Insights

Antitrust Alert: New Court Direction on Antitrust Cartel Fines in Germany

The German Federal Court of Justice ("BGH") has handed down a decision that is likely to have a significant impact on the setting of cartel fines in Germany, potentially reducing the maximum cartel fine for some defendants.  The decision deals with fines imposed on a number of German cement producers that entered into agreements to fix market shares and distribution areas.  The participants of the cartel challenged the fines imposed by the German Federal Cartel Authority ("BKartA").

Background

Under German law, the maximum fine for antitrust infringements is ten percent of the total sales of the infringer and its affiliates in the financial year before the BKartA’s decision (Section 81(4)(2) ARC).  However, the law does not specify how fines must be assessed in individual cases.  It merely says that the "importance of the infringement" must be taken into account (Section 17(3) OWiG).

In 2006, the BKartA published Guidelines on the setting of fines ("BKartA Guidelines") which are, with certain exceptions, modeled on Guidelines published by the European Commission earlier that year ("EC Guidelines").  Under the BKartA Guidelines, the BKartA starts with a basic amount of up to 30% of the "relevant sales" affected by the infringement (i.e. the products or services that were the subject of the cartel).  The BKartA may then take into account aggravating and mitigating factors.  The amount is then capped at 10% of worldwide sales. 

So far, the practice of the BKartA has mirrored that of the EU Commission.  The EC Guidelines also provide for a base amount of up to 30%, and the Commission also applies aggravating and mitigating factors, and the resulting fine must also be capped at the 10% of total sales (Article 23(2)(2) Regulation 1/2003).  While defendants in EU proceedings have claimed that the setting of fines through a method where the individual steps of calculating the fine may exceed the 10% maximum violates Regulation 1/2003, the European courts have dismissed this argument.  The European Court of Justice found that, when calculating the applicable fine, the Commission is free to exceed the maximum fine of 10% of revenues ("cap amount") at any intermediate step as long as the final fine imposed on the company does not exceed the cap. 

The BGH, in its decision of 26 February 2013, adopts a different approach.  The Court ruled that the 10% maximum set forth in German law is not a cap but the maximum fine.  This means that fines must be calculated in a manner that ensures that only the most serious infringements of competition law (such as price-fixing over a long period of time) trigger a fine equivalent to 10% of global sales.

Implications

The BGH decision may significantly affect the level of fines imposed by the BKartA and the courts.  It may well turn out to be a milestone in particular for one-product-companies.  Their "relevant revenues" equal their aggregate worldwide sales.  Unlike the Commission, which in its intermediate steps in calculating a fine, may exceed the cap amount, the BKartA will be allowed to approach the ceiling amount only if it has sufficient reasons to do so.  While the BKartA will have to review how to adapt its fine-setting guidelines, the expectation is that future "average" cartel law infringements of one-product-companies will be sanctioned with fines significantly below the cap of 10%.

The BGH decision concerns German law only.  The established EU method of fine setting will remain in place unless the ECJ revisits its established case law. 

Lawyer Contacts 

For more information, please contact your principal Jones Day representative or either of the lawyers listed below.

Thomas Jestaedt
Frankfurt / Brussels
+49.69.9726.3612 / +32.2.645.14.14
tjestaedt@jonesday.com

Carsten T. Gromotke
Frankfurt
+49.69.9726.3942
cgromotke@jonesday.com

Johannes Zöttl
Düsseldorf
+49.211.42471.277
jzoettl@jonesday.com

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.

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