Sanctioning Antitrust Infringements in Germany - Administrative & Criminal Sanctions for Individuals and Companies

1. Sanctioning Antitrust Infringements in Germany –Administrative & Criminal Sanctions for Individuals and CompaniesInternational Competition Network – Cartel Working Group Subgroup 1 Peter Stauber, LL.M. / Berlin, Germany

2. Outline • System of administrative and criminal sanctions in Germany for antitrust infringements • Similarities and differences • Interaction between administrative and criminal system • Focus on sanctions for individuals

3. General principles (1)

4. General principles (2)

5. Administrative sanctions • Administrative Sanction = mixture of administrative and criminal law • Administrative part • investigation and sanctioning (setting of fines) by administrative authority • review by independent court only upon appeal • Criminal part • Procedural: applicability of Code of Criminal Procedure • Basic principles of rule of law apply: • Presumption of innocence • Prohibition of retroactivity • “Nullapoena sine legecerta“-principle • maximum fine on undertakings of 10% of worldwide turnover must not be applied as “capping threshold“, but as upper limit fine (Federal Court of Justice, dec. dd. 26 February 2013 – KRB 20/12) • Calculation method of European Commission is considered unconstitutional in Germany…

6. Criminal sanctions Bid-rigging (Sec. 298 CC) • limited applicability • preconditions • Procurement procedure • anti-competitive agreement concerning bid • submission of a bid (on the basis of the anti-competitive agreement) • Applicable also to private procurement procedures (if procedural structure similar to public procurement procedure) • What if procurement authority is aware of anti-competitive agreement or has even instigated the agreement? • What if no bid has been submitted?

7. Interaction between administrative and criminal sanctions • Priority of criminal prosecution • Administrative and criminal proceedings not possible simultaneously • NCA bound by criminal sanction  ne bis in idem • If criminal prosecution is terminated, administrative sanctions might be imposed • However, criminal procedure does not bar administrative sanctions against • undertakings • individuals not involved in the criminal offence

8. Interaction between administrative and criminal sanctionsExample Construction company Brick and Mortar (BAM) wants to participate in public procurement procedure by airport authority for construction of two new airport terminals. BAM’s sales director Karl Kartell agrees with sales manager of competitor Sticks&Stones(SAS) as well as head of public airport authority that (1) SAS submits inflated bid for terminal 1 so that BAM shall win, (2) BAM submits inflated bid for terminal 2 so that SAS shall win, and (3) BAM and SAS pay head of airport authority a kickback of 5%. • Kart Kartell, SAS’ sales manager and head of airport authority could be prosecuted for bid rigging, bribery of a government official (and possibly also for breach of trust vis-à-vis their respective employers) • BAM and SAS might be fined by (federal or regional) competition authority with up to 10% of worldwide turnover • Managing directors of BAM and SAS might be fined individually for failure in properly supervising their respective sales directors (even if they lacked knowledge of anti-competitive agreement) • Involved individuals and companies can be “blacklisted” for future procurement procedures

9. Sanctions for antitrust infringements by individuals

10. Calculation of antitrust fines for undertakings (1) • Federal Cartel Office‘s Fining Guidelines (25 July 2013) • Statutory framework of fines • Statutory minimum: 5 Euro • Statutory maximum 10% of worldwide group turnover • Case specific maximum: 10% of the offence-related turnover multiplied with a factor based on worldwide turnover of undertaking Example: Cartel Corp. has worldwide turnover of 3 bln Euro. German subsidiary Kartell-GmbH participates in price fixing concerning sale of product X in Germany. Duration of price fixing is 5 years; Kartell GmbH’s annual turnover with product X in Germany was 100 mEuro. • Statutory maximum: 300 mln Euro (= 10% of 3 bln Euro) • Case-specific maximum: 200 mln Euro (= 10% of [100m Euro x 5years] x 4)

11. Calculation of antitrust fines for undertakings (2) • Determination of the fine based on case-related criteria • offence-related • type and duration of the infringement • size of affected market • relevance of undertakings on affected market • socio-economic relevance of affected products • degree of organization (“incidental” infringement vs. professional “cartel bureaucracy”) • offender-related • role of undertaking in the infringement (instigator / forced participant) • degree of culpability • repeat offender • financial/economic capacity of offender  in/ability to pay

12. Thank you for your attention! Expertise European, German and Hungarian antitrust and competition law: national and international merger control, cartel investigations, compliance advisory, antitrust litigation including cartel damage claims International Franchising Career Legal studies in Berlin and Dresden, Leuven and Budapest Work experience with major international law firms in Budapest, Brussels, Moscow and New York With Noerr since 2007 Languages German, English, Hungarian, Russian and French Distinctions Leaders in their Field for Kartellrecht "Corporate M&A: Competition" in Germany and Hungary, Chambers Global (2014) Peter Stauber, LL.M. Associate Partner Noerr LLP Charlottenstrasse 57 10117 Berlin Germany