Antitrust Alert: Court Corrects Cartel Fining Practice of German Cartel Office

This week the Higher Regional Court of Düsseldorf has published a decision that is likely to significantly affect the way in which cartel fines are determined in Germany.  This decision relates to a ruling made by the Court already in June 2009. 

The decision involves a cement cartel that the German Federal Cartel Office (FCO) fined in 2003 (€ 661 million in total).  Upon appeal, the Court confirmed that the cement producers had fixed prices but reduced the fines of the appellants to € 330 million in total.

Upon appeal against a fining decision by the FCO, the Court is entitled to review the facts and impose a fine or to acquit the appellant.  In its decision, the Court found that the FCO had erred in how it has read the provision of the German Competition Act that defines the upper limit of fines (Section 81, Para. 4 of the German Antitrust Act).

Based on Sentence 1 of this provision, the FCO may impose fines of up to € 1 million on cartels and for certain other severe infringements of the Act.  However, sentence 2 provides that:  

Beyond sentence 1, a higher fine may be imposed on businesses or associations of businesses; the fine must not exceed 10 per cent of the total revenues that such business or association of businesses generated in the financial year preceding the decision of the authority.

The FCO interprets this Sentence 2 as a "cap".  Its 2006 Guidelines on the setting of fines set out how this interpretation works in practice.  The FCO first defines a "base amount" of up to 30% of the German revenues that were related to the infringement over the period it continued; increases the base amount by a factor of up to 100% as a deterrence; and then takes account of aggravating and mitigating factors.  If the resulting figure exceeds 10% of the infringer’s total group-wide revenues, the fine cannot be higher (i.e., it is "capped") than a figure equivalent to those 10% of revenues (FCO 2006 Guidelines, 18.).  These administrative rules largely mirror the approach the European Commission takes to the EU antitrust rules (2006 Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003). 

By contrast, in the Court’s interpretation, the 10% rule of Sentence 2 is not a "cap" but defines the upper limit of the fining bracket.  On that basis, the fine has to be determined on a scale from € 0 to 10% of the revenues of the business that has infringed cartel provisions, based on mitigating and aggravating factors and the function of cartel fines to deter from similar anticompetitive in the future. 

Some commentators have suggested that the decision will force the FCO to impose lower fines generally.  However, the new President of the FCO, Mr. Andreas Mundt, pointed out in a press release that the FCO’s fines were in the past always below the 10% limit.  Additionally, he emphasized that the Court’s interpretation of the Act "could also lead to distinctly higher fines in many other cases."  One of the reasons is that the FCO would have to move away from a methodology that is primarily driven by the (German) revenues that are connected with the infringement and would instead have to take account of 10% of the (worldwide) revenues that are generated group-wide.  

With regard to the cement cartel, the issue arose only in relation to one of the five businesses with which the Court had to deal on appeal.  For this business, the Court reduced the fine from € 142 million to € 70 million.  There were, however, several factors that accounted for the Court’s determination in addition to its understanding of Sentence 2 (e.g., that the FCO had taken long to close its investigation, that the series of infringement dated back to 1990s).  The Court did not specify the role played by its understanding of Section 81 in this regard.

The Court’s decision is not final.  The case is currently pending at the Federal Civil Court (BGH), Germany’s supreme court.  The FCO announced in a press release that it "sees no reason to change its current fining practice, which is in line with that of the European Commission and most of the EU Member States".  But even if the BGH will confirm the Court's decision, infringing the prohibitions on restraints of trade in Germany is, in the future, as likely to result in significant financial exposure as it was in the past. 

The decision of the Court is available (in German) here.  

For more information, please contact: 

Dr. Carsten T. Gromotke

Thomas Jestaedt
Frankfurt / Brussels
+49.69.9726.3612 / +32.2.645.14.14

Dr. Johannes Zöttl

Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter. Please visit our Publication Request form to add your name to our distribution list.