In 2020, the Federal Cartel Office ("FCO") examined approx. 1200 notifications of which only seven went into phase II. Two of the latter (XXXLutz/Tessner Group and Kaufland/Real) were cleared subject to conditions. Three proceedings (Allianz/ControlExpert, Malteser Krankenhaus/Diakonissen Flensburg and Carglass/A.T.U.) ended with an unconditional clearance. In the two remaining cases, the investigation is still ongoing.
Increase in Turnover Thresholds
In the context of the 10th amendment of the Act against Restraints of Competition ("ARC") the domestic turnover thresholds were raised significantly from EUR 25 million to EUR 50 million and from EUR 5 million to EUR 17.5 million. This change, introduced at the last minute (originally, an increase to EUR 30 million and EUR 10 million, respectively, was planned), is expected to lead to a considerable decrease in the number of notified mergers – presumably by 30-40%.
In Miba/Zollern, the Düsseldorf Higher Regional Court had to rule on the admissibility of a challenge to the FCO's prohibition decision after a ministerial permit had been granted. In August 2019, Miba and Zollern had received a ministerial approval for the establishment of a joint venture in the engine bearing construction sector, which had previously been prohibited by the FCO (see Newsletters 1/2019 and 2/2019). The appeals lodged by the parties against the prohibition were dismissed by the Düsseldorf Higher Regional Court on 26 August 2020 due to a lack of legal interest in bringing proceedings.
The court reasoned that the prohibition contested by Miba and Zollern no longer had any legal effect because the planned merger was permitted by the ministerial approval. Even if the ministerial approval had been subject to onerous ancillary provisions, there was no longer any legal interest in pursuing the originally notified project, at the latest from the time when the parties implemented the transaction under the conditions of the ministerial approval.
With regard to the part of the E.On/RWE transaction that was subject to German merger control, the Higher Regional Court of Düsseldorf on 4 November 2020, in line with established case law, confirmed that the informal clearance letter in the preliminary review procedure cannot be subject to an appeal. A challenge by third parties is not admissible even in situations where the FCO deliberately and unlawfully refrained from initiating an in-depth review.
In three cases, the FCO dealt with the acquisition of stores of the food retailer Real by its rivals. In these proceedings, the FCO modified its previous approach to the geographic market definition by using data from a customer loyalty system to determine the catchment area in which 90 percent of all customers of of a given store live. Within a so defined geographic market, the so-called core area, i.e. the area from which two thirds of all customers of a store come, was subject to a more detailed examination. With regard to the definition of the relevant product market, superstores and supermarkets, organic supermarkets were included in addition to self-service department stores, hypermarkets and supermarkets, but specialty stores such as bakeries or drugstores were not taken into account. As usually in food retail cases, the FCO also closely examined the relevant procurement markets.
On 22 December 2020, the FCO finally cleared the acquisition of up to 92 stores by Kaufland (Schwarz Group) subject to conditions. On the same day, it also approved the acquisition of up to 24 Real stores by Globus in phase I. The acquisition of up to 72 Real locations by EDEKA is currently still under an in-depth review.
In November 2020, the FCO cleared XXXLutz's investment in the Tessner Group. The approval was made subject to the condition precedent that a total of 23 stores (including one of XXXLutz') are sold. This decision fits into the FCO's tendency to favor up-front buyer solutions.
Curiously, the FCO's review was limited to the sales side. The competitive effects of the transaction on the procurement markets were examined by the European Commission and approved shortly afterwards without conditions in the first phase. The proceedings were split when the Commission partially referred the case, which originally fell under its jurisdiction, to Germany. Since the procurement markets extend geographically beyond Germany, the Commission only granted only a partial referral notwithstanding that the parties had asked for the case to be referred in its entirety.
During the reporting period, the FCO approved the establishment of a joint venture between newspaper publishers Süddeutsche Zeitung and Frankfurter Allgemeine Zeitung for the joint marketing of nationwide print advertisements. After the merger control clearance had already been granted in July 2020, the parallel examination under the antitrust prohibition (Section 1 ARC/Art. 101 TFEU) continued until October. Here, the reluctance of the FCO to apply the exception for publishing cooperations in Section 30 (2b) ARC became clear once again: the FCO relied instead on Article 101(3) TFEU to approve the cooperation.
In the merger control proceedings, the FCO assumed a relevant product market for ads in news print media addressing upscale target groups. In addition to nationwide daily newspapers, the FCO also included weekly and Sunday newspapers in the relevant market. It remained open, however, whether there is a single market for attention-grabbing and classified ads or whether the latter are to be subdivided into separate markets for specific classes (e.g., real estate). In this context, the FCO found that there is at least a unilateral substitution since consumers regarded printed classified ads as fully substitutable with online ads, which have a much higher reach.
The FCO also cleared ProSieben-Sat.1's acquisition of The Meet Group, which operates the dating app "Lovoo" in Germany. The acquirer already owned the online dating agencies "Parship" and "ElitePartner".
The FCO assumed a nationwide market for online dating platforms. Despite existing differences (non-remuneration, "swipe function"), dating apps were included for the first time in the relevant product market. Due to the diverging business models, the FCO analyzed both revenue-based and user-based market shares. Despite an increasingly concentrated market, the FCO did not expect any significant impediment to effective competition. In addition to low barriers to entry, high innovation competition, and the presence of important competitors (Match Group and Magic Lab), the imminent market entry of Facebook Dating and the lack of closeness of competition between the parties played a role in its decision. The FCO was not concerned about a possible tipping of the market because multi-homing is prevalent as is the importance to attract new customers.
Due to the pandemic-related extension of the review period from one to two months, the FCO was able to clear the transaction in first phase despite extensive market investigations.
In its examination of the merger of the book retailers Thalia and Osiander, the FCO for the first time explicitly included not only brick-and-mortar stores but also online and mail-order retailing in the relevant product market. This was due to the progressive convergence of and interrelations between online and offline retailing. Since the transaction did not give rise to competitive concerns on neither the regional retail nor the nationwide procurement markets, it was cleared in the first phase.
In December 2020, the German Government decided to prohibit the acquisition of IMST GmbH by the Chinese defense contractor China Aerospace Science and Industry Corporation (CASIC). IMST GmbH is a specialist in mobile communications, radar and satellite technology. This was only the second transaction to be blocked based on concerns over public order or security. In 2018, a Chinese investor's takeover of the machine tool manufacturer Leifeld Metal Spinning failed to pass scrutiny. The examination under foreign trade law will gain even more importance with the expansion foreseen in the draft 17th amendment to the Foreign Trade and Payments Ordinance.
Abuse of Dominance
In December 2020, the FCO initiated another abuse procedure against Facebook to examine a possibly abusive tying of the use of Oculus' virtual reality headsets to ownership of a Facebook account.
The well-known Facebook user data saga also continued during the reporting period. As a reminder, in February 2019, the FCO had prohibited Facebook from using conditions that make the use of the social network dependent on the extensive collection and processing of user data by Facebook. The Federal Court of Justice overturned the decision of the Düsseldorf Higher Regional Court to grant Facebook's appeal suspensive effect (see Newsletter 1/2020).
Against the background of imminent enforcement, Facebook again applied for the order of suspensive effect on 30 November 2020. On the same day, the Düsseldorf Higher Regional Court granted a preliminary suspensive effect. The next milestone is likely to be the oral hearing in the main procedure before the Düsseldorf Higher Regional Court, which was postponed from the end of November 2020 to 26 March 2021.
Not least against the backdrop of the repeated delays in the Facebook proceedings, the 10th ARC amendment shortened the legal process for appealing decisions under the new Section 19a GWB, which contains an additional element of intervention against companies with significant importance across markets. The Federal Court of Justice ("FCJ") will have sole jurisdiction over disputes relating to rulings under the new provision.
Currently, there are two investigations pending against Amazon in Germany. The most recent deals with so-called "brandgating", i.e. the possibility granted by Amazon to brand manufacturers to exclude third-party retailers from selling the products concerned on the German Amazon marketplace. Such agreements are often a legitimate means to prevent free-riding. In Amazon's case, the FCO is examining in particular the proportionality of Amazon's business practice in this area.
Separately, the FCO is examining whether Amazon is abusively influencing the pricing of third-party retailers. Particularly in the course of the COVID 19 pandemic, the FCO received several complaints from third-party sellers who had been blocked by Amazon because of alleged inflated pricing. The FCO now wants to clarify the extent to which Amazon systematically monitors prices, what intervention options Amazon reserves for itself and how these are implemented.
In the long-running dispute between Nokia and Daimler over the licensing of standard-essential patents within multi-level supply chains, the ECJ will now have to deal with the question of the extent to which companies in the value chain (other than the manufacturer of the end product) are entitled to a license on FRAND terms. At the end of November, the Düsseldorf Regional Court – with some support of the FCO – referred this question to the ECJ.
The legal dispute between Nokia and Daimler is of fundamental importance also beyond the automotive industry. If the owner of a standard-essential patent were to abuse its dominant position by bringing an action for an injunction against the distributor of the end product for patent infringement without first having complied with the licensing request of its patent-using suppliers, the patent owners would have to incur considerable additional expense and probably also lower licensing income. Moreover, the order for reference of the Düsseldorf Regional Court addresses important concretizations of the requirements from the ECJ ruling in the Huawei/ZTE case from 2015.
Prohibition of Cartels
In 2020, the FCO imposed fines totaling EUR 358 million on 19 companies and 24 individuals. Only 13 companies informed the FCO of potential cartel infringements under the leniency program. FCO President Mundt attributed this renewed decline compared to 2019 (16 leniency applications) in particular to the increased risk of subsequent damages proceedings.
Rulings by the Federal Court of Justice on the Start of the Limitation Period
In two decisions, the FCJ dealt with the question when the statute of limitations for a cartel infringement begins to run. The Beer Cartel ruling of 13 July 2020 concerned a meeting of representatives of various beer brewers in March 2007, at which information was exchanged on a potential increase in beer prices. The prices were then indeed increased at the beginning of 2008 and remained at this higher level until at least July 2009. Unlike the lower court, the FCJ was not of the opinion that the anti-competitive coordination was terminated with the end of the meeting in March 2007 and that the absolute limitation period of ten years had started to run as of then. Instead, the FCJ clarified that the concept of coordinated conduct requires not only a coordination but also specific market conduct implementing the coordination. However, there is a factual presumption that an information exchange influences the subsequent market behavior of the companies involved. Therefore, in the case of a price increase presumably based on an exchange of information, the end of the infringement occurs only once the increased prices are no longer in effect. This could mean - subject to the renewed assessment of the evidence by the lower court - that the limitation period did not begin until July 2009.
In a decision of 25 August 2020, the Federal Court of Justice took the view that in case of an bid-rigging arrangement the limitation period does not start with the contract award but only upon full execution of the contract. This also applies to infringements committed by those companies, which did not submit their own bids due to the cartel agreement. It will be interesting to see whether the FCJ will feel compelled to revise its view in light of a ruling by the ECJ on 14 January 2021. According to the EU judges, in case of a tender procedure in breach of Article 101 TFEU the limitation period is already triggered with the conclusion of the contract put out to tender, i.e. at a - possibly much - earlier point in time than assumed by the Federal Court of Justice (C-450/19).
Liquefied Gas Cartel
With a ruling by the Higher Regional Court of Düsseldorf on 2 October 2020, the longest cartel proceedings in Germany so far have come to an end. In 2007, the FCO had imposed fines totaling EUR 180 million on seven producers of liquefied gas. The appeal proceedings before the Higher Regional Court ended in 2013 after 130 days of hearings with an increase of the fines to EUR 244 million. However, the Federal Court of Justice overturned this ruling in early 2019 and referred the case back. Now, after only six more days of hearings, the Düsseldorf judges finally closed the proceedings with the imposition of fines of just EUR 40 million on the basis of an agreement with the companies involved.
Fines against Aluminum Smelters
On 23 December 2020, the FCO imposed fines totaling EUR 175 million on five aluminum smelters and ten of their employees. According to the FCO’s findings, there was a basic understanding among the companies to pass on increases of their procurement costs to the customers (mostly in the automotive industry). At numerous meetings in 2006-2018, senior executives had shared their individual costs and cost increases for aluminum and its conversion into a suitable forging feedstock, and discussed their success in passing these costs on to customers. In addition, according to the FCO, the companies had agreed to confine certain rebates to their own value added activities and to exclude the procurement costs.
Administrative and Directors' Liability in Connection with Cartel Proceedings
During the reporting period, there were three high-profile Regional Court decisions concerning damage claims raised by cartelists.
On 2 December 2020, the Regional Court of Bonn dismissed an action brought by BayWa, a trader of agricultural goods, against the FCO for damages of around EUR 73 million due to the alleged breach of official duties. This dispute stemmed from the FCO's cartel proceedings against BayWa and other wholesalers of crop protection products, which ended in early 2020 with the imposition of fines totaling almost EUR 155 million, thereof just under EUR 69 million for BayWa (see Newsletter 1/2020). Despite agreeing to a settlement, BayWa subsequently filed a claim for reimbursement of its fine and the legal fees it had incurred in connection with the cartel proceedings.
The court proceedings centered on the - undisputed - fact that an FCO official had called three of the agricultural traders concerned on the basis of an anonymous tip-off, informed them about a possible cartel investigation and urged them to consider a leniency application or to obtain legal advice. Two of the traders had then indeed filed leniency applications within 24 hours, which enabled the authority to initiate proceedings.
The Regional Court of Bonn rejected BayWa’s claim of a violation of the constitutional principle of equal treatment as there was no “equality in the wrong”. Moreover, BayWa was the only company named in the anonymous tip-off and was described as the initiator of the cartel, which according to the court justified it to treat the company worse than the other cartel participants. Moreover, the court considered the causal link between the alleged breach of administrative duty and the damages claimed to be of a purely hypothetical nature in view of numerous other possible factual scenarios, in which BayWa could have been fined even without the calls in question. Finally, the court held that BayWa would have had first to bring an action against the fining decision with the Higher Regional Court of Düsseldorf.
Overall, this is only the second administrative liability action that has been brought against the FCO. Against this background, and in view of the fact that some considerations of the Regional Court of Bonn regarding the FCO’s leniency program and its criteria for determining fines appear at least questionable, it is to be hoped that BayWa will press for clarification by the FCJ of the legal questions at issue.
In September 2020, the Regional Court of Saarbrücken dismissed two director liability actions brought by Villeroy & Boch in which the company had claimed damages of more than EUR 70 million against four former members of its Management and Supervisory Boards. The background to the proceedings was a fine imposed by the European Commission on Villeroy & Boch in 2010 in the so-called bathroom cartel totaling EUR 71.5 million; in addition, the company demanded compensation for the legal fees incurred during the cartel investigation. The core allegation against the managers was that they had failed to set up a competition law compliance system.
The Regional Court stated that the 10-year statute of limitations for asserting directors' liability claims had not started to run with the fining decision in 2010 but already much earlier in 2005 with the issuance of the first invoice by Villeroy & Boch’s competition law firm relating to the Commission's investigation. On this basis, the asserted claims were time-barred.
In addition, the judges also denied the compensability of cartel fines, at least if they were levied by the Commission. They pointed out that, under EU law, fines can be imposed only on companies but - unlike under German competition law - not on individuals. The effet utile of EU law requires that this principle is also observed in the context of subsequent director liability proceedings.
The compensability of cartel fines is also at issue in a damage action brought by ThyssenKrupp against a former member of its Executive Board in connection with the rail cartel which was initially brought before a labor court but is now pending before the Regional Court of Dortmund. However, a final clarification of the intricate legal questions concerning the interplay between corporate liability and competition law can only be expected from a referral to the Federal Court of Justice.
Rulings by the Federal Court of Justice on the Rail and Truck Cartels
During the reporting period, the FCJ issued three more judgments in connection with the rail cartel and its first judgment on the truck cartel.
In Rail Cartel III, the Federal Court of Justice confirmed its view already taken in the Grey Cement Cartel I ruling (2013) that a cartel participant can be held jointly and severally liable for cartel-inflated prices in the context of a specific sales transaction, for which no specific agreement, or no participation of the defendant in such an agreement, was ascertainable. According to the judges, the existence of a comprehensive basic agreement, which had an effect on prices and in which the defendant had participated, is sufficient. This judgment confirms the FCJ's tendency to hand down plaintiff-friendly rulings.
In Rail Cartel IV, the FCJ dealt in detail with the relevant criteria for proving and quantifying price umbrella effects due to inflated prices charged by cartel outsiders. The ECJ in Kone (2014) and subsequently the Federal Court of Justice in Grey Cement Cartel II (2018) had ruled that damage claims against the cartel participants may be brought on this basis. Pursuant to the Federal Court of Justice, relevant factors in this context are the market coverage of the cartel, the duration of the infringement, the degree of market transparency, the homogeneity of the products concerned, the supply elasticity of the cartel outsiders and the competitive pressure exerted by them. These clarifications are to be welcomed, especially since they offer various avenues for a defense against claims based on price umbrella effects.
Finally, in Rail Cartel IV and V, the Federal Court of Justice again dealt with the prerequisites and scope of the pass-on defense and established high prerequisites in this regard. For example, following these rulings the pass-on defense is de facto excluded (i) in case of widely dispersed damages with low individual value (Streuschäden) and (ii) if the damage claims within a “chain of damages” (Schadenskette) are bundled in one hand as is often the case, e.g., for intra-group resales. In such scenarios, the cartelists do not need to be protected from double recourse. However, these comments are unlikely to be the last word on these complex issues as the Federal Court of Justice uses a number of vague legal terms, which leave a wide scope for interpretation.
In its first ruling on the truck cartel of 23 September 2020, the Federal Court of Justice clarified that fining decisions have the binding effect for follow-on damage actions provided for in the ARC irrespective of whether they were issued on the basis of a settlement or after the conduct of contentious proceedings. In addition, the judges stated that the factual presumption regarding the occurrence of cartel-related damages as part of the lower courts’ overall assessment of the relevant facts must not result in the cartelists being required to provide proof to the contrary. Finally, the Federal Court of Justice emphasized that the counter-arguments put forward by the cartelists need to be looked at not only in isolation but must be considered also in their entirety. The Federal Court of Justice also held that the statute of limitations for damage claims is suspended not only as of the opening of formal proceedings by the Commission, but already as of any investigative measure that is recognizably related to a possible cartel infringement (such as a dawn raid). This controversial question is of particular relevance for certain legacy cases.
The Regional Court of Dortmund’s "Courage to Estimate"
In highly publicized judgments of 30 September 2020 and 4 November 2020 regarding the rail cartel, the Regional Court of Dortmund attested itself “courage to estimate” and estimated damages based on a 15% cartel-surcharge on the basis of Section 287 of the German Code of Civil Procedure without taking into account the expert opinions submitted by the parties and without appointing its own expert. In its September 2020 judgment the court relied on a clause in the general terms and conditions agreed between the parties relating to liquidated damages and applied a 15% cartel-related price surcharge to net sales. By reference to this judgment, the court did the same in its judgment of 4 November 2020 even though in that case none of the purchases in question was subject to a liquidated damages clause.
Whether this free estimate of the Regional Court of Dortmund meets the requirements of Section 287 of the Code of Civil Procedure is already questionable to begin with. This is because the liquidated damages clause was not individunegotiated between the parties and thus does not even begin to reflect a potential cartel return. In addition, the rulings are unlikely to be transferable to cases where a clause on liquidated damages is missing. In addition, it should be noted that the German legislator expressly decided against a presumption regarding the amount of damages. Finally, while it is true that the FCJ clarified in Schienenkartell II that a court does not have to obtain an expert opinion “in every case”, this wording indicates that an expert opinion should still be the rule. Thus, there seems to be no basis for courts to ignore diligent and methodically sound expert opinions provided by the defendant even within the more lenient framework of Section 287 of the Code of Civil Procedure.
Damages in Case of a Mere Information Exchange?
In a positive development from the defendants’ point of view, two lawsuits were dismissed, which concerned damage claims based on an anti-competitive exchange of information:
In a ruling of 20 August 2020, the Regional Court of Nuremberg-Fürth dismissed an action against members of the truck cartel on the grounds that the exchange of gross price lists, to which the truck cartel was limited according to the Commission’s findings, had no direct link with the sales market. In view of the strong diversification, high complexity and variety of the trucks concerned, there was also no general principle based on experience (allgemeiner Erfahrungssatz) to the effect that a mere exchange of information necessarily resulted in higher prices. It was therefore incumbent on the plaintiff to prove an overwhelming probability that the exchange of the list prices could have enabled the coordination of net prices or promoted their monitoring. The court found that the plaintiff had not met this burden of proof.
Already in May 2020, the Higher Regional Court of Frankfurt/Main had dismissed a damage action brought by Schlecker insolvency administrator against seven members of the drugstore cartel. The court pointed out that it is more difficult to prove damages in case of a mere information exchange than in the context of classic price, quota or customer cartels. Moreover, the judges expressed doubts as to whether the factual presumptions for cartel involvement and cartel-related higher prices established by the FCJ in Rail Cartel I and II are applicable in such scenarios: While it can be assumed that the cartel participants used the exchanged information when determining their subsequent market strategy, this aspect must be distinguished from the question whether this then also had an actual effect on price competition.
Cologne Regional Court on the Sugar Cartel
There has also been a noteworthy development in connection with damage actions relating to the sugar cartel. Following the imposition of fines totaling EUR 280 million by the FCO on Südzucker, Nordzucker and Pfeifer & Langen in 2014, more than 100 confectionery and beverage manufacturers have filed damage claims, reportedly with a cumulative value of more than EUR 900 million.
In October 2020, the Regional Court of Cologne dismissed three of these claims in their entirety. According to the court, the plaintiffs had failed to prove that without the cartel there would have been an overwhelming probability of lower prices despite the existence of a tight oligopoly in the sugar market and the “implicit collision” between the main players to be expected as a result of this market structure. The court referred to rulings by the Federal Court of Justice, pursuant to which there is a general principle based on experience and, based on that, a factual presumption that a cartel usually causes damages. However, the Cologne judges held that this does not have any quantifiable influence on the result of the comprehensive assessment of all relevant circumstances, which nevertheless needs to be carried out. In the framework of this assessment, it was of decisive importance that the plaintiffs had not been able to present any methodology, which could have been used to determine a possible difference between prices resulting from implicit collusion and the allegedly cartel-inflated prices.
This client information contains only a non-binding overview of recent developments in German competition law and is not meant to replace legal advice. In case of comments or questions, please contact: