Guide to Antitrust Law

Compendium | Competition Policy

Guide to Antitrust Law Key principles, Risks and Compliance

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Foreword Functioning competition is one of the key drivers of a dynamic economy. It promotes innovation, maintains open markets, and ensures efficient use of financial and operational resources. Antitrust law, which is designed to prevent unlawful agreements between companies and the abuse of dominant market positions, is a key element in safeguarding fair and effective competition. It is crucial that companies make antitrust rules part of their corporate culture and comply with them in all areas of their business.

Ten years have passed since the last edition of this guide.

Its central focus has not changed since then: compliance with antitrust law is becoming increasingly important.

Since 2004, companies have been required to assess for themselves whether their conduct is permissible under antitrust law. In the event of infringements, the companies involved face the risk of heavy fines (often in numerous jurisdictions), claims for damages, severe reputational damage, exorbitant legal costs, a fall in market value, liability on the part of directors and officers, and even criminal consequences. For many market participants, it is often not easy to reliably identify the boundaries of conduct permitted under antitrust law.

Antitrust law is rightly playing an increasingly central role within companies – particularly against the backdrop of enormous geopolitical and transformation-related challenges – and must be at the heart of any company’s corporate governance. Regular, thorough training of employees has become essential because antitrust law now affects every part of a company. Case law, administrative practice and new market developments have massively extended the scope of prohibitions on restrictive practices. Ongoing digitalisation is changing how competition authorities investigate. It has not become any easier for companies to assess whether they are operating within the bounds of the law, and there are no signs of a reversal in this trend.

Competition compliance is here to stay.

This guide provides an introduction to the current state of antitrust law. The guide is aimed at managing directors and heads of sales and procurement, but the overview it provides may also be of interest to in-house lawyers who are not antitrust specialists.

The editors would like to thank all the experts involved, in particular the author, Johanna Bottyanfy of Gleiss Lutz.

Niels Lau

Dr. Ulrich Soltész, LL.M.

General Counsel Federation of German Industries

Partner, Lawyer Gleiss Lutz

Contents A B

Introduction 6 Prohibited Practices

8

I.

The prohibition on restrictive practices

9

1.

Overview

9

2.

Behaviour in relation to competitors

2.1 Fixing of prices or terms and conditions

II.

Abuse of a dominant position

21

1.

Dominant position

21

2.

Strong market position

21

3.

Paramount significance for competition across markets

22

4.

Abuse

22

12

4.1

Unfair prices, terms and conditions

22

12

4.2 Unequal treatment of business partners

22

4.3 Refusal to do business or to supply

22

(territories, customers or quotas)

12

4.4 Prohibition of tying

23

2.3 Information exchange and benchmarking

12

4.5 Predatory pricing

23

2.4 Purchasing cooperations

14

4.6 Discount systems

23

2.5 Sales cooperations

14

2.6 Research and development

14

2.7

15

2.2 Market allocation

Sustainability cooperations

2.8 No Poach agreements 3.

15

Behaviour in relation to suppliers and buyers

16

3.1 Influence on resale prices

16

3.2 Most-favoured customer clauses / best price guarantees / parity clauses

16

3.3 Exclusive purchase obligations

16

3.4 Exclusive supply obligations

17

3.5 Exclusive sales territories / right of exclusive distribution

17

3.6 Selective distribution systems

18

3.7 Dual distribution

18

3.8 Restrictions on online trading

19

C

Remedial Measures Following Sector Inquiries

24

Inhalt

D

Antitrust Proceedings

26

I.

Jurisdiction

27

II.

Investigative powers

27

1.

Requests for information

27

2.

Inspections

28

III. Sanctions 1.

Fines

29

1.1

Level of fines

29

1.2

Blame the parents:

1.3

Liability of parent companies

29

Liability in the case of legal succession

29

1.4 Multiple penalties for proceedings in different states

29

1.5

Limitation period

29

2.

Other sanctions imposed by antitrust authorities

3.

Consequences for individuals under criminal law

4.

32 32

Trade associations / associations of undertakings

32

IV. Immunity from / reduction of fines through leniency applications and settlement procedures

33

E. Consequences under Civil Law, in Particular Damages I.

34

Nullity of agreements that violate antitrust law

35

II.

Claims for damages by cartel victims 35

1.

Who has a claim for damages?

35

2.

Who can be held liable for damages?

36

3.

Amount of damages

36

4.

Burden of proof and access to evidence

36

F.

Antitrust Compliance

38

I.

Objectives and functions of compliance programmes

II.

39

Structuring and introducing an antitrust compliance programme

39

1.

Preparation and organisation

39

2.

Measures and modules

40

3.

Monitoring and optimisation

40

4.

Response to specific violations

40

End Notes

41

Imprint

42

A. Introduction

Introduction

6

A

A

Introduction

Antitrust law, which is designed to protect competition, has gained in importance in Germany and internationally over recent decades like almost no other area of law.

The risk of being hit with fines running into millions, or even billions, as a result of isolated breaches by individual employees has prompted many companies to provide their staff with training on antitrust law and to have their business operations reviewed for potential violations of antitrust law.

The scope of competition authorities’ enforcement activities has broadened in recent decades. Nowadays, it is not only horizontal infringements – i.e. core infringements agreed between competitors, such as price-fixing or market-sharing – that are punished with very substantial fines, but also vertical restrictions on competition – i.e. those agreed between suppliers and customers. The potential for sanctions has also increased significantly due to the fact that, following antitrust proceedings conducted by competition authorities, private claims for damages from customers harmed by the antitrust infringement are now regularly to be expected.

The guide does not cover merger control, EU State aid rules or the EU’s Foreign Subsidies Regulation. Nor does it address the regulatory law applicable besides antitrust law in certain sectors, such as energy and telecommunications. Regulation of platforms, for example by the EU’s Digital Markets Act, is also not covered.

This guide provides merely an overview of antitrust law and does not serve as a substitute for legal advice on the basis of actual circumstances in an individual case. For this reason, the authors do not assume any liability for its content.

The BDI’s positions on antitrust law can be found at www.bdi.eu.

Furthermore, the international dimension of antitrust law is becoming increasingly prominent. Antitrust law is gaining popularity worldwide. Other states have tightened their national antitrust regulations, increasingly taking their cue from the practice of the European Commission. The advantage of this is that similar rules now apply everywhere. One point to note is that UK-linked cases previously within the European Commission’s jurisdiction can now, post-Brexit, be pursued by the British competition authority, the CMA, as well.

This guide begins by outlining the key provisions of the law prohibiting restrictive practices and abuses of a dominant position (B.), moves on to examine sector inquiries (C.), and then looks at how antitrust proceedings are conducted before Germany’s Federal Cartel Office (the Bundeskartellamt) and the European Commission (D.) Here, we will explain how fines can be averted or reduced by self-reporting an antitrust violation (in what’s termed a “leniency programme”). Section E. gives an overview of the civil law consequences of an antitrust violation, focusing on claims for damages. Finally (F.), we look at “compliance programmes” that companies can use as internal measures to stop antitrust violations happening in the first place.

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B. Prohibited Practices

Prohibited Practices

8

B

Prohibited Practices

I. The prohibition on restrictive practices 1. Overview German and European antitrust law prohibit agreements and concerted practices between undertakings as well as decisions by associations of undertakings that have as object or effect an appreciable restriction of competition. This is known as the “prohibition on restrictive practices”. i

This prohibition is interpreted very broadly. The term “agreement” includes not only written contracts but also gentlemen’s agreements, for example, which are only verbal. It is therefore not necessary for the agreement to have been set out in writing or for it to be legally binding.

Example The heads of sales at two companies tendering for the same project agree by telephone not to bid below a certain price for the project. This agreement breaks antitrust law.

It is not even necessary to conclude such an agreement.

The prohibition on restrictive practices includes concerted practices. These require only that companies be in contact with one another, whether directly or indirectly, and that they change their market behaviour as a result. Competitors are acting in concert if they exchange sensitive business information, for example on upcoming price increases.

It is assumed that the companies will use this information when deciding how to act on the market, thus affecting their market behaviour.

The term “undertaking” needs to be understood broadly, as it covers any entity performing an economic activity, regardless of the entity’s legal form. As a general principle, economic activity is defined as any market offer of goods or services. It is not necessary that the entity intends to gain economically from the activity. Freelancers can be “undertakings” as well. Public law entities are also undertakings in this context if the activity in question could also be offered by private parties on the market. As associations of undertakings, trade associations also fall within the scope of antitrust law.

practices are authorised to represent their company in legal dealings (see the example above of a telephone call between the heads of sales of two companies).

Under the prohibition on restrictive practices, competition is restricted if an undertaking’s freedom to compete, i.e. its actions on either the supply or the demand side, is compromised. Such restrictions of competition include price fixing or market allocation between competitors or retail price maintenance vis-à-vis distributors (see 2. and 3. for more details). That the parties intended to restrict competition is enough for the restriction to count as an antitrust violation. So the argument that the agreement was never de facto implemented will not contest the existence of an antitrust violation.

Example The leading European manufacturers of a particular product agree that in future each of them will only supply customers from their respective country. From the outset, however, none of them keeps to this agreement in practice. The fact that the parties did not implement the agreement does not mean that no anticompetitive market allocation occurred.

Even if the parties did not intend the restriction of competition, the restriction may still qualify as an antitrust violation if an agreement or concerted practice effected the restriction of competition in practice.

For a restriction to fall under the prohibition on restrictive practices, the restriction of competition by effect or by object must be appreciable. The European Commission’s “De Minimis Notice” states ii that agreements between competitors with a combined market share not exceeding 10% do not qualify as “appreciable” (for agreements between suppliers and buyers, the threshold is 15%). But these rules do not apply to severe antitrust violations, i.e. restriction of competition by object (hardcore violations). Restrictions of competition by object are always appreciable.

If the criteria just set out for an antitrust violation have in principle been met, the actual practice may, however, be exempted from the prohibition on restrictive practices.

As a basic principle, the actions of any employee can constitute grounds for liability under antitrust law. It is not necessary that the persons engaged in anticompetitive 9

Exempted from the prohibition on restrictive practices are agreements and concerted practices by undertakings as well as decisions by associations of undertakings that • contribute to improving the production or distribution of goods or to promoting technical or economic progress (“efficiency gains”), • allow the buyers of goods a fair share of these efficiency gains, • provide (only) for restrictions of competition that are indispensable to achieving efficiency gains, and that • do not create the possibility of eliminating competition in respect of a substantial part of the products in question.

Accordingly, restrictive agreements may be allowed if they bring about efficiency gains in the form of savings through synergies or improvements in quality and it can be expected that a fair share of these gains will be passed onto buyers, for example as lower prices or improved product quality.

Companies and their legal advisors will need to judge for themselves whether the criteria for an exemption are met.

Antitrust authorities do not issue companies with “clean bills of health”. But the European Commission has published a number of block exemption regulations and accompanying guidelines to clarify the requirements for an exemption. The most important of these in practice are the “Horizontal Guidelines”, addressing various practices between competitors, and the “Vertical Guidelines”, dealing with agreements between suppliers and buyers. iii

10

Prohibited Practices

“The freer an economy is, the more social it is.”

Ludwig Erhard Economist and former Federal Chancellor

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2. Behaviour in relation to competitors

2.1 Fixing of prices or terms and conditions Any agreement between competitors on price, price discounts or on the time and scope of price changes is prohibited. Such agreements are “hardcore antitrust violations”, and never allowed. This includes both direct price setting as well as indirect price setting by agreeing on pricing factors such as profit margins.

Example Several competitors agree not to offer their products on the market below a certain minimum price.

2.2 Market allocation (territories, customers or quotas) Partitioning a market between competitors is also a hardcore antitrust violation, which means it is never allowed.

Markets are often partitioned such that competitors promise not to “go after” certain customers or sales territories.

Even agreeing not to exceed certain production volumes or quotas, to keep the parties’ market shares stable, is not allowed.

Example Competitors A and B agree that B will not supply certain customers that A has supplied to date. In return, A will not try to acquire B’s regular customers.

2.3 Information exchange and benchmarking Each company must decide by itself what pricing policy it will pursue on the market and what means it will use to implement this policy (the “requirement of autonomy”). But companies are allowed to unilaterally and independently track general price developments on the market and adjust prices accordingly.

As a general rule, not only price fixing but also agreements on other commercial conditions (terms and conditions of delivery, terms and conditions of guarantees, payment deadlines, default interest etc.) are not allowed. In an individual case, however, standardisation of commercial conditions may be exempted from the prohibition if it creates efficiency gains and benefits consumers as well because market offers are easier to compare, for example. Recent developments have shown that surcharges or premiums may also be the subject of prohibited agreements even if they raise the final price by only a few per cent or if they are theoretically offset and equalised by discounts.

Example Competitors A, B and C have to pay their suppliers a raw materials surcharge for a certain material. They pass this surcharge on to their customers through the final price of the product.

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The exchange of market-relevant information between competitors can affect competition in various ways, so it must be assessed on a case-by-case basis. The following principles apply: Competitors are generally not allowed to exchange price-related information (purchase, sale or resale prices including list prices, price components, price calculations) or information about sales policy, sales territories or customers (customer lists, current contracts or invitations to tender).

The exchange of certain other competitively sensitive information is problematic and may not be allowed in individual cases. Such information includes other terms and conditions that do not relate directly to prices (terms and conditions of guarantees or delivery etc.), costs (of manufacturing, management etc.), capacity, production, volumes, turnover and sales figures, market shares, plans to enter or leave a market, the launching of new technology or products, a specific company’s advertising plans or other important parts of company strategy.

The Horizontal Guidelines give examples of information that do not generally constitute commercially sensitive information and can therefore be exchanged. Information which is generally not commercially sensitive relates to the general functioning or state of an industry; public policy or regulatory matters (which could be used, for example in industry-wide public relations or lobbying initiatives); non-confidential technical issues relevant to the industry in general and general promotional opportunities.

Prohibited Practices

It is irrelevant whether the competitors exchange the information directly or an intermediary is involved (“hub and spoke”). In recent decisions, the European Commission has also viewed the exchange of information between an undertaking and a competitor with a non-controlling stake in it as anti-competitive. Such minority shareholdings do not violate antitrust law per se, but often make it easier to exchange confidential information, exert influence on decisions and, ultimately, align business strategy. Where competitors hold non-controlling stakes, therefore, antitrust precautions must be taken, such as clean team agreements, Chinese Walls or NDAs (non-disclosure agreements), and the exchange of information must be kept to a minimum.

By contrast, companies are generally permitted to adjust their behaviour in the light of information relating to competitors where this information is obtained from customers or publicly available. When competitively sensitive information (on upcoming price increases, for example) is announced on public media, however, antitrust authorities will check whether this information does indeed serve the customer or whether it is in fact addressed to competitors. Such announcements may signal particular behaviour to a competitor, or a reaction to previous behaviour by a competitor.

Example In an investor call, company A gives very short notice of a price increase. Indirectly, this is meant as a request to competitors to also increase their prices.

Such signalling shows that it can be hard to differentiate clearly between permitted and prohibited market behaviour, especially in highly transparent markets. Indications include a company’s internal reactions to competitors’ announcements (for example advancing price increases after the competitor’s announcement) and subsequent external communication (to customers, investors, other stakeholders) which competitors may also notice. And as described: there is no need for an explicit agreement between the competitors to communicate indirectly through public channels.

Implied (conclusive) conduct is sufficient.

Rule of thumb: When a company publicly announces an upcoming price increase, this information will generally serve customers and will generally not raise concerns. But if a company publishes detailed information on its market situation or future intentions at an unnecessarily early date, and perhaps regularly, caution is advised and legal advice should be sought.

Even a one-off unilateral disclosure of competitively sensitive information may constitute an antitrust violation and entail severe fines unless the receiving company publicly distances itself. The form (written or verbal) and occasion of the information exchange (business or personal, spontaneous or organised, e.g. trade fairs, association meetings, market information systems, factory visits etc.) plays no role in the assessment under antitrust law. As a rule, it is also irrelevant when the exchange of information took place (for example, an information exchange after the implementation of a price increase regarding the questions whether the price increase has been received by the market).

Example Two employees of competing companies happen to meet each other outside of working hours.

One of them mentions that his company will be increasing its sales prices in the next quarter because of an increase in the price of raw materials.

This alone can constitute an antitrust violation.

It should be noted that even just receiving (hearing, reading etc.) commercially sensitive information disclosed by a competitor may establish the recipient’s liability under antitrust law. In practice, the only way to rule out this risk is for the recipient to immediately and openly protest at the disclosure and to document this protest.

Market statistics published by trade associations or third parties (on average prices or production volumes, for example) do not generally raise antitrust concerns if these data do not reveal an individual competitor’s figures (prices, production quantities etc.) or the data are so old that no conclusions can now be drawn about the competitor’s current commercial policy.

Example The five biggest manufacturers in an industry regularly report their monthly turnover to a trade association, which aggregates the figures and returns the totals to the manufacturers.

If the participating manufacturers cannot identify a particular competitor’s figures from the totals, this information exchange through the trade association is allowed. But if only two manufacturers are involved in the information exchange, either can identify the other one’s figures by deducting its own turnover. The information exchange then raises antitrust concerns.

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The prohibition on restrictive practices also applies with- If cooperations do not coordinate prices, allocate sales terriout restriction to Benchmarking. In this context, too, in- tories or customers, or limit output, they may be exempted if formation must not be exchanged on price-related topics, they entail efficiency gains (e.g. synergy effects) and it can distribution policy, sales territories or customers. Informa- be expected that a fair share of these gains will be passed tion on costs, turnover or sales figures, market shares and on to buyers. This is likely where the undertakings hold a technologies should only be given if the data disclosed is combined market share not exceeding 15%. Antitrust auold enough. During factory visits, you should ensure that thorities take a highly critical view of sales cooperations, any information exchanged is limited to aspects of produc- however, so you should always obtain professional advice. tion and that no processes are demonstrated which are of Ask an expert on antitrust law. strategic importance to one of the undertakings.

If the only way to deliver a customer’s requested performance or to enter a new market is for two or more competi­ tors to act jointly, their cooperation may still be allowed if it 2.4 Purchasing cooperations includes the joint setting of the sales price (the “working Undertakings use purchasing cooperations to purchase group principle”). But this should be checked beforehand goods or services jointly. Some cooperations of this type by lawyers proficient in antitrust law. may be exempted from the prohibition on restrictive practices if they achieve efficiency gains (lower purchase prices, lower transaction and transportation costs etc.), and if, e.g.

Example because of competitive pressure, it can be expected that a fair share of these benefits will be passed on to buyers, primarily Two companies submit a joint offer for a major as lower sales prices. If the undertakings in the cooperation project they cannot deliver on their own. This have a combined market share not exceeding 15% on both cooperation constitutes a “working group” the purchasing market and the selling market, a purchasing and is allowed under antitrust law. There is no syndicate will generally be allowed. Parties’ obligation to restriction of competition here. But the compameet their needs through joint purchases only may also be nies should ensure that their cooperation and exempted if it can be assumed that the efficiency gains rethe exchange of sensitive information remain ferred to above can only be achieved through such obligation. limited to the project.

Example Several small companies establish a joint venture to negotiate cheaper purchase prices and terms and conditions of supply with their suppliers. The participating undertakings are free to meet their needs on their own or through the joint venture. If the small companies have a combined market share not exceeding 15% on the selling market, this buying syndicate is generally allowed under antitrust law.

2.5 Sales cooperations Sales cooperations can take a variety of forms and are found in joint selling, joint advertising or joint after-sales service, for example. Any assessment under antitrust law therefore applies to a specific individual case only. But as a rule of thumb, a sales cooperation will generally not be allowed if it includes or leads to coordination of sales prices between competitors. The same applies where the distribution agreement results in the allocation of sales territories or customers amongst competitors or involves restrictions on production.

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2.6 Research and development R&D agreements may also be relevant under antitrust law.

Such agreements may be used to finance research or to jointly improve or develop products. R&D agreements may cover not only products but also technology or intellectual property and may be made as early as the innovation phase (i.e. without being specifically linked to a product or technology). Such agreements may also concern analyses, studies and tests, or the establishment of joint facilities for test production.

They will generally not raise concerns if the participating competitors do not possess market power (i.e. no more than 25% market share together) or the agreements do not appreciably reduce innovation competition. Cooperation between undertakings that are not competitors will generally not raise concerns.

In contrast, the prohibition on restrictive practices will generally apply to R&D agreements that set prices, limit output, partition markets or restrict technical development. Such agreements enable companies to prevent the market entry of products, agree on the development of products no longer

Prohibited Practices

in the R&D agreement’s scope, or even limit improvements to a jointly developed product, thus restricting competition.

For research cooperation to be allowed, it must be determined that all parties have full access to the joint R&D’s final results for the purposes of further research and development and for the purposes of exploitation. This access includes the resulting IP rights and resulting know-how. Alternatively, each undertaking must be provided with the other undertaking’s know-how needed to exploit the results.

2.7 Sustainability cooperations Undertakings may also cooperate on sustainability. If these cooperations do not concern aspects relevant to competition, such as product price, quantity, quality, choice or innovation, they will generally not raise concerns. This includes agreements to ensure compliance with international treaties or conventions not fully implemented by the state.

Example A group of undertakings and their suppliers undertake not to supply or purchase products made using child labour or materials harmful to the climate.

The prohibition on restrictive practices does not apply to agreements concerning purely internal matters either.

gains may consist in a system that accelerates the introduction of sustainable products for example, or clean production technologies, improved production conditions, or better product quality. It is important that these benefits be quantifiable, objective, specific and verifiable. The general principle is that efficiency gains must benefit customers.

If the efficiency gain consists in reduced water or air pollution, for example, the agreement’s contribution to this reduction must be set out exactly. As a minimum, it must be possible to estimate the extent of the improvement.

One problem with taking efficiency gains in the area of sustainability into account is that these often occur on markets that do not improve the customer’s situation on the relevant product market, for example when more environmentally friendly processes are to be introduced in production abroad.

These are “external effects”, which are harder to quantify and therefore harder to present to an antitrust authority.

If undertakings plan to jointly develop a (binding) sustainability standard, this will not raise antitrust concerns if the following requirements are met (“safe harbour”): the standards must be developed in a transparent process, there must be no direct or indirect obligation to participate, and no commercially sensitive information may be exchanged unless required for the cooperation. The participating undertakings must always have the option of applying higher sustainability standards. Compliance with and application of the standards must also be effective and non-discriminatory for all undertakings. Nor may the sustainability standard result in major price increases or reductions in quality, and the participating undertakings’ combined market share must be below 20%.

Example Competitors A, B and C work in a sector of the economy seen as being highly polluting. To counter their poor reputation, the undertakings plan to establish joint standards to improve the environmental record of their premises, with energy-saving measures and an obligation to reduce single-use plastics.

Nor are antitrust concerns raised by databases on supply chains to verify supplier sustainability (as long as they do not involve obligations to purchase or not purchase from the suppliers in question) or by campaigns to raise industry or customer awareness of sustainability issues. Any costs incurred owing to product-related sustainability standards must not be passed on to customers.

2.8 No Poach agreements “No poach” is a form of buyer cartel and may include agreements on salaries or an information exchange that can reveal salary information. The Commission views such no poach agreements as a severe violation of competition law, as they hinder the efficient allocation of employees to undertakings. This is the case as soon as two companies make a corresponding agreement. In a recent decision, the Commission even held that a no poach agreement existed where one of the undertakings held a non-controlling stake in a competitor.

Efficiency gains may compensate for possible restrictions of competition. In sustainability cooperations, efficiency 15

3. Behaviour in relation to suppliers and buyers Restrictive agreements may exist not only between competitors but also between suppliers and their buyers (“vertical restrictions of competition”). In this section we will look at a number of scenarios that are particularly relevant in practice.

3.1 Influence on resale prices A manufacturer or supplier is not allowed to influence what prices its customers may demand from their customers.

Fixed-price or minimum-price requirements (“retail price maintenance”) are never allowed, and the antitrust authorities now investigate them systematically. Nor is any manufacturer or supplier allowed to exert influence on the individual components of a price, such as the distributor’s margin or the size of discounts.

By contrast, recommended retail prices (“RRPs”) are allowed where the buyers (the distributors) remain free in their pricing decisions and the RRP does not have the same effect as fixed or minimum prices because of pressure exerted or incentives granted. Exerting pressure on a buyer to keep to an RRP is always prohibited. In a case where a manufacturer sent distributors RRPs and then contacted the distributors to discuss their pricing, this was enough to qualify as impermissible pressure.

Example A manufacturer notifies a distributor that the latter’s current resale prices give the impression that the products in question are cheap goods. The manufacturer also claims that the distributor is ruining other distributors’ margins.

Competition authorities saw this discussion as constituting an attempt to influence the sale price.

Setting the distributors binding maximum sale prices, however, is generally allowed. But this does not apply if the maximum prices have the effect of minimum or fixed prices, for example because the “maximum price” is set so low that it is virtually impossible for a distributor to charge a lower price.

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3.2 Most-favoured customer clauses / best price guarantees / parity clauses Most-favoured customer clauses (also known as best price guarantees or parity clauses) at the manufacturer’s expense are clauses in which a manufacturer undertakes to a particular customer not to offer other customers more favourable terms and conditions or to always grant that customer the most favourable terms and conditions. Under the EU’s Vertical Block Exemption Regulation iv, most-favoured customer clauses are exempted from the prohibition on restrictive practices if neither the manufacturer nor the customer benefitting from the clause have a market share over 30%. If one of the parties’ market shares is above this limit, most-favoured customer clauses are only allowed if they effect or safeguard significant efficiency gains. “Broad parity agreements” between undertakings and online intermediation services are also excluded from the exemption. Such agreements exist if the manufacturer is prohibited from using competing platforms to sell, at better terms and conditions, its products offered through the online intermediation service.

Such online intermediation services include e-commerce marketplaces, app stores, price comparison tools and social media services used by undertakings.

However, agreements in which companies commit themselves not to offer at a lower price the products offered through the online intermediation service are allowed.

Given the difficulties in differentiating these cases, professional legal advice should be sought before taking such a solution to market.

Clauses at the buyer’s expense that restrict the latter’s freedom to set its resale price are always prohibited, under the principles regarding the ban on influencing buyer’s resale prices (see 3.1 above).

3.3 Exclusive purchase obligations Obliging a buyer to meet its demand for goods exclusively or predominantly through a particular supplier or to exclusively or predominantly (more than 80%) distribute only a particular provider’s goods (an “exclusive purchase obligation”) may constitute a restriction of competition because such obligations have the capacity to restrict the possible sales of competing suppliers. Under the Vertical Block Exemption Regulation, however, exclusive purchase obligations are generally exempted from the prohibition on restrictive practices if neither contractual party has a market share over 30% and the exclusive purchase obligation was agreed for a term no longer than five years.

Prohibited Practices

Example

Example 1

A brewery concludes a beer supply agreement with a restaurant owner. For a maximum of five years, the agreement states, only this brewery’s beer may be sold in the restaurant. In return, the restaurant obtains the beer at a particularly low price. Both the brewery and the restaurant have market shares below 30%.

A textiles company develops a novel, high-performance material which is especially well suited to the manufacture of tents. A tent manufacturer wants to use this material exclusively and offers the textiles company a higher price if the new material is only supplied to this manufacturer. If the parties’ market shares are each below 30%, then the exclusive supply obligation is allowed under antitrust law.

A beer supply agreement such as this one is allowed under antitrust law. There is no need to examine whether the exclusive purchase obligation appreciably impairs other breweries’ possible sales

Beyond this threshold for market shares and the five-year cap, the market conditions must be examined to determine whether the agreed exclusive purchase obligation is indeed capable of appreciably impairing the possible sales of competing suppliers. If the answer to this is yes, the exclusive purchase obligation may still be allowed if it creates significant efficiency gains. This may be the case, for example, where the supplier has invested significantly in a particular distributor’s distribution of the supplier’s products and the supplier would not have invested this sum were the distributor in question to distribute competing suppliers’ products as well.

3.4 Exclusive supply obligations An exclusive supply obligation is a contractual agreement under which a supplier of particular products or provider of particular services undertakes to deliver these products or services exclusively to a particular buyer (the contractual partner). Such agreements do not raise antitrust concerns if neither the supplier’s nor the buyer’s market share on their markets is over 30%. If this requirement is not met, the specific case must be investigated to determine whether the exclusive supply obligation stops competing buyers from accessing an important source of products or services. Exclusive supply obligations may be necessary and are generally allowed in subcontracting agreements to ensure that the supplier does not use the knowledge and resources received from the client for the benefit of third parties.

Example 2 A smartphone manufacturer has developed a high-performance camera and, on cost grounds, wants to have it manufactured by a subcontractor. The smartphone manufacturer provides the subcontractor with the knowhow needed to manufacture the camera. The subcontractor must undertake to only use this know-how to supply the smartphone manufacturer in question and not for third parties. As a general rule, such agreement is also allowed under antitrust law.

3.5 Exclusive sales territories / right of exclusive distribution In an exclusive distribution system, the manufacturer allocates a territory or a group of customers exclusively to one distributor, while restricting all its other distributors from actively selling into the exclusive territory or to the exclusive customer group. Such systems do not raise antitrust concerns if neither the manufacturer’s nor the individual distributor’s market share is over 30% and no more than five distributors have been named per allocated territory or allocated group of customers. The manufacturer is still not allowed to prohibit the distributor from setting its own sale prices or to impermissibly restrict the sales territory.

If the supplier’s or the individual distributor’s market shares are over the 30% threshold, the next question is whether the right of exclusive distribution results in significant efficiency gains. This may be the case, for example, where a distributor has to invest heavily in order to develop a new sales territory and this will only be worth it if the distributor is granted the right of exclusive distribution. The principle to be followed is this: the higher the number of individual distributors named for a particular territory, the lower the likelihood that they will have sufficient incentives to invest in promotion, as the other exclusive distributors in the same territory may free-ride on their investment efforts.

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Example

Example

A solar panel distributor based in Spain is only prepared to invest in major marketing for a German manufacturer’s high-quality solar panels if the devices are not distributed by other distributors in Spain as well. The German manufacturer therefore prohibits its distributors in other EU Member States from actively selling to Spain. All distributors are allowed to continue selling passively to Spanish customers, i.e. to deliver to customers who approach distributors outside Spain on their own initiative. If the market shares of the German manufacturer and the distributor in question are both below 30%, the restrictions on distributors’ active sales to Spain are allowed under antitrust law.

A leading manufacturer of motorboats requires that its distributors have a bricks-and-mortar sales space and ensure that trained sales staff are present during all opening hours. Distributors failing to meet these criteria do not receive supplies. Such distribution system may still be allowed if the manufacturer’s market share is over 30%. This is the case where in-person expert customer service is needed owing to product complexity and customer safety, and the criteria are applied to all distributors in the same way.

3.7 Dual distribution

3.6 Selective distribution systems A selective distribution system gives a manufacturer the option of organising its sales by only supplying distributors that meet certain criteria such as the level of their employees’ professional skills or their possession of specific equipment. In a selective distribution system, these distributors simultaneously undertake not to sell such goods or services to unauthorised distributors within the territory reserved by the supplier for operating the system. Selective distribution systems tend to exist for high-quality brand products that may place special requirements on distributors for reputational reasons. As a general rule, selective distribution systems will not raise concerns if the selection of approved distributors is based on qualitative criteria (and not criteria tied to the number of distributors that could be approved), the restrictions are necessitated by the nature of the product, the objective criteria are applied to all distributors willing to distribute the product, and the criteria as a whole do not go beyond the extent required (known as “Metro criteria”).

If these requirements are not met, the selective distribution system will only be allowed if the market shares of both the manufacturer and the individual distributor are not over 30% and the distributors included in the distribution system are not subject to any restrictions in their sales to end consumers or other distributors within the selective distribution system.

In many cases, vertical agreements between suppliers and buyers do not raise antitrust concerns, according to the principles set out above. But this does not apply to vertical agreements between competitors.

If the supplier or manufacturer has not only established a distribution network but also operates its own retail outlets or an online shop through which it sells its products directly to end customers, the supplier and the buyer find themselves simultaneously in a vertical distribution relationship and in competition with one another (“dual distribution”). In this relationship, suppliers and buyers have an interest in exchanging certain information, for example on sales figures or product quality.

Exchanging the following information will mostly not raise concerns: • Technical information on the contract products, • Logistical information on production and distribution, • Information on sales figures and customer behaviour, • The buyer’s purchase prices from the supplier, • Resale price recommendations and marketing information.

It is not allowed to exchange information about future prices in the supply relationship, or information about customer purchases and behaviour that restricts territory or customers, or resale or maximum price recommendations used for impermissible restrictions. Ultimately, however, this needs to be decided on a case-by-case basis, so companies should obtain legal advice.

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Prohibited Practices

3.8 Restrictions on online trading Given the ever-increasing importance of the internet as a distribution channel, manufacturers operating a selective distribution system for their products are increasingly faced with the question of whether, and to what extent, they are permitted to restrict their distributors’ online sales. In principle, every distributor must be permitted to conduct online sales. It is not allowed to prohibit the effective use of the internet as a distribution channel. Such prohibition occurs, for example, in the following scenarios: - The product may only be sold in a physical shop.

- The distributor is not allowed to operate an online shop, or - the distributor is not allowed to operate more than one online shop.

Requiring minimum sales in physical shops is allowed as long as this does not stop internet sales in their entirety.

Requiring that the distributor provides a link from its own online shop to the manufacturers’ website is also allowed.

Online advertising may only be restricted if it does not stop a distributor from using an advertising channel, such as a search engine or price comparison website.

An example of this is where the distributor is prohibited from sending its prices to a comparison website, or the manufacturer bans use of its trademark such that the products cannot be found by search engines.

with objective criteria, such as the higher fixed costs that bricks-and-mortar stores have compared to internet sales.

Example A manufacturer grants a certain general bulk discount but only to distributors whose customers can view the products in person. So online distributors without a bricks-and-mortar point of sale do not receive the bulk discount.

This discounting practice could raise antitrust concerns, as the level of bulk discount is not in line with the extra costs of operating a bricksand-mortar point of sale.

A further problem is that of dual pricing. This refers to a situation in which the wholesale price for identical prices or services depends on whether they are bought online or offline. Here again, the point in question is whether the dual pricing is intended to stop effective use of the internet. This would be the case, for example, were the prices to differ so significantly that internet sales would be completely unprofitable. But different online and offline prices are allowed if, for example, the difference derives from investments made or costs incurred in connection with the respective type of distribution.

In selective distribution, however, restrictions on online sales may not necessarily be impermissible. A manufacturer may require that the distributors included in the system have a physical point of sale (“bricks and mortar store”), if there are objective grounds for doing so (see 3.6 on “Selective distribution systems”). Purely online distributors may then be excluded from the distribution system. By contrast, a blanket ban on internet sales for distributors who already operate a bricks-and-mortar store is a hardcore restriction and impermissible, because it would restrict passive sales, i.e. sales to customers who approach a distributor on their own initiative using the internet.

Excluding distribution through online marketplaces such as eBay or Amazon Marketplace must also be justified on objective grounds, usually connected to the properties of the product (see 3.6 on “Selective distribution systems”).

In addition to these restrictions, concerns may also be raised if online sales are placed at a disadvantage to bricks-andmortar distribution, for example through discounts or subsidies granted only to bricks-and-mortar stores or tied to in-person customer service. To be allowed, the basis and level of such discounts or subsidies should be clearly in line 19

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Prohibited Practices

II. Abuse of a dominant position While the prohibition on restrictive practices described above concerns coordinated restrictions of competition between two or more undertakings, the prohibition of abuse applies to unilateral conduct by undertakings.

German and European antitrust law prohibit the abuse of a dominant position by one or several undertakings. v

So the key elements of the prohibition of abuse are a dominant position (see 1.) and the abuse of this position (see 4.).

Unlike EU law, German antitrust law also prohibits certain unilateral practices by undertakings that, while not dominant, enjoy a “strong” market position in that they have superior market power vis-à-vis their competitors (see 2.).

And German law also contains provisions on undertakings with paramount significance for competition across markets. These rules target major digital undertakings (see 3.).

1. Dominant position An undertaking is dominant if it does not face sufficient competitive pressure in the market in which it operates and can therefore act independently of its competitors and customers to a significant extent.

To determine whether an undertaking has a dominant position in a market first requires that the relevant market be defined. Markets are frequently defined by product, geography and time. The undertaking’s own assessment of the market in which it operates can serve as an initial point of reference.

But from an economic perspective, many product categories are often combined into one market even though they belong to different markets from an antitrust law perspective. The decisive point under antitrust law is whether the products or services are interchangeable from the consumers’ perspective in terms of their characteristics, price and intended use (“criterion of functional interchangeability”).

importance of the intermediary services provided by an undertaking for access to procurement and sales markets. Under German law, an undertaking is generally assumed to have a dominant position if it has a market share of at least 40%.

It is also possible that several undertakings, rather than a single undertaking on its own, collectively hold a dominant position. Such “collective” dominance exists where the undertakings concerned collectively hold the position required for dominance and do not engage in significant competition with each other. Under German law, a collective dominant position is presumed if three undertakings have a combined market share of at least 50%. Such a presumption also applies if five undertakings have a combined market share of at least 66%. In the case of collective dominance, each of the undertakings concerned is prohibited from abusing this position.

2. Strong market position Under German law, not only dominant undertakings, but also undertakings that hold a strong market position – i.e. enjoy superior market power compared to competitors – are subject to certain requirements under the prohibition of abuse. An undertaking is considered to hold a strong market position where other undertakings, as suppliers or purchasers of a certain type of goods or commercial services, depend on it such that they cannot adequately or reasonably switch to other undertakings and there is a clear imbalance in countervailing bargaining power. Undertakings with superior market power compared to competitors are those whose market position, although below the threshold of dominance, exceeds that of their competitors and therefore allows them to hinder competitors in their activities, for example through predatory pricing.

In an age of increasing digitalisation, legislators have also recognised that undertakings of any size may become dependent on digital platforms, given those undertakings’ reliance on certain data. A strong market position may therefore also exist where an undertaking controls data on which other undertakings depend.

A number of criteria are used to determine whether a dominant position exists. These include the market share of the undertaking in question, the market share gap between the undertaking and its competitors, any technological, financial or commercial advantages, the degree of concentration of the other side of the market and “intermediation power”, i.e. the 21

3. Paramount significance for competition across markets German law also includes a specific provision aimed at addressing abusive conduct by undertakings with paramount significance for competition across markets. The legislator was concerned about undertakings which are not necessarily dominant in individual markets but are capable of exerting a significant influence on competition because they have a key position in at least two markets, benefit from network effects, data advantages, etc. The intention here was to regulate digital giants and their special position, e.g. as providers of messaging programmes or search engines.

The rules are closely related to platform regulation at EU level (Digital Markets Act).

4. Abuse

Undertakings with a dominant position are prohibited from abusing this position. The mere fact that an undertaking holds a dominant position is not in itself objectionable. An undertaking may therefore lawfully establish and maintain a dominant position and pursue its economic interests in the market, but must exercise this position in a “responsible” manner both vis-à-vis trading partners, i.e. suppliers and customers, and competitors. A practice is abusive if it deviates from what is normal in the context of merit-based competition. This is particularly the case in the event of discrimination or obstruction of other undertakings.

The broad scope of this definition can in some cases give rise to difficult questions regarding the distinction between abusive and legitimate competitive behaviour. However, the legislature and the decision-making practice of the courts and antitrust authorities have developed various categories of abusive behaviour, some of which are explained below.

4.1 Unfair prices, terms and conditions German and European antitrust law prohibit dominant undertakings from imposing excessively high prices or other unfair terms and conditions on customers (“exploitative abuse”). Various methods can be used to determine whether a price is excessively high. Where possible, reference is made to the price level on comparable markets with effective competition, and an assessment made as to whether the price applied by the dominant undertaking deviates significantly from the price on the comparable market. Whether other terms and conditions are unfair and therefore abusive is determined by weighing the interests of the dominant undertaking and the customer and assessing whether the 22

terms and conditions imposed by the dominant undertaking are based on sufficient objective reasons. Antitrust law prohibits not only the imposition of excessively high prices and unfair terms and conditions on customers, but also the demand for excessively low prices and other unfair terms and conditions from suppliers.

4.2 Unequal treatment of business partners Even an undertaking with a dominant or strong market position is generally allowed to adapt to the specific negotiating situation and demand different prices or terms and conditions from its business partners. But unequal treatment may be impermissible if, after weighing all the circumstances of the individual case, it does not appear to be sufficiently objectively justified. Unequal treatment can also occur indirectly, for example by inducing third parties (suppliers) to deliver to certain retailers only under certain conditions. Price differentiation based on the size of the customers’ purchase quantities generally does not raise concerns, however.

4.3 Refusal to do business or to supply Even undertakings with a dominant or strong market position are generally free to decide which customers they wish to enter into business relationships with. But a refusal to do business or supply constitutes abuse where, after weighing the mutual interests, it does not appear to be objectively justified. This may be the case in particular where the supply is indispensable for the customer to continue its business activities. In general, refusing to supply an undertaking that has not yet been supplied requires less objective justification than terminating an existing supply relationship.

A special case of refusal to supply arises where access is denied to facilities, products, rights or data that are indispensable for entry into an upstream or downstream market (“essential facility”). Examples of this include seaports, rail networks, and software interface information needed to develop compatible add-ons. For undertakings wishing to enter the market, it is unreasonable or impossible for them to replicate such a facility themselves. In rail transport, for example, it would not be possible for an undertaking wishing to enter the market to construct an additional rail system. Where a dominant undertaking that controls or owns an “essential facility” denies competitors in upstream or downstream markets access to that facility, such a refusal is generally abusive unless it is sufficiently objectively justified.

Prohibited Practices

4.4 Prohibition of tying

4.6 Discount systems

Tying occurs when an undertaking makes the supply of a certain product or service conditional on the purchase of additional products or services. If a dominant undertaking sells a product over which it holds a dominant position only in combination with another product, competitors may be hindered, and this may make the tying impermissible.

Discounts may be used by dominant undertakings to foreclose competitors where the discounts are designed to tie customers to the dominant undertaking beyond individual purchase transactions. Such a loyalty-inducing effect arises in particular if the granting of a discount depends on the customer’s total purchases from the dominant undertaking within a given period. The closer customers come, over the agreed period, to achieving the target volume required to obtain the discount through their purchases from the dominant undertaking, the more difficult it becomes for competitors to make a competitive offer to those customers (“pull effect of discounts”).

Tying is generally only permitted if there is an objective reason (such as health protection or safety considerations) for doing so. A commercial practice that would be acceptable in a normal market might, in certain situations, no longer be justified by the dominant position of a competitor.

Example A dominant supplier of industrial gases is only willing to supply customers on the condition that they also have their gas containers filled by it. Since the sale of gas and the filling of gas containers constitute two distinct services, this amounts to tying. It must therefore be assessed whether the tying hinders other undertakings in offering filling services on the market for filling services and whether the filling carried out by the gas supplier itself is justified by objective reasons, such as safety considerations.

The following system has emerged for the assessment of discount systems under antitrust law: Discounts that are linked to the purchase of a certain percentage of the customer’s total requirements or to the purchase of a certain volume based on the customer’s total requirements (loyalty discount in the narrower sense) are generally not allowed. On the other hand, quantity discounts that only apply to a single order generally do not raise concerns. If none of the aforementioned cases apply, it must be determined, on the basis of the specific circumstances of the individual case, whether the discount could foreclose competitors and whether it can be justified on objective economic grounds. In general, the longer the reference period for granting a discount, the greater the risk that the discount is unlawful.

Example 1

4.5 Predatory pricing Dominant undertakings may temporarily offer a product or service for a particularly low price (“predatory pricing”) in order to drive less financially robust competitors out of the market or to prevent their entry. In case law, the following framework has emerged for determining when particularly low prices are abusive: Prices below the dominant undertaking’s average variable costs (in relation to the product) are generally regarded as abusive. If the prices are above the average variable costs but below the average total costs (i.e. share of fixed costs plus variable costs), an abuse only exists if it can be proven that the dominant undertaking intended to use the lower prices to drive its competitors out of the market.

German law also prohibits undertakings with superior market power compared to small and medium-sized competitors from offering goods and services below cost, unless such pricing is merely occasional or objectively justified (a dominant position is not required, but the market share of the undertaking in question must exceed that of the small and medium-sized competitors).

A dominant manufacturer gives distributors a bulk discount of 3% of the order quantity for every order in which more than 200 product units are purchased. Such a discount is generally allowed as it only applies to a single order.

Example 2 A dominant manufacturer grants a 10% discount on the total order value to all customers who reach an order volume of EUR 20,000 over a period of one year. This discount is problematic, and its effects need to be analysed more closely. In case law, a reference period of one year (as in this case) has been found to be impermissibly long for bulk discounts.

Example 3 A dominant supplier offers a 15% discount to a particular business customer on the condition that the customer purchases 90% of its annual requirements from it. Such a loyalty discount is generally not allowed.

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C. Remedial Measures Following Sector Inquiries

Remedial Measures Following Sector Inquiries

24

C

C

Remedial Measures Following Sector Inquiries

The Federal Cartel Office can order remedial measures following a “sector inquiry”. These remedial measures must be aimed at addressing significant and lasting disruptions of competition. Unlike in cases involving cartel prohibitions or market abuse, this does not require proof of a legal infringement, but rather the existence of distorted market structures.

However, strict requirements are in place when it comes to establishing such a disruption of competition. The disruption must have persisted for at least three years and be likely to continue for at least another two, and the undertakings in question must have contributed materially to the disruption through their conduct and their significance for the market structure. Only when this has been established can remedial measures be imposed.

As part of these measures, the Federal Cartel Office may also order divestiture and oblige dominant companies to sell shareholdings or assets. This is envisaged as a last resort where other remedial measures are not feasible, are not equally effective, or would be more burdensome for the undertaking than the divestiture.

“Competition is and will remain the driving force of our free market economy. Growth, prosperity and, above all, innovation depend on us keeping markets open.”

Andreas Mundt President of the Bundeskartellamt

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D. Antitrust Proceedings

Antitrust Proceedings

26

D

D

Antitrust Proceedings

I. Jurisdiction

II. Investigative powers

Leaving aside the role of the courts in civil law disputes, re- 1. Requests for information sponsibility for enforcing European antitrust law lies with the European Commission and the national competition Antitrust authorities have the option of requesting inforauthorities: in Germany, the Federal Cartel Office and, to a mation from undertakings. They can send requests for very limited extent, the competition authorities of the fed- information for this purpose, usually by e-mail. eral states. The Federal Cartel Office is generally responIn the course of their investigations, antitrust authorities sible for prosecuting violations of German antitrust law. frequently send multiple rounds of requests for information Whether an antitrust violation is prosecuted by the Euro- to numerous market participants. The addressees may be pean Commission or the Federal Cartel Office is determined undertakings the authorities suspect of involvement in an in accordance with the rules of Regulation 1/2003 vi and the antitrust violation. However, the authorities can also send “ECN Notice”vii. Accordingly, an antitrust violation is gen- questionnaires to other market participants (like customers, erally prosecuted by the European Commission and not by suppliers, competitors, associations, etc.). the national competition authorities if it affects more than The responses to the often very broad and far-reaching three EU Member States. requests for information should be carefully considered. If Whether a case should be pursued at all lies within the an undertaking provides false or misleading information, discretionary powers of the European Commission or, as it may be subject to a considerable fine. There is effectively the case may be, the Federal Cartel Office (prosecutorial no “right to remain silent” comparable to that in German discretion). These authorities are therefore authorised to criminal proceedings. prioritise certain proceedings or to discontinue them, for example in return for commitments offered by the under- In practice, requests for information play a very important takings concerned. But “hardcore violations”, including role. They serve primarily as a warning signal for the secresale price maintenance, are rigorously pursued and se- tor concerned. Undertakings often decide to cooperate with verely sanctioned. The Federal Cartel Office does not have the authority under the leniency programme immediately an obligation to investigate alleged infringements or even after receiving a request for information. This is because to sanction certain practices. However, market participants detailed questionnaires sent by antitrust authorities frehave the option of informing the Federal Cartel Office about quently show that the authority already has substantial suspicious behaviour by competitors or suppliers, for exam- proof of an antitrust violation. In such a scenario, many ple, and suggesting that investigations be initiated. undertakings involved in the violation seek to cooperate in order to obtain a (modest) reduction in the fine. This can lead to a domino effect, as authorities often receive a number of leniency applications after sending a request for information. In such cases, many undertakings also try to obtain a fine reduction by uncovering additional antitrust violations that the authorities were not yet aware of.

When an undertaking receives a request for information from the antitrust authorities, the situation should be analysed as quickly as possible in consultation with experts. Timing plays a key role, particularly with regard to cooperation with the authorities.

And the amounts at stake are often very substantial.

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2. Inspections In cases involving severe antitrust violations (“hardcore violations”), antitrust authorities generally make use of their Typical course of a dawn raid: The inspecting offipower to carry out unannounced inspections (dawn raids) cials usually arrive at the undertaking’s premises at the business premises of the undertakings concerned. early in the morning. Reception staff should immediately inform management and the legal departIn the event of a dawn raid, it is important to observe cerment and escort the officials into a separate room. tain rules of conduct that should be laid down in advance.

External lawyers should be called in right away.

The undertaking concerned must ensure that the officials Management and members of the legal department are not obstructed during the inspection and that no docushould then request to see the search warrant and ments are destroyed. When conducting the inspection, the review it for any obvious errors or inconsistencies officials from the antitrust authority are generally authorised to enter all premises specified in the search warrant and (for example, an incorrect company name). The ofto inspect business documents. Today, most inspections ficials should be accompanied at all times by senior focus on digital data, with paper files and other physical executives or external lawyers. documents playing only a minor role. The inspection concentrates on the undertaking’s notebooks, smartphones and local data carriers, which are examined on site using specific search terms, but also on data stored in the cloud. A further challenge posed by inspections, which are now As the inspections often last several days, rooms and doc- largely digital, is the need for the undertaking’s in-house uments in which the antitrust officials suspect relevant IT team to be available at short notice. Experience shows evidence may be sealed and thus made inaccessible to the that technical complications can rarely be avoided. Authoremployees of the undertakings concerned. Undertakings ities may have an interest in and require prompt access to are obliged to tolerate these investigative measures. Dur- encrypted or otherwise inaccessible data. ing a digital inspection, the authorities may block e-mail accounts, and any attempt to circumvent such measures As a result of ongoing digitalisation, the authorities are confronted with ever larger volumes of data. Follow-up inis strictly prohibited vestigations usually last only a few days, and this is often insufficient to examine the data in depth using search terms Warning: The antitrust authorities may impose alone. For this reason, cooperation by undertakings in the substantial fines if e-mails are deleted during an context of leniency applications is of great importance to inspection. the authorities in fully establishing the facts.

The relevant findings are then secured by the authority and taken for further analysis. It is essential that the retained data be reviewed by lawyers before it is finally taken away by the authorities, so that an objection can be raised if necessary (for example, where the documents concerned are protected by legal professional privilege, see below). Copies of the retained data should also always be requested.

In the event of a dawn raid by the European Commission, communications between the undertaking and its external lawyers relating to the facts under investigation are protected from inspection and seizure (legal professional privilege). However, this protection does not extend to communications between an undertaking and its in-house lawyers.

During inspections by the European Commission and the Federal Cartel Office, officials’ questions concerning facts and documents related to the purpose of the inspection must generally be answered. Undertakings, associations of undertakings, but also entities that are not undertakings, and natural persons are obliged to provide information.

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In addition to inspecting business premises, the antitrust authorities may also search other premises, such as the private homes of persons involved in the antitrust violation, if there are indications that books or business documents that could be used as evidence are located there.

Antitrust Proceedings

Fig. 1: Federal Cartel Office – Number of searches carried out to secure evidence of cartel infringements 17

18 15

18

17

10 7

2013

2014

2015

2016

2017

2018

11

11

2023

2024

5

2019

2

2

2020

2021

2022

Source: Bundeskartellamt, Annual Reports

III. Sanctions 1. Fines 1.1 Level of fines Competition authorities may penalise antitrust violations by imposing substantial fines. Such fines may amount to up to 10% of the undertaking’s total worldwide turnover (group-wide) and can reach several billion euros.

1.4 Multiple penalties for proceedings in different states In cases of cross-border infringements, competition authorities in different states may initiate parallel proceedings and impose fines. Within the EU, however, parallel proceedings are excluded once the European Commission has initiated proceedings, depriving national competition authorities of their jurisdiction to apply antitrust law. But in non-EU countries (US, UK, Turkey, etc.), parallel proceedings are permitted.

1.5 Limitation period 1.2 Blame the parents: Liability of parent companies Under German and European antitrust law, parent companies may be held liable for antitrust violations committed by their subsidiaries where they have exercised decisive influence over them. According to case law, a decisive influence is (rebuttably) presumed if the parent company holds the majority of shares in the subsidiary. This means that the parent company does not have to be involved in the actual violation.

1.3 Liability in the case of legal succession If an undertaking involved in an antitrust violation is transferred from one legal entity (natural or legal person) to another, the legal entity that was responsible for the undertaking at the time the violation was committed is generally liable. In certain scenarios, however, the new legal entity is liable. Thus, in the event of a universal succession or universal succession concerning parts of an undertaking, the fine may also be imposed on the legal successor(s).

Infringements of the prohibition on restrictive practices and the prohibition of the abuse of a dominant market position are subject to a limitation period of five years under German and European antitrust law. The limitation period starts to run from the date on which the infringement ceases. Where a cartel existed over a prolonged period and was terminated less than five years ago, fines may also be imposed for conduct dating back well beyond five years, as antitrust authorities typically regard the conduct as a single and continuous infringement.

Fines may be imposed well beyond five years after the infringement has ceased, provided that the Commission or a national competition authority investigates or pursues the case before the limitation period expires. Measures such as written requests for information or the initiation of proceedings interrupt the limitation period, which then starts to run anew. This extension of the limitation period for prosecution is generally limited in that the limitation period expires no later than ten years after the infringement has ceased, unless the period is suspended by proceedings pending before the European Court of Justice in connection with a decision of the European Commission.

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Fig. 2: European Commission – Fines imposed for cartel infringements under Article 101 TFEU, 1990-2024

Fines 1990-2024

Period

Number of cases

Fines (in EUR)

1990-1994

10

344,282,550.00

1995-1999

9

270,963,500.00

2000-2004

29

3,157,348,710.00

7

2005-2009

33

7,863,307,786.50

6

2010-2014

31

7,598,728,479.00

2015-2019

26

8,182,654,159.00

3

2020-2024

20

2,352,162,000.00

2

Total

158

29,769,447,184.50

Source: European Commission, Cartel Statistics

9 8

5 4

1 19901994

19951999

20002004

20052009

20102014

20152019

20202024

Fig. 3: European Commission – Ten highest cartel fines under Art. 101 TFEU

Year

Kartellverfahren

Amount in EUR

2016/2027

Trucks

3,807,022,000.00

2019/2021

Forex

1,413,274,000.00

2012

TV and computer monitor tubes

1,409,588,000.00

2013/2016/2021

Euro interest rates derivatives (EIRD)

1,303,518,000.00

2008

Carglass

1,185,500,000.00

2014

Automotive bearings

953,306,000.00

2021

Car emissions

875,189,000.00

2007

Elevators and escalators

832,422,250.00

2001

Vitamins

790,515,000.00

2010/2017

Airfreight

739,642,616.00

Source: European Commission, Cartel Statistics

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Antitrust Proceedings

Fig. 4: Federal Cartel Office – Fines imposed 2005-2020 (in Mio. EUR per year)

1,117

847.4

434.8 313.7

297.5

266.7

163.9

316 189.8

376 244.4

208 124.6

4.5 2005

2006

2007

2008

2009

2010

2011

2012

2013

349.4

2014

2015

2016

66.4 2017

2018

2019

2020

Source: Bundeskartellamt, Activity Report 2019/2020, p. 60

Fig. 5: Federal Cartel Office – Selected maximum fines that have become final

Year

Cartel case

Amount of fines (in EUR)

2024

Broadband devices

15,840,000.00

2023

Industrial construction services

2,983,600.00

2022

Expansion joints for bridges

7,329,600.00

2021

Steel forging companies

34,542,000.00

2020

Plant protection products

157,817,170.00

2020

Aluminium forging companies

22,906,500.00

2019

Quarto plates/Heavy plates

646,405,000.00

2018

Special steel

291,712,300.00

2014

Sugar

281,752,650.00

2014

Sausage

79,627,500.00

2014

Beer

317,481,000.00

2009

Coffee

162,582,000.00

Source: Bundeskartellamt, Annual Report 2024/2025

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2. Other sanctions imposed by antitrust authorities

4. Trade associations / associations of undertakings

In addition to imposing fines, the European Commission The Federal Cartel Office is taking an increasingly close look and the Federal Cartel Office may order the parties involved at trade associations too. Associations are not allowed to to cease the anticompetitive conduct or, where the conduct make cartel arrangements or organise cartels. In the past, has already ended, make a finding of infringement, thereby however, some associations have offered a forum for anestablishing the unlawfulness of the conduct. In addition to ticompetitive activities. In some cases, this was enough to other measures, the Federal Cartel Office may also confis- establish the association’s own liability. cate the entire additional revenue generated by the cartel members from the antitrust violation, provided that such Antitrust compliance is a particularly important issue from revenue has not already been forfeited through the payment the association perspective because the most important of fines or damages. In this context, it is presumed that the competitors usually attend association meetings. So most associations have taken precautions to ensure that no comantitrust violation resulted in an economic advantage. petitively sensitive information is exchanged at meetings.

We also strongly recommend that the participants of an asSanctions may be imposed not only by antitrust ausociation meeting take full and accurate minutes, which thorities, but also by contracting authorities, which can then prove that the matters discussed comply with anmay consider undertakings involved in an antitrust titrust law (and, if necessary, that explicit objections were violation to lack reliability and consequently exbrought if any non-compliant matters were raised). clude them from future procurement procedures (“procurement ban”). This can have far-reaching Matters which can generally be discussed without risking economic consequences. “Self-cleaning measures”, an antitrust violation include association activities, genthrough which companies may re-establish their erally known or historical company data, and the legal or reliability, may include the payment of damages political environment, such as proposed legislation or court (see E.) as well as internal investigative measures. judgments.

3. Consequences for individuals under criminal law Under German law, fines can also be imposed on the individuals involved in the cartel arrangements. In many countries both within and outside the EU (e.g. Brazil, the US and the United Kingdom), antitrust violations are also criminal offences and can be punished with fines or imprisonment.

If an antitrust violation has an impact on these countries, this can lead to international arrest warrants and extradition requests.

In Germany, only bid-rigging, i.e. collusion between participants in a tender regarding the amounts of their bids, is a criminal offence and can carry a prison term of up to five years. There is also ongoing debate as to whether – and if so, under what circumstances and to what extent – the management board may be held accountable to the undertaking for the violations.

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Prices, strategies and even general market developments from the respective undertakings’ perspective must not be discussed at association meetings. If the economic development of markets or industries is discussed, this must be based on generally known, non-individualised information. Publicly known developments do not include the individual undertakings’ evaluations of this development, or anecdotes connected to it, so they should not be discussed.

Example Under Association A’s compliance rules, exchanging information on prices or other commercially sensitive information is prohibited.

But the first item on the agenda of each of its meetings is a tour d‘horizon in which each undertaking in attendance gives its perspective on global developments and exchanges views on general market tendencies. The representative of Undertaking A, for example, reports on difficulties that current market developments have presented her company with. The representative of Undertaking B adds that his company has faced similar issues, going into detail on this.

Antitrust Proceedings

It should also be ensured that the market data exchanged as part of the association’s in-house statistics complies with antitrust law. Such market data – benchmarking, for instance – may only be shown in anonymous and aggregated form such that individual companies cannot be identified from the data.

In this context, the “first-come, first-served” principle applies, i.e. only the undertaking that is the first to provide decisive information leading to the uncovering of the cartel receives full immunity. For undertakings that come forward later, the only reward is a reduced fine, which for the undertaking in second place may already be as little as 30–50%. And the reduction is even smaller for the third and fourth undertakings.

IV. Immunity from / reduction of fines through leniency applications and settlement procedures

Once the leniency application has been submitted, the undertakings are obliged to cooperate fully with the antitrust authority for the duration of the procedure.

Antitrust authorities grant leniency for the early detection of antitrust violations. If an undertaking only files a leniency application after being raided by an antitrust authority, the likelihood is high that another cartel member has already disclosed the violation to the authority. Even so, undertakings that have been raided may still benefit from submitting a leniency application to secure a reduced fine.

In most countries, as well as at EU level, cartel members can obtain full immunity or a reduction of the fine facing them for the violation by way of a voluntary disclosure (the leniency application). These leniency rules or programmes are seen by the competition authorities as a mechanism to At EU level, undertakings can obtain an (additional) reduccombat cartels and are frequently used. These days, most tion in fines by way of a settlement procedure. At the end cartels are exposed because one of the participating under- of a simplified procedure, undertakings are granted a 10% discount on their fine if they admit to the facts of the case takings reports them. and acknowledge the fine up to the level offered by the antitrust authorities. However, the authorities are under no obligation to offer the undertakings a settlement procedure.

Fig. 6: Applications for leniency submitted to the Federal Cartel Office 2005-2020 80 70

72

69

66

60 51

40

41

42

41

30 26

20

0

59

56

50

10

76

24

25

41

37

41 36

29

29

37

24

20 13

7

25 19

16 14

12

13 11

6

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Number of cases in which applications for leniency were made Source: Bundeskartellamt (Annual Report 2019/2020, p. 58)

Total number of applications for leniency

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E. Consequences under Civil Law, in Particular Damages

Consequences under Civil Law, in Particular Damages

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E

Consequences under Civil Law, in Particular Damages

Antitrust violations not only entail cartel fines imposed by the competition authorities, but also result in serious adverse consequences under civil law. These include agreements that violate antitrust law being null and void and the possibility of cartel victims bringing actions for damages. In recent years, the EU has seen the rise of a veritable litigation industry, much like the one that took shape in the US decades ago.

I. Nullity of agreements that violate antitrust law Agreements or decisions that violate the German or EU prohibition on restrictive practices are null and void. This means that claims arising from these agreements or decisions cannot be asserted. The question of potential partial nullity is governed by the principles of civil law.

As a rule, nullity only affects the actual agreements that violate antitrust law. Contracts with third parties (e.g. customers) are generally valid, since although they may have been affected by the cartel agreement, they do not themselves violate antitrust law. However, customers harmed by cartel arrangements may, in some cases, claim damages from the cartel members.

II. Claims for damages by cartel victims Potential actions for damages brought by cartel victims, i.e. primarily by direct or indirect customers of the participating undertakings, can lead to very high costs for the cartel members. Parties harmed by the cartel may pursue damages through civil litigation, especially since the EU’s Directive on Antitrust Damages and case law have made it easier for them to enforce their claims.

1. Who has a claim for damages?

In principle, “anyone” who has suffered harm as a result of a restriction of competition in violation of antitrust law can claim damages. In addition to those customers who procured the goods or services directly from the cartel members, indirect customers are also entitled to claim damages from the parties involved in the cartel. For example, customers who procure goods indirectly from a cartel member via a wholesaler can assert claims for damages if the goods were sold on to them at inflated prices. But under certain conditions, the cartel member can counter the wholesaler’s claim for damages by arguing that the price increase caused by the cartel was passed on to its customers, meaning the wholesaler did not suffer any harm (the “passing-on defence”).

In certain situations, damages can also be claimed by customers who have neither directly nor indirectly procured goods or services from participating undertakings, but are customers of companies that were active in the same market as the cartel members without being cartel members themselves (i.e. cartel outsiders). Customers of cartel outsiders may be exposed to inflated prices (or other unfavourable terms) if these cartel outsiders have increased their prices while benefiting from the cartel’s influence (“umbrella pricing”).

Example The five largest companies in a sector agree to increase their prices. In view of this development, a sixth company – though not part of the cartel – also increases its prices. The customers of this sixth company can, under certain conditions, demand compensation from the five participating undertakings for the harm suffered as a result of their supplier’s price increase.

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2. Who can be held liable for damages?

4. Burden of proof and access to evidence

In principle, the harmed party may choose to claim damages from any cartel member and is not restricted to the company from which it obtained the overpriced goods or services. The company that pays the damages can demand (pro rata) compensation from the other participating undertakings (joint and several compensation). There are certain considerations to be taken into account when pursuing claims against companies that have submitted a leniency application, however. Nevertheless, even companies that have applied for leniency must compensate their own direct or indirect customers or suppliers for any harm caused. Cooperating with the antitrust authorities through a leniency application does not, therefore, shield companies from civil claims for damages brought by the customers who were affected by the antitrust violation.

A key question in cases involving claims for cartel damages is who bears the burden of proof. As a rule, the fact that the defendant committed an antitrust violation is established by the prior fine decision issued by the antitrust authority, which is binding on the civil court. Additionally, the plaintiff may benefit from a certain easing of evidentiary requirements, including with respect to access to evidence.

Under German antitrust law, a plaintiff is entitled to access evidence, and this right may be exercised even before an action for damages is brought.

Example Competitors A, B and C agree to increase their prices. In order to avoid a fine, competitor A reports the antitrust violation to the Federal Cartel Office as part of the leniency programme.

The customers of companies A, B or C can now, in principle, take action against either A, B or C and demand compensation for the harm caused by the price increase. For example, B’s customers can sue C for damages. However, as a leniency applicant, company A is generally only liable to its own customers (although there are exceptions to this rule).

3. Amount of damages A key challenge in asserting claims for damages lies in establishing the precise extent of the harm suffered. As a general rule, the harm must be calculated as the difference between the actual market price due to the antitrust violation and the hypothetical market price that would have existed in the absence of the violation. However, the amount of damages can be estimated by the courts when certain prerequisites are met. Interest is payable on the respective amount as from the date on which the harm occurred.

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Generally speaking, actions for damages filed following the antitrust authority’s fine decision (follow-on actions) are more likely to succeed due to the binding effect of the authority’s decision on the civil court, compared with the (very rare) standalone actions brought without any prior official investigation. The binding effect extends not only to decisions of the Federal Cartel Office and the European Commission, but also to those of the competition authorities in all EU Member States.

Consequences under Civil Law, in Particular Damages

“By ensuring a level playing field, competition policy allows all companies, from all Member States, to compete on the merits in the EU market and foster innovation.

For decades, this approach has delivered remarkable results. It has made Europe prosperous, open, and dynamic. […] It has been the compass that has guided us toward growth, innovation, and fairness.”

Teresa Ribera Executive Vice-President for a Clean, Just and Competitive Transition, European Commission

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1. Bestandsaufnahme F. Antitrust Compliance

Antitrust Compliance

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F

Antitrust Compliance

Because of the substantial risks associated with antitrust violations, virtually all companies today treat antitrust compliance as a top priority. Compliance programmes aim to minimise the risk of antitrust violations. But beyond that, they also fulfil a number of other important functions. Companies tend to adopt certain established approaches and key elements when introducing and designing their compliance programmes, but these programmes should also be tailored to the organisational structures and risk profile of the respective company.

I. Objectives and functions of compliance programmes

II. Structuring and introducing an antitrust compliance programme

The introduction of compliance programmes in companies A compliance programme must be designed effectively in is intended to raise awareness among employees at all order to achieve the stated objectives. Guidance for the levels about antitrust risks associated with their business “proper” structuring of the compliance programme can now activities. In this way, they can help to prevent antitrust be found in a wide range of publications. violations and all the associated negative consequences.

In fact, compliance programmes fulfil several important functions: While their main goal is to prevent future an- 1. Preparation and organisation titrust violations, they also help uncover violations that have already been committed. This then enables the company to decide at an early stage whether to file a leniency A compliance programme must be individually tailored to application with the antitrust authorities, potentially avoid- the organisational structures and industry-specific risks of ing a fine altogether or significantly reducing it. Moreover, each company. This entails first identifying and assessing each bringing the violation to an early end shortens the period company’s antitrust risks in order to adapt the compliance of the infringement, which in turns reduces potential fines programme to its unique risk profile. The purpose of this risk and claims for damages. analysis is to pinpoint the types of antitrust violations that may occur within the company concerned and to identify the funcFor management board members and senior manage- tional areas, employees and, in the case of large undertakings, ment, their duty to the company may actually require them national subsidiaries most at risk of such violations. to implement an effective compliance programme. One of the key questions is the extent to which they may delegate This includes questions such as which employees interact responsibility for compliance. This calls for an in-depth with competitors because of their areas of responsibility legal assessment especially in the context of a corporate (for instance, attending industry association meetings), and group, i.e. where the relationship between parent and sub- which functional areas within the company pose a particular sidiaries is involved. Finally, in some countries – Germany risk under antitrust law (usually sales and senior manageamong them – compliance programmes are taken into ac- ment). Using the outcome of this risk analysis, decisions are count as a mitigating factor when calculating fines, pro- made regarding the functional areas, employees, or national vided specific requirements are met. subsidiaries where the compliance programme measures need to be (especially frequently) applied.

The introduction and implementation of compliance programmes help prevent future antitrust violations and uncover violations that have already been committed. For management board members and senior management, their duty to the company may require them to implement an effective compliance programme.

Alongside the risk analysis, it has proven effective to designate a person in a management position to take overall responsibility for implementing and monitoring the compliance programme. In large undertakings, this role is often assigned to the Chief Compliance Officer (CCO) or the head of the legal department. In smaller companies, this role could, for instance, be taken on by the CFO. 39

An advice and whistleblower hotline can also be set up to handle questions regarding the permissibility of planned projects and allow suspicions to be reported confidentially and, if necessary, anonymously. It is important to consider that employees will actually use the hotline only if they are assured of confidentiality and are protected against reprisals.

companies in the same or a related industry, for example.

Further measures may include ad hoc internal investigations and audits to systematically look for compliance violations in specific business divisions.

3. Monitoring and optimisation 2. Measures and modules One of the most effective ways to prevent employees from engaging in antitrust violations is to foster a genuine culture of compliance across every level of the organisation.

To this end, it is essential that the company’s top management clearly endorses compliance with antitrust law (tone from the top) and communicates this throughout the company.

The company can also draw up internal guidelines containing simple, clear rules that employees must follow to avoid antitrust violations. In addition to general rules, such as not exchanging information with competitors on competitively sensitive topics like prices or customers, the guidelines should also contain information on procedures to follow, such as how to react in the event of an antitrust violation and what precautions to take before any planned contact with competitors. The guidelines can also list the offices or individuals to be contacted in case of questions or suspicions (advice and whistleblower hotline).

Example Company A introduces compliance guidelines for dealing with competitor information received from customers. These include, for example, rules on whether and how this information may be shared within the company.

The internal compliance guidelines should be made available to employees in the respective working language.

Specific steps to promote antitrust awareness could include regular training and ensuring that training materials are always accessible. The training sessions should be tailored to the employees’ areas of responsibility, as what matters in sales often differs from what is important at trade association meetings, for instance. These measures can be rounded out by e-learning modules, self-assessment checklists, onboarding briefings for new staff, incorporating compliance criteria into individual evaluation questionnaires, and regular employee newsletters reporting on current developments or violations by other 40

The compliance programme should be continuously monitored to identify any weak spots and adjusted as needed.

This can also be done according to a fixed auditing and optimisation plan. Company guidelines and training materials should be reviewed at regular intervals and kept up to date.

4. Response to specific violations Companies are required to take appropriate action if employees violate compliance guidelines. Firstly, the company must ensure that the violation is stopped. It can also impose sanctions – to the extent allowed by law – on the employees concerned. These sanctions serve to document the management’s commitment to enforcing the compliance strategy and preventing further violations. These sanctions can be detailed in dedicated disciplinary guidelines to ensure that employees understand the sanctioning process and to serve as a further deterrent against committing compliance violations. The disciplinary guidelines can also set out who in the company has the authority to impose sanctions. This issue can be particularly sensitive if a member of the management is personally involved in a compliance violation.

The disciplinary guidelines should also cover the challenge of balancing the need to impose sanctions and the need to work together with the employees responsible for the purpose of submitting a leniency application. Under certain circumstances, employees involved in a compliance violation may be granted immunity from specific sanctions if they cooperate fully with the internal investigation and thereby facilitate the prompt submission of a leniency application.

End Notes

End Notes i

ii

iii

iv

v

vi

Section 1 Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, “GWB”) and Article 101(1) Treaty on the Functioning of the European Union (“TFEU”).

European Commission, Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice), OJ 2014 C 291/1.

European Commission, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements, OJ 2023 C 259/1 as well as European Commission, Guidelines on Vertical Restraints, OJ 2022 C 248/1.

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1.

Article 102 TFEU, Sections 18 et seq. GWB. Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1.

vii Commission Notice on cooperation within the Network of

Competition Authorities, OJ, C 101, 101/43. See also Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market.

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Overall Editorial Team Nadine Rossmann Department Law, Competition and Consumer Policy Dr. Ulrike Suchsland Department Law, Competition and Consumer Policy

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