On February 7, the European Commission (EC) and the European Free Trade Association (EFTA) Surveillance Authority conducted unannounced inspections in the energy exchange market. Representatives of Nord Pool Spot (Lysaker, Norway) and EPEX Spot (Paris, France and Leipzig, Germany) announced that the companies were subject to inspections. It is not known whether other companies were also raided. The inspections show that the EC’s enforcement policy extends beyond the retail level of the energy sector.
The General Court rejects intervention of damages claimants in appeal before the European courts by taking a narrow and rather formalistic view of legal interest in the appeals. While it is true that damages actions are legally possible as stand-alone actions, the reality in Europe is that third parties’ damages actions stand and fall with the decision that finds an infringement.
The German Competition Authority has started a sector inquiry in the food retail sector yesterday and has sent questionnaires to 21 retailers and over 200 producers in the food and beverages industry.
According to the press release (at the moment only available in German at: https://www.bundeskartellamt.de/wDeutsch/download/pdf/Presse/2011/2011-09-16_PM_SU_LEH.pdf), the inquiry will focus on the following product categories: canned vegetables, milk, butter, cold coffee and milkdrinks, ketchup, frozen pizza, roasted coffee and sparkling wine. The inquiry could be extended to further product categories in the future.
The Authority will primarily investigate the question whether the retailers enjoy significant buyer power vis-à-vis producers.
A sector inquiry concerns a whole sector and is not directed against any particular undertakings. However, depending on the outcome of the investigation, the Authority may initiate antitrust investigations against one or more undertakings in the sector.
On 21 July 2011, the German Federal Cartel Office (FCO) published a consultation paper on substantive merger control called “Draft Guidance on Substantive Merger Control” (Draft Guidance). This is the first time the FCO has consulted on a guidance paper. Comments on the draft guidance can be submitted until 21 September 2011.
Against the fact that the German merger control regime catches a large number of mergers (around 1000 mergers a year) and that the FCO has a strong enforcement record (15 Phase II- proceedings in 2010), the Draft Guidance provides detailed insight in the approach taken by the FCO in assessing mergers.
German merger control is applicable if the following three cumulative turnover thresholds are met: the aggregate worldwider turnover of all undertakings concerned exceeds € 500m, the turnover in Germany of one undertaking concerned exceeds € 25m and the turnover in Germany of another undertaking concerned exceeds € 5m. In addition, German merger control catches the acquisition of control as well as the acquisition of a minority shareholding of 25 percent or – in cases of “competitively significant influence” even shareholdings below 25 percent. The Draft Guidance does not deal with the question under which conditions German merger control is applicable, it only concerns the substantive analysis of mergers which fall under German merger control.
The Draft Guidance reflects the existing approach of the FCO rather than proposing an new way of thinking. While it also encorporates economic considerations, it largely provides a agency friendly interpretation of the FCO’s decision practice and relevant case-law. Still, it shows a move towards more economic analysis and a deviation from the FCO’s traditional, more market structure oriented approach. But it seems unlikely that the strict enforcement policy of the FCO will change as a result of the new guidance paper.
The Draft Guidance focuses on the question whether a merger will lead to the creation or strengthening of dominance. Unlike in other jurisdictions, such as the US and EU, the creation or strengthening of a dominant position is the criterion for the prohibition of a merger in German merger control. While discussions are under way about the introduction of the SIEC test (“significant impediment to competition”) in an effort to harmonize German with EU merger control rules, the FCO makes it clear that it anticipates that the Draft Guidance will remain relevant even if the underlying test changes.
In terms of substance, the Draft Guidance distinguishes between horizontal, vertical and conglomerate mergers and between single firm dominance and collective dominance. The definition of dominance and the substantive assessment relies on standard theories of harm and recognised economic theories that are also used by other competition authorities such as the European Commission.
Some elements of the Draft Guidance reflect a traditional German understanding of merger control which may differ from the approach in other jurisdictions. Thus, the Draft Guidance suggests that the purpose of merger control is to protect competition as [...]
A recent decision by the Court of Justice of the European Union may make it easier for prospective claimants to obtain at least those leniency statements and related materials that are submitted to the national competition authorities of the EU Member States. Companies doing business in the European Union are urged strongly to follow developments in this area and factor the risk of disclosure into the decision of whether or not to apply for leniency.
The German Supreme Court, in a landmark ruling handed down on 28 June 2011, has held that members of a cartel are able to defend themselves against a claim for damages by raising the defense that the relevant applicants have passed on the damage caused by higher prices onto a downstream market (the so-called "passing-on defense"). At the same time, the Supreme Court held that indirect purchasers have standing to claim damages following a violation of the antitrust rules.
The judgment is of considerable practical importance. In parallel with efforts at EU level to encourage private antitrust enforcement, actions for damages in Germany against members of a cartel have increased in number and significance. In the majority of cases, it is the amount of damages which is the subject of proceedings, since the relevant infringement of the rules has already been established pursuant to a legally binding administrative decision in accordance with § 33(4) ARC.
Cartelists, therefore, face in addition to fines also damages claims potentially reaching into the millions. The level of damages is assessed on the basis of the difference between the cartel price and a given hypothetical market price. As a result of the passing-on defense, the level of damages claimed can, however, be considerably reduced. Economic studies show that in theory direct purchasers pass on to a large extent higher (cartelised) prices on to their customers. In practice, however, the passing on of damage can be difficult to prove, since the defendant does not have information at its disposal relating to the prices charged by damages claimants on downstream markets.
The admissibility of the passing-on defense was, on a number of grounds, denied by both the first instance court and the Berlin High Court. It was, however, accepted by the Düsseldorf Higher Regional Court. Indeed, in the literature, the issue has been extensively debated. It was, inter alia, open to question whether § 33(3)(2) ARC ("If a good or service is purchased at an excessive price, a damage shall not be excluded on account of the resale of the good or service") excludes the possibility to plea the passing-on defense. It was also argued that the passing-on defense would undermine the effectiveness of private antitrust enforcement. In contrast, the Supreme Court made it clear that in accordance with the general principles underlying the calculation of damages, the passing on of damage must be taken into account.
Given the lower sums of damages available and the clear difficulties relating to the discharging of the burden of proof, it is questionable whether indirect purchasers will make use of their right to bring a claim. It is therefore expected that the passed on part of the damage resulting from a cartel will in practice remain unclaimed.
More than 100 countries worldwide have merger control regimes. In the majority of these regimes, including the U.S., EU and most EU Member States, parties to a transaction may not close a deal without approval from the competition antitrust regulator. An infringement of this obligation, or "gun-jumping", carries risks that are generally well understood. But companies should be aware that the German Federal Cartel Office (FCO) has recently taken a more aggressive approach in its enforcement of gun-jumping, in particular concerning the fining policy for gun-jumping.
On Tuesday, June 28, 2011, the German supreme court (Bundesgerichtshof-BGH) has clarified two important questions concerning cartel damages actions in Germany.
First, indirect purchasers as well as direct purchasers are entitled to seek damages from cartel members. Second, cartel members can use the "passing-on" defence and argue that their customers have passed on the damage suffered from the cartel (BGH, judgement of 28 June 2011 – KZR 75/10).
In Europe, the interplay between antitrust and criminal law at the national level may vary significantly by jurisdiction. Some European Union member states, such as the United Kingdom, Ireland, and Romania, have criminalized competition law. Other jurisdictions, such as Germany and Italy, do not envisage criminal penalties for anticompetitive practices; however, such conduct may sometimes qualify as a separate criminal offense. The following cases, across Europe, show that there appears to be a general trend towards more effective enforcement against serious antitrust violations – including by means of criminal penalties against individuals – and not only in the countries with criminal competition laws.
The European Court of Justice (ECJ) ruling of 14 June 2011 followed a case that originated in Germany. Pfleiderer, a firm in the wood industry, was considering a damages claim against members of a paper cartel. It sought access to the cartel files held by the German Competition Authority (FCO) in order to substantiate its claim. A dispute followed over whether disclosing the documents of companies who had cooperated with the FCO would undermine the national leniency programme since potential leniency applicants would fear eventual disclosure.
A German court asked the ECJ for a preliminary ruling whether or not the provisions of EU competition law are to be interpreted as meaning that cartel victims can be granted access to leniency applications received by an EU Member State competition authority.
The ECJ has held that it was for the courts and tribunals of each EU Member State on the basis of their own national law to determine the conditions under which such access must be permitted or refused by weighing the interests protected by EU law. The upshot of this ruling is therefore that each judge in each Member State has a discretion as to what type of leniency document can be disclosed to a cartel victim. The ECJ has therefore distanced itself from recommendations made by the Advocate General who suggested that documents which existed before the cartel was uncovered could be disclosed but said that submissions drafted for the purpose of revealing the infringement should be protected.
For leniency applicants, weighing the decision whether to apply for leniency has now become even more complex. On the one hand, a potential leniency applicant stands to benefit from immunity, or a reduction, from fines. On the other hand, it will now have to take into consideration not only the remaining risk of a fine and criminal sanctions but also the the fact that private damages claimant might get easier access to incriminating evidence. Such complexity is all the more greater given that the ECJ’s ruling may lead to different results in different European countries.
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