred outside Germany if they impact German territory.
The German courts′ jurisdiction over private claims follows the general rules of international procedural law, in particular, the Brussels Ia-Regulation. For instance, German courts have jurisdiction if at least one of the defendants is based in Germany or if the harmful event occurred in Germany.
Within the EU, the FCO co-operates intensively in the ECN network and regularly applies the principles of comity laid out in Article 12 (1) of Regulation (EC) No 1/2003. This provision allows the member states′ competition authorities and the Commission to exchange and use in evidence any matter of law or fact for the purpose of applying EU competition law. Details of the FCO′s powers concerning the exchange of information with other competition authorities and further details are laid out in Sections 50a to 50e of the ARC.
The FCO also co-operates with competition authorities outside the EU. Such co-operation can be based on bilateral agreements (eg, the Agreement with the United States Relating to Mutual Cooperation Regarding Restrictive Business Practices) or within multilateral networks, in particular, within the OECD.
During the COVID-19 pandemic, the desire for undertakings to co-operate with competitors took many forms, ranging from the exchange of competitively sensitive information or the establishment of a purchasing co-operation to the allocation of sales territories or customer groups and agreements on joint development, production or distribution of products. The admissibility of such a co-operation is generally subject to the self-assessment of the companies, therefore, companies continue to bear the risk of inadmissibility under competition law with all its consequences.
However, as a reaction to the COVID-19 pandemic, the FCO has been more willing to review individual cases on an informal basis, provide additional guidance for companies and issue comfort letters (Vorsitzendenschreiben). In a joint communication, the FCO, together with other national competition authorities of the EU member states, expressed the view that the current competition rules are flexible enough to take account of changing market conditions such as the social and economic impact of the crisis.
At the same time, authorities have repeatedly emphasised that they will prosecute hardcore cartel infringements without reserve and intervene against agreements that seek to exploit the current crisis, particularly the inappropriate raising of prices. However, the authorities have stated that they will not actively intervene against necessary and/or temporary measures to prevent supply shortages.
The legal framework, however, has generally been untouched by the COVID-19 pandemic. Changes to the law only addressed details, eg, a waiver of the obligation to pay interest on cartel fines for undertakings in financial difficulties until 30 June 2021.
The FCO has a vast scope of discretion as to whether and how to open proceedings. They are usually triggered by leniency applications (see 2.11 Leniency and/or Immunity Regime), formal or informal complaints, anonymous hints or the FCO′s own investigations, eg, from previous proceedings or sector inquiries. The FCO even operates a system for anonymous tip-offs via its website.
The first steps taken by the FCO depend on the nature of the infringement and evidence that the FCO has already obtained. In less severe or merely bilateral cases, the FCO may issue a statement of objections at an early stage and request that the suspects comment on it. The FCO can also issue formal requests for information or documents.
In hardcore cartel proceedings, the FCO will usually first hear the leniency applicant before initiating further steps. It will request as much information as possible to be in a position to initiate dawn raids (see 2.2 Dawn Raids). At this early stage of the proceedings, the FCO will try to ensure that the investigation remains highly confidential not to put effective dawn raids at risk and may even ask the leniency applicant to continue the cartel behaviour not to raise any suspicion.
Dawn raids used to be highly common in cartel investigations in Germany before the COVID-19 pandemic, and the FCO has been increasingly active again since the beginning of 2022. However, during 2020 and 2021, we have only seen a very limited number of searches. They can be conducted at the premises of the suspect, including private homes, but also at third parties′ premises. The obligations of a firm or individual faced with such an inquiry depend on whether they intend to co-operate with the FCO under the Leniency Notice or defend themselves.
In the latter scenario, persons affected by a dawn raid might nevertheless have an obligation to actively support the officials in their search, but they must tolerate it.
By contrast, if the undertaking has already applied or intends to apply for leniency or a reduction of fines under the Leniency Notice, it must fully and continuously co-operate with the FCO under the FCO′s Leniency Notice.
To conduct a dawn raid, the FCO needs to obtain a search warrant from the District Court of Bonn. A search warrant is only dispensable in case of imminent danger. The search warrant determines the scope of the search.
For instance, if the search warrant has been rendered in light of alleged infringements concerning customers in a certain territory, any evidence clearly related to other customers may not be seized under a search warrant. In practice, the FCO sometimes obtains extensions to the search warrant, or additional search warrants, from the court by an on the spot phone call.
The FCO usually takes copies of paper documents and portable electronic data and seizes original folders, phones, laptops and other parts of the IT infrastructure. It may also take a copy of the server for IT forensic experts to analyse at the FCO's premises in Bonn. This may include extensive screenings of emails, other electronic data and the recovery of deleted data.
Currently, officers or employees are neither required to actively support the FCO′s search nor respond to questions during a dawn raid unless duly summoned as witnesses.
However, Section 59b (3) of the tenth amendment to the ARC provides that the FCO shall be entitled to request access to documents or request information from directors and employees of the undertaking to get access to evidence or receive explanations on facts or documents. Non-compliance with this duty to co-operate would also entail a fine. Since this provision is new to the regime and is discussed controversially, we expect that its parameters and scope will be legally challenged before the courts.
The FCO is obliged to take minutes of the dawn raid, including lists of the individual pieces of evidence seized, and has to take these minutes to the case file. Access to files will be granted to legal counsel.
There are no specific rules on the spoliation of information in German competition law. The spoliation of information can qualify as a disruption of official activities (Section 164 of the Code on Criminal Procedure) and can lead to a temporary arrest while the official activities are ongoing. If this obstructs the public enforcement of criminal charges (eg, in the case of bid rigging), it can also amount to an obstruction of justice (Section 258 of the Criminal Code).
Criminal charges can also be applied if documents under official seizure are destroyed, damaged, rendered unusable, or removed or if premises sealed by the authorities are opened (Section 136 of the Criminal Code). If the undertaking concerned co-operates in the context of leniency applications or settlement proceedings, any spoliation of information will put the positive outcome of these endeavours at risk. In a defence scenario, any attempt to impair the FCO′s investigation would be considered an aggravating factor, which would increase the fine.
Any legal or natural person affected by an investigation has a right to a defence counsel (Section 137 of the Code on Criminal Procedure), and it is very important that suspects seek legal representation early on. External counsel and company counsel may be present during dawn raids, even though the FCO does not have to wait for the arrival of any counsel to start the dawn raid.
Company counsel may be present during the interview of an employee if the employee agrees, but they must not act as defence counsel of their employer or other employees of the undertaking under investigation (Section 46c of the Federal Lawyers′ Act or Bundesrechtsanwaltsordnung).
According to Section 146 of the Code on Criminal Procedure, any counsel can only act on behalf of one person in one proceeding. However, an exception to this rule is accepted with the simultaneous representation of the undertaking concerned and an individual (often a director) of the same undertaking. If several employees from the same company require legal representation, they need separate counsel, which can come from the same law firm. Once an undertaking and its counsel become aware of enforcement efforts, they must immediately decide whether it will co-operate with the FCO or defend itself. This decision determines all steps that follow. Regardless, a counsel will have to engage in extensive internal fact-finding to have a robust basis for any decisions and formulate the best strategic approach.
If the undertaking decides to co-operate with the authority under the Leniency Notice, a counsel will place a marker with the FCO (and potentially other antitrust authorities) as soon as possible and remain in close contact with the FCO. If the undertaking intends to defend itself against the allegations, the initial role of the undertaking (and counsel) is rather passive towards the authority until receipt of the statement of objections.
In addition, a counsel will need to assist in ensuring that the infringement ceases effectively and instruct staff accordingly. This may be different in a co-operation scenario if the FCO requests that the cartel be continued to guarantee the confidentiality of the investigation until further notice.
In fining proceedings, the hearing of witnesses follows Sections 48 et seq of the Code on Criminal Procedure. Interviews with the suspects follow Sections 133 et seq of the Code on Criminal Procedure, and the taking of evidence other than the hearing of witnesses is governed by Sections 94 et seq of the Code on Criminal Procedure. In a co-operation scenario, the suspects′ rights to refuse testimony under these provisions conflicts with the duty to co-operate to receive immunity or reductions of the fines.
The FCO is empowered to conduct all necessary investigations and collect all necessary evidence. Essentially, the FCO can interview witnesses, request and review information, conduct dawn raids and seize evidence.
The hearing of witnesses follows the general rules of the Code of Civil Procedure; witnesses can refuse their testimony under the conditions laid out in Sections 383 et seq of the Code on Civil Procedure (see 2.7 Attorney-Client Privilege). Further details are regulated in Section 57 (2‒6) of the ARC, eg, that witness statements must be recorded in writing. The FCO can also seize objects (including documents and data carriers) in accordance with Section 58 of the ARC.
The tenth amendment of the ARC has given additional powers to the FCO, inter alia, regarding requests for information. The authority can now widely request information from companies as long as the information is in possession of the company, including market studies and related analysis. Furthermore, the FCO may also review documents at the premises of a company during normal business hours (Sections 59 and 59a of the ARC).
Some of these new powers have been criticised as far too broad and vague in terms of constitutional law. However, practice will show how the FCO intends to use these powers.
The collection of evidence other than documents or testimony also falls under the wide legal basis described above. Leniency statements, witness testimonies and the seizure of documents and data carriers are the most important means of evidence.
As regards the production of documents (see 2.5 Enforcement Agency’s Procedure for Obtaining Evidence/Testimony), the relevant provisions in Sections 59 and 59a of the ARC do not differentiate between documents within or outside Germany.
German law does not specifically privilege attorney-client communication. The German Code on Criminal Procedure does, in principle, acknowledge attorneys′ right to refuse testimony and grants protection from the seizure of documents. In practice, these safeguards only apply regarding correspondence directly related to the defence in a particular case.
Any other correspondence, in particular, the results of internal investigations, may be subject to seizure. The Constitutional Court approved such a narrow understanding of the relevant provisions in its 2018 Jones Day decision.
The protection from seizure does not extend to in-house counsel unless the correspondence in the in-house counsel′s possession constitutes defence communication with external counsel.
Other Relevant Privileges
Generally, witnesses can refuse testimony for the reasons set out in Sections 383 et seq of the Code on Civil Procedure, for instance, a witness does not have to testify against close relatives. Section 384 contains a list of factual reasons that would allow refusing testimony, eg, if the testimony would entail the risk of being prosecuted for a criminal offence or an administrative offence (nemo tenetur).
However, the tenth amendment to the ARC contains a severe – and possibly too far-reaching – restriction to the principle of nemo tenetur. In case of requests for information (also in the context of dawn raids), the addressee may have to provide self-incriminating information if the FCO cannot obtain this information otherwise. The relevant information may then be used against the undertaking. However, its use against a natural person providing the information would require their prior consent.
Non-cooperation with the FCO may lead to a substantial fine in a number of situations, eg, when a request for information is not answered or if the response is incorrect, incomplete or belated. Companies may receive fines if they refuse access to their premises during a dawn raid or a request for a review of evidence. In addition, the obstruction of a dawn raid may lead to an additional fine, eg, by deleting evidence during the search, warning other companies or breaking an official seal.
It has to be noted, however, that there is no obligation under German law to notify a potential infringement to the authorities. Under the FCO′s Leniency Notice, only full and constant co-operation can lead to a reduction of fines.
Information and documents that need to be submitted to the FCO include confidential information such as business secrets. However, such information will not be published in the public versions of the FCO's decisions.
The FCO grants access to the file to the parties subject to the proceedings once the statement of objections has been issued. However, such access can only be obtained via external counsel, who are themselves legally bound to protect the business secrets of other parties. They may only forward such information where necessary for defence purposes.
Nevertheless, this bears the practical risk that confidential information may become available to competitors or third parties. Thus, parties to the proceedings should always consider the confidential information they are willing to disclose to the FCO.
Aggrieved third parties can also request access to the file; however, they will generally only receive the non-confidential version of the fining decision. Special rules apply in the context of civil claims for cartel damages (see 5.1 Private Right of Action).
There is no set procedure for defence counsel to raise arguments against enforcement. Facts and arguments can be brought forward at any time. However, in practice, it may be advisable for strategic reasons not to bring forward any facts or arguments before the FCO issues its statement of objections and counsel can get access to the file.
The FCO will usually set a deadline to reply to the statement of objections.
German law provides for a leniency programme which foresees full immunity for the first leniency applicant and substantial reductions of fines for subsequent applicants. Details are stipulated in the FCO′s Leniency Notice (Bonusregelung), recently aligned and the changes to the ARC after the tenth amendment (Sections 81h to 81n of the ARC). The revised guidelines emphasise the importance of personal statements by individuals directly involved in illicit behaviour. In addition, the FCO is now expressly required to provide information in the event of proceedings being discontinued.
The leniency programme is available to natural persons, undertakings and associations of undertakings. The granting of immunity requires that:
Further duties apply, eg, regarding confidentiality.
If the FCO is already in a position to obtain a search warrant, full immunity is still possible. It then requires (together with the remaining conditions under points two to four) that the applicant is the first participant in the cartel to contact the FCO before it has sufficient evidence to prove the infringement and that no cartel participant is granted immunity under the conditions described above.
One of the main differences vis-à-vis the FCO′s former rules is that now even so-called “ring leaders” (ie, companies that were the sole leader of a cartel) are entitled to full immunity. Compelling others into a cartel excludes immunity, though.
Reduction of Fines
If no immunity can be granted, the FCO can reduce the fine if an applicant provides the FCO with information and, where available, evidence that makes a significant contribution to proving the infringement. Full and continuous co-operation with the FCO is also a prerequisite for reducing the fine. The amount of the reduction depends on the time of the co-operation and the quality of added value provided.
The leniency programme provides for the possibility to declare the willingness to co-operate (“marker‟). The timing of placing the marker is decisive for the rank of the leniency application. It can be placed verbally or in writing, in German or English.
The marker must contain details about the type and duration of the infringement, the product and geographic markets affected, the identity of those involved and other competition authorities′ applications that have been or are intended to be filed. After the marker has been placed, the FCO will set a deadline of up to eight weeks for the applicant to submit a full-fledged leniency application.
If an undertaking decides to apply for leniency with the European Commission because it considers the Commission to be the best-placed authority, the FCO accepts a summary application in accordance with the ECN notice. It can then exempt the undertaking from filing a full leniency application until further notice.
Besides the leniency and immunity scheme described in 2.11 Leniency and/or Immunity Regime, there is no relevant amnesty regime relating to the prosecution of cartel conduct.
In practice, the FCO rarely relies on witness statements from employees, even though it can theoretically summon company employees as witnesses both in administrative proceedings and fining proceedings (see 2.9 Protection of Confidential/Proprietary Information).
The FCO can obtain documentary information from the target by means of dawn raids (see 2.2 Dawn Raids and 2.3 Spoilation of Information) or seizure of objects (see 2.9 Protection of Confidential/Proprietary Information).
The FCO can obtain information from companies or individuals outside of Germany by seeking international legal assistance from the respective authorities. Co-operation within the ECN is well established. Details are laid out in Section 50d of the ARC.
Under Section 50f of the ARC, the FCO is entitled to share information with other agencies for the purpose of their respective tasks. This includes regulatory authorities like the Federal Network Agency and consumer protection authorities or the Federal Commissioner for Data Protection and Freedom of Information. If the FCO and the public prosecutor are conducting parallel investigations, there is extensive co-operation between them under Section 82 of the ARC.
The FCO regularly co-operates with other enforcement agencies, especially in the context of the ECN. The co-operation between the authorities within the ECN is now governed by Sections 50c and 50d of the ARC, which transpose the relevant provisions of the ECN+ Directive (see 1.7 Principles of Comity).
Under German law, criminal law only applies to natural persons, which means that if conduct (such as bid rigging) also amounts to criminal behaviour, there will be two separate proceedings, ie, proceedings regarding administrative fines against the undertaking and criminal proceedings against the individual(s).
The investigations related to criminal cases (ie, against the individual) are conducted by the public prosecutor. The FCO is in charge of the investigations against the undertaking but can choose to hand over these proceedings to the public prosecutor. As the FCO has special expertise and staff for these cases, it will generally refrain from doing so.
The public prosecutor will investigate the case and, once it has collected sufficient evidence, issue a bill of indictment to the criminal court – either the local court (Amtsgericht) or the regional court (Landgericht), depending on whether the sentence is likely to exceed four years of imprisonment. At this stage, the suspect′s defence lawyer has a right to access the file. Before the indictment, access to files will depend on whether it may impede the investigation. The criminal court will then usually open the formal proceedings.
Under German law, the notion of “civil cases‟ in cartel matters only refers to private civil litigation (see 5. Private Civil Litigation Involving Alleged Cartels). The proceedings on administrative fines as described in 3.6 Procedure for Issuing Complaints/Indictments in Criminal Cases is an administrative procedure conducted by the FCO. Appeals against the FCO′s decisions can be brought before the Higher Regional Court of Düsseldorf, which will also take evidence if the appellants appeal certain facts.
Within its wide procedural discretion, the FCO usually initiates its proceedings against all or several undertakings and individuals involved in the cartel. Depending on the case and, in particular, the undertakings′ decisions on whether to enter into settlement talks or not, the FCO can then split off individual proceedings and, eg, settle one case while further pursuing others. It may also, at any stage during the investigation, stop proceedings against selected undertakings or individuals.
The FCO bears the burden of proof for all necessary facts to establish an infringement that applies to administrative proceedings and fining proceedings. The only difference in the standard of proof concerns a potential exemption from the prohibition of cartels under Section 2 ARC/Article 101 (3) of the TFEU (“exempted agreements‟). In fining proceedings, the FCO will have to demonstrate that the behaviour in question does not meet the exemption.
Within its competences, the FCO acts as the finder of facts and applies the law. If the FCO′s decision goes to appeal before the Higher Regional Court of Düsseldorf, the court will act as a finder of the facts and apply the law.
In criminal proceedings, the public prosecutor acts as the finder of the facts until the indictment, and then the criminal court finds the facts and applies the law to those facts.
The FCO can and does regularly rely on information obtained in other proceedings, eg, regarding neighbouring product markets. The FCO often gains insight into certain markets through sector enquiries and initiates proceedings based on these insights.
There are no specific rules of evidence for the FCO′s proceedings. In case of an appeal, the Higher Regional Court can only rely on the means of evidence prescribed in the Code of Criminal Proceedings, particularly witnesses, experts and documents.
The FCO usually does not rely on external experts for its investigations in cartel proceedings. It is possible, at all stages of the investigation, to retain expert advice by either the FCO or the parties involved, eg, on the economics of relevant markets or constitutional issues. Parties may also consult economic experts (eg, auditors) should they consider invoking an inability to pay a fine.
See 2.7 Attorney-Client Privilege.
If the cartel conduct amounts to criminal behaviour, the FCO and the public prosecutor can conduct proceedings in parallel. In this case, usually, the FCO will lead the proceedings against the undertaking and the public prosecutor against the individuals involved in the cartel.
The FCO has the authority to impose administrative fines directly. Administrative fines for undertakings can reach up to 10% of the economic entity′s turnover in the previous financial year (see 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards).
The FCO′s cartel proceedings are often terminated by settlements, which require the undertaking to admit the wrongdoing and all necessary facts for a fine to be imposed in a settlement statement. There is no formal legal procedure for settlements. The FCO follows its own best practices laid down in an internal explanatory note. A settlement procedure usually involves several talks with the authority and only occurs later in the investigation, often after the statement of objections has been issued.
The FCO has an incentive to settle cases because settlements provide a faster and more efficient way to remedy the competition concerns.
Undertakings that engage in settlements are rewarded with a reduced fine (up to 10%) and the issuance of a shorter and less detailed fining decision (Kurzbescheid), which can be beneficial in the defence against damage actions. For the undertaking concerned, another incentive for settlements is the Higher Regional Court of Düsseldorf′s practice of establishing even higher fines than the FCO. This gives the FCO a strong (albeit questionable) leverage in settlement discussions.
If an undertaking's cartel infringement is established by a competition authority, this has severe effects on potential follow-on damage claims. If the defendant in a damage claim is the formal addressee of a competition authority′s final decision, the factual findings of this decision are binding to the court in the damage proceedings and can no longer be rebutted (Section 33b of the ARC). In practice, this binding effect goes even further.
Even if a defendant is not the addressee of a competition authority′s decision but is mentioned in the decision addressed to another cartel member, it will be very difficult, if not impossible, for the defendant to rebut the facts stated in the decision.
In addition, cartel infringements can lead to exclusion from public procurement. Final fining decisions will be published in the competition register, opened for the registration of public entities in April 2021. It will allow for data exchange between public entities for their public procurement activities.
Under current German law, criminal law only applies to individuals, not companies. If an individual has committed a crime from within or to the benefit of a company, the company itself can only be sanctioned by means of an administrative fine.
As regards the individual, cartel behaviour is not per se a criminal offence. Concluding contracts on the basis of cartels can, in theory, be classified as fraud (Section 263 of the Criminal Code), but in practice, it is very difficult to establish all of the relevant elements.
By contrast, the specific case of bid rigging amounts to a criminal offence in itself (Section 298 of the Criminal Code). It can entail a criminal fine or imprisonment for up to five years. For the procedural aspects, see 3.6 Procedure for Issuing Complaints/Indictments in Criminal Cases.
See 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards.
Following the tenth amendment to the ARC, compliance efforts are now explicitly listed as a possible mitigating factor. Section 81d of the ARC now stipulates that compliance efforts before and after the infringement can be taken into account. As to compliance efforts before the infringement, these measures must be “appropriate and effective‟. According to the official grounds of the law, this is generally the case if the infringement was detected and reported in line with compliance measures and if the management was not involved. This is now also reflected in the FCO’s fining guidelines.
Before the amendment, the FCO argued that the finding of an infringement merely proves that existing compliance efforts were not effective. The FCO was only willing to consider the positive effects of compliance programmes in settlement talks. Under the new fining guidelines, this strict approach will likely no longer be applied. However, the FCO’s president has also indicated that he tends to use the new provision in a rather reluctant way.
There is no legal obligation to consumer redress under German law, but it can be a mitigating factor in determining a potential fine.
The FCO′s decisions are subject to appeal. The appeal must be lodged with the FCO within two weeks after the service of the decision. If the FCO decides to uphold its decision, it transfers the file to the public prosecutor, who is then charged with defending the decision in the court proceedings before the Higher Regional Court of Düsseldorf.
Appeals used to be rather frequent for fining decisions that were not issued as settlement decisions. However, companies have become much more reluctant to appeal since the Higher Regional Court of Düsseldorf has tightened its approach by applying a different calculation method for fines that often leads to even higher fines than with the FCO.
Private firms and individuals may claim damages from cartel behaviour (Sections 33a of the ARC et seq). In addition, the law provides for the possibility of claiming for injunctive relief and rectification. Damage actions have become common in practice in recent years in Germany, with claims amounting to millions of euros in individual cases.
For a damage action to succeed, the defendant must have engaged in a cartel infringement resulting in a financial loss to a third party. If the cartel behaviour has been established in a final decision of a competition authority, this finding is binding to the court and no longer has to be proven by the claimant. Otherwise, the claimant bears the full burden of proof for the cartel infringement, which is why standalone damage claims are rather uncommon.
Burden of Proof
Under the general rules of civil procedure, the claimant would bear the full burden of proof concerning all of these questions. Deviating from these general rules, the ARC provides for a shift of the burden of proof with respect to the existence of damage, as Section 33 (2) of the ARC provides for a rebuttable legal presumption that cartels result in damages. However, this provision is only applicable for damages occurring after 27 December 2017.
Nevertheless, for damages that occurred before that date, the courts can ease the burden of proof for the claimant to some extent. To establish causal damage, the Federal Court of Justice′s case law (notably in a series of cases regarding alleged damages arising from the Railway Cartel) requires a comprehensive assessment of all relevant aspects of the case. This comprehensive assessment allows the Federal Court of Justice to establish a factual presumption that cartels lead to damage. To counter this presumption, defendants can bring forward facts and evidence (generally economists' expert statements), which the court has to consider.
Quantum of Damages
The courts can estimate the quantum of the damage (Section 287 of the Code of Civil Procedure). In order to provide the court with the necessary factual basis for the estimate, the parties usually rely on economic expertise. However, some courts are increasingly attempting to estimate the damages rather freely and even without turning to economists′ expert statements. Several appeals against such judgments are currently pending at the Higher Regional Court level. It can be expected that this questionable practice will (like several other questions in this ever-evolving field of law) sooner or later be reviewed by the Federal Court of Justice.
For damages occurring after the entry into force of the tenth amendment in January 2021, the ARC now goes even further and provides for a rebuttable presumption that a business with cartel members was affected by the cartel if it falls into the factual, temporal and local context of the cartel.
The Federal Court of Justice also recently strengthened the claimants′ position by accepting liquidated damages clauses for antitrust infringements in general terms and conditions (Railway Cartel VI).
Preparing a Claim
To prepare or support a claim, claimants have a right to request documents or information from the defendant or any other person in possession of relevant information (Section 33g of the ARC). Requests for documents or information are only justified if proportionate and must not extend to leniency applications or settlement submissions.
Cartel damage claims must be brought before the competent Regional Courts (Section 87 of the ARC). However, not all Regional Courts have jurisdiction over cartel-related proceedings because most of the Federal States have assigned jurisdiction over these actions to designated Regional Courts and designated chambers within these courts.
There are no class actions in Germany, although injured parties can assign their claims to a third party who can then file a bundle of claims. This practice has become particularly relevant for individuals, who would otherwise not be willing to seek legal recourse for their (comparatively) small damages.
In recent years, such bundling of claims has become more popular with the rise of legal tech and process financing via online-based platforms. However, courts do not always accept the legality of an assignment to such claims vehicles. In a spectacular judgment of February 2020, the Regional Court of Munich dismissed the claims of more than 3,000 freight forwarders against members of the truck cartel because of a breach of the Legal Services Act (Rechtsdienstleistungsgesetz). However, in light of the Federal Court of Justice’s “AirDeal” judgment of July 2021, which approved a similar claims vehicle in a joint consumer claim, it seems questionable whether this judgment will be upheld. The appeal is still pending before the Higher Regional Court of Munich.
The right to claim damages also extends to indirect purchasers. The procedural setting is the same as for claims by direct purchasers. For a claim by an indirect purchaser to be successful, the cartel must have caused damage to the direct purchaser of the product or service affected by the cartel.
In a second step, this damage must have been passed on to the claimant. For damages that occurred before 27 December 2017, the burden of proof lies with the claimant. For damages that occurred after that date, Section 33c (2) of the ARC provides for a legal presumption that damage has been passed on. The defendant can rebut this presumption.
If the claim is brought by a direct purchaser, the defendant can bring forward the passing-on defence. However, there is no legal presumption in their favour that the direct purchaser has passed on their damage to the next market level. In addition, the defendant at least needs to substantiate that there were no negative volume effects (lost profits) due to the anti-competitive sales prices. The Federal Court of Justice′s recent decision in the Railway Cartel V–judgment will make it more difficult for defendants to invoke the passing-on defence. The Court ruled that in cases of scattered damages, where the indirect customers are unlikely to assert their relatively low damages, allowing for a passing-on defence would lead to an unjustified exoneration of the cartel participant.
In other (albeit exceptional) cases, such as intra-group sales, courts have shifted the burden of proof that the damage was not fully passed on to the purchaser.
Final fining decisions from competition authorities are usually the core evidence in cartel damage proceedings, and they are binding to the court (see 4.3 Collateral Effects of Establishing Liability/Responsibility and 5.1 Private Right of Action). Other evidence obtained from the public enforcement proceedings other than leniency applications and settlement submissions can also be used as evidence. However, the conditions for a claimant to obtain such documents as laid out in Section 89c of the ARC are strict.
In particular, the claimant must not be able to obtain the information otherwise, which includes the possibility to request the desired information or document from the defendant or third parties under Section 33g of the ARC.
The number of court proceedings in cartel damage claims is still increasing. Nevertheless, most cases are being settled, often before court proceedings have even been initiated. This is particularly true if the parties are still in an ongoing business relationship.
If a case ends up before the court, the timeframe can differ significantly from case to case. It mainly depends on the legal and economic complexity of the case and on the workload of the deciding chamber. A judgment in the first instance can easily take two years and rarely less than one year. Some chambers face a significant work overload, mainly because of the rise of mass proceedings like the claims against the truck cartel. Hence, even cases that remain pending for six years or more in the first instance are no longer uncommon.
The compensation of attorneys is, in most cases, subject to an agreement between the respective party and their attorney. The agreed fees must not be lower than the statutory fees, which mainly depend on the value of the claim. The value is capped at EUR30 million for the determination of the legal fees.
With a claim value equal to or exceeding this cap, the statutory attorney's fees are approximately EUR270,000. Contingency fees are generally prohibited under German law.
German procedural law follows a loser-pays-principle, limited to the statutory fees. These fees include both sides' attorneys' fees and the court fees (see 5.6 Compensation of Legal Representatives).
First-instance judgments in cartel damage proceedings are regularly subject to appeal before the Higher Regional Courts. The appeal can be based on a wrong application of the law or an erroneous finding of the facts in the first instance. New facts and evidence may only be brought forward to a limited extent.
A first-level appeal can again be appealed before the Federal Court of Justice if the Higher Regional Court admits such a second-level appeal. This review is restricted to questions of law.
Many cartel damage claims are still settled outside court, ie, without any formal claim at all or with an out-of-court settlement in legal proceedings. However, it is essential for both parties to seek legal advice for the conclusion of a valid and effective settlement agreement and to be prepared with the necessary economic expertise at all stages.