The wilful or negligent violation of section 1 ARC as well as of Article 81 EC can be fined as an administrative offence under section 81(1) and 81(2) ARC. The fine can amount to up to €€1million (section 81(4) 1 ARC) and beyond, but for each undertaking and association of undertakings participating in the infringement, the fine shall not exceed 10 per cent of the total turnover in the preceding business year (section 81(4) 2 ARC).
Section 1 ARC is addressed to ‘undertakings’ and ‘associations of undertakings’. These entities are subject to the ARC and can be fined for an infringement on the basis of section 81 ARC. An undertaking is legally responsible for any violation of ARC provisions if a person entitled to represent the undertaking violates its duty to supervise the competitive behaviour of the overall undertaking with regard to ARC provisions. German law also provides for the possibility of fining certain natural persons (a legal representative or another person in a comparable position) if such a person has personally contributed to the infringement or has not taken appropriate measures to prevent the anticompetitive conduct (sections 130 and 30 of the Administrative Offences Act, ‘Gesetz über Ordnungswidrigkeiten’). In addition, if a natural person carries out business activities, such person is to be classified as an ‘undertaking’ and can be an offender within the meaning of section 81 ARC.
The Bundeskartellamt (Federal Cartel Office), being the national authority enforcing German and European Competition Law, first adopted a notice containing leniency regulations on 17 April 2000 (Notice 68/2000). This notice has now been replaced by ‘Notice no 9/2006 of the Bundeskartellamt on the immunity from and reduction of fines in cartel cases’ dated 07 March 2006 (‘Leniency Guidelines’). The notice is available in German, English and French on the website of the Bundeskartellamt (www.bundeskartellamt.de). This second notice is understood to be an updated and modernised version of the original leniency notice that takes account of both EC leniency policy and the model leniency programme developed by the European Competition Network (ECN).
The Leniency Guidelines apply to the setting of fines imposed on both natural persons offending against ARC provisions and undertakings. As the leniency policy of the Bundeskartellamt is intended to be in line with the Leniency Notice of the EC Commission, literature and case law relating to the EC Leniency Notices of 1996, 2002 and 2006 can provide useful information on the interpretation and application of the Leniency Guidelines.
It should be noted that the ARC provisions as well as Article 81 EC are enforced not only by the Bundeskartellamt, but also by the supreme competition authorities (‘Landeskartellbehörden’) of the 16 Federal States (‘Bundesland’). The Bundeskartellamt will deal with infringement cases only if the effect of the infringement on the market extends beyond the territory of one Bundesland. In all other cases, the Landeskartellbehörden will conduct the investigations (section 48 ARC). This division of competencies should be taken into account when considering a leniency application since the Leniency Guidelines of the Bundeskartellamt do not directly apply to infringement proceedings conducted by the Landeskartellbehörden. Although the Bundeskartellamt and the Landeskartellbehörden apply the same substantial and procedural rules (ie the ARC provisions), they are not bodies of the same legal entity. Therefore, the Leniency Guidelines of the Bundeskartellamt, which are administrative principles only binding on itself, cannot have a binding effect on the Landeskartellbehörden and cannot be invoked by a leniency applicant in infringement proceedings before these authorities.
The leniency applicant is recommended to apply to the Bundeskartellamt even if a Landeskartellbehörde may actually be competent under section 48 ARC. In the application it should be argued that the conditions of the Leniency Guidelines of the Bundeskartellamt are met and that the applicant is willing to fully cooperate in line with these guidelines, but that there is no comparable leniency protection before the Landeskartellbehörde actually competent for the case. The lack of leniency protection before the respective competition authority of the Bundesland should be sufficient justification for applying the mechanism of flexible competence under the new section 49(3) ARC. According to this provision, the Landeskartellbehörde of one Bundesland may, at the request of the Bundeskartellamt, refer the case to the Bundeskartellamt if this is required by the specific circumstances of the relevant case.
2. What are the basic tenets of a leniency/immunity programme?
According to the Leniency Guidelines, cartel members can receive (complete) ‘immunity from fines’ or a ‘reduction of fines’ of up to 50 per cent.
The qualification of a leniency applicant for one of these options is in particular dependent upon:
Full immunity will be granted only to the ‘first in’ and only under certain circumstances (see question 8 below). The first applicant can be granted full immunity even after the Bundeskartellamt has learned of the cartel infringement and even if the Bundeskartellamt was already in a position to obtain a search warrant. Subsequent applicants, or applicants not fulfilling the preconditions for full immunity, can receive, at most, a 50 per cent reduction. If the applicant played a ‘decisive’ role in the cartel, he cannot receive full immunity, but is not generally excluded from being granted a reduction of the fine. As a further important condition, the cooperation with the enforcement authority must be continuous and without reservations.
The new leniency notice provides for the possibility of placing a marker, ie a cartel member’s declaration of its willingness to cooperate. The Bundeskartellamt will acknowledge receipt of the marker, but will generally not decide on the extent of the reduction of the fine until the final decision is adopted. Only if the marker refers to an application for complete immunity will the Commission issue in the course of the proceedings an assurance saying that the applicant will be granted full immunity provided that the applicant was neither the only ringleader of the cartel nor coerced other undertakings into participating in the cartel.
The Leniency Guidelines are legally binding on the Bundeskartellamt. They limit the discretionary powers conferred upon the Bundeskartellamt for the setting of fines. However, it should be noted that the Leniency Guidelines do not automatically reduce the prospective fine. There is still some scope left for the final decision by the Bundeskartellamt.
3. How many cartels have been unveiled and punished since the adoption of the leniency policy?
The Bundeskartellamt praises the efficiency of the Leniency Guidelines in detecting and punishing cartels. The number of leniency applications has consistently increased over the last years and is expected to increase further. In the years 2000 to 2006, 130 leniency applications were filed concerning 32 different proceedings. Seventy-six of these 130 applications were filed in the years 2005 and 2006.
4. What is needed to be a successful leniency applicant? Is documentary evidence required or is testimonial evidence sufficient?
There are no clear-cut requirements for a successful leniency application. The leniency notice requires any applicant to ‘cooperate fully and on a continuous basis’. The leniency applicant is expected to provide all ‘verbal and written’ information available to him, including documents and evidence relating to the cartel. In particular, all information necessary for the calculation of the fine has to be handed over. Furthermore, the identity of all employees involved in the cartel agreement have to be named. The duty to hand over information in whatever form does not end with filing the application but continues throughout the proceedings.
The Bundeskartellamt will not consider the cooperation as fulfilling the above requirements if the leniency applicant merely submits information, documents etc without any further explanation. In particular, the cooperation requires an oral or written description of the relevant cartel behaviour, including time and place of meetings, details of the illegal behaviour, as well as the identity of the companies involved.
In order to receive full immunity, it is required that the leniency application enables the Bundeskartellamt to initiate further investigatory measures. Full immunity will only be granted if the application enables the Bundeskartellamt to obtain a search warrant. If the Bundeskartellamt had already been in a position to obtain a search warrant due to information available to it, the applicant will be granted full immunity only if the information in the application enables the Bundeskartellamt to prove the offence. Consequently, the leniency applicant is required to gather and present the documents and the factual background of the relevant cartel behaviour in order to increase its chances of meeting these thresholds.
As regards the reduction of the fine, the Leniency Guidelines require the applicant to hand over ‘all the information and evidence available’ to the applicant which makes a significant contribution to proving the offence. The value of the contributions to uncovering the illegal agreement will be one decisive aspect relating to the amount of the reduction that will be granted to the applicant. This provision in the Leniency Regulation proves to be problematic in practice. Companies not having particularly incriminating documents or information can be, thus, provoked into exaggerating the information in their possession and the facts that can be proved with the same.
TIMING
5. What are the benefits of being ‘first in’ to cooperate?
If the leniency applicant is ‘first in’ to cooperate, such applicant will – subject to the conditions set out in question 8 below – not be fined at all. As this full immunity will be granted only to the ‘first in’, companies are under significant pressure to evaluate the risk of being uncovered not only by the competition authority but also by their fellow cartel members. The Leniency Guidelines create an unstable situation between cartel members similar to the ‘Prisoner’s Dilemma’. However, even the ‘second in’ can qualify for full immunity under certain conditions, see below 6.
6. What are the consequences of being ‘second’? Is there an ‘immunity plus’ or ‘amnesty plus’ option?
If the leniency applicant is only ‘second’ and the first applicant qualifies for full immunity, then the second applicant will be granted a reduction of its fine that, however, will not exceed 50 per cent. This leniency position can be achieved even after an investigation has been initiated.
It has to be noted that an applicant can receive full immunity even if he is not the ‘first in’. The German Leniency Guidelines do not exclude the possibility of the second applicant moving into the position of the first applicant. This might be the case if the first applicant was the sole ringleader or does not fulfil its obligation to cooperate. The prospect of overtaking the first applicant intensifies the competition between applicants for offering the most value
– and for denouncing the first applicant. No rules exist as to ‘immunity plus’ or ‘amnesty plus’.
7. Are subsequent firms given any beneficial treatment if they make a useful contribution? How are ‘useful contributions’ defined?
Leniency applicants subsequent to the ‘first in’, or not qualifying for full immunity although being first, may only receive reduced fines. The maximum reduction that can be granted is 50 per cent.
In order to qualify for a reduction, the applicant has to adhere to the following obligations:
Provided that the applicant fulfils these obligations, the Bundeskartellamt will determine the reduction of the fine on the basis of the value of the contribution and the sequence of the applications.
An application can be made as long as the proceedings have not been concluded by the Bundeskartellamt by means of a formal decision. In particular, a reduction is not excluded because the initiation of the investigation has become known. However, the later the applicant decides to file an application, and the more information the Bundeskartellamt has already collected, the less ‘significant’ the applicant’s information will be. On the other hand, the sequence of applications as such is not the exclusive determining factor for the amount by which the fine is reduced. If an early applicant is not able to present valuable information, then a later applicant will be able to achieve a more significant reduction by presenting data of higher value.
Apart from the value of the contributions and the sequence of the applications, the Leniency Guidelines do not mention any further aspects that will be taken into account in the course of determining the reduction of the fine. The Leniency Guidelines do not exclude the possibility of a reduction of the fine for the ringleader of a cartel or for an undertaking that coerced other undertakings into participating in the cartel.
SCOPE/FULL LENIENCY
8. Is it possible to receive full leniency? And, if so, what are the conditions required to receive full leniency?
On the basis of the Leniency Guidelines the conditions for full immunity depend on the question whether the Bundeskartellamt already has sufficient evidence to obtain a search warrant or not.
Before this is the case, a leniency applicant (automatically) receives full immunity if the applicant:
9. How many companies have received full immunity from fines to date?
In the meantime, several undertakings have received full immunity. There is no official data on the total number of applicants that have received full immunity.
PROCEDURE/CONFIDENTIALITY
10. What are the practical steps required to apply for leniency?
Under the first Leniency Guidelines of 2000, undertakings considering a leniency application to the Bundeskartellamt were faced with the lack of transparency of the whole leniency procedure and, thus, with legal uncertainty. They were required not only to assess the risk of being uncovered by the competition authorities or by other cartel members. In addition they had to examine all information available to them as to whether it will be of sufficient value. The new Leniency Guidelines introduce what is known as a marker system that is intended to give applicants guidance and certainty during the proceedings.
The applicant can initiate the leniency proceedings by contacting the ‘Sonderkommission Kartellbekämpfung’ (Special Unit for Combating Cartels) or the chairman of the competent ‘Beschlussabteilung’ (decision-making division) of the Bundeskartellamt. The contact details are: Bundeskartellamt Sonderkommission Kartellbekämpfung Mr Töllner Kaiser-Friedrich-Strasse 16 53113 Bonn, Germany Fax: +49-(0)228-94.99.400
The applicant can place a ‘marker’ by announcing his unreserved willingness to cooperate with the Bundeskartellamt. Placing the marker does not require the undertaking to submit a complete application as set out in question 4 above. It has to contain only a summary of the most important identifying aspects of the cartel including details about the type and duration of the infringement, the product and geographical market affected, the identity of those involved and the other competition authorities to which applications have been, or are intended to be, filed. The marker can be placed verbally or in writing. It can be in English or in German.
The Bundeskartellamt will then confirm that a marker has been placed and will set a time limit of not more than eight weeks for filing the complete application for leniency containing all the necessary information. The application can be filed in written or verbal form and either in German or in English. In the latter case, a written German translation must also be provided. An application submitted by an undertaking will be treated by the Bundeskartellamt as an application also for its current and former employees, unless otherwise indicated. The Bundeskartellamt can exempt the applicant from filing a complete application if the European Commission is the best placed authority to decide on the case and if the applicant intends to file, or has already filed, an application to the European Commission.
Thereafter, the Bundeskartellamt will confirm receipt of the complete application. It will generally not decide whether and to which extent immunity or a reduction will be granted. The Bundeskartellamt will only state which rank the applicant is at and whether the applicant fulfils its cooperation duties. Only if the undertaking fulfils the conditions for automatic full immunity, ie applies for leniency before the Bundeskartellamt has sufficient information to obtain a search warrant (see above 8), the Bundeskartellamt will ‘assure the applicant in writing that he will be granted immunity from the fine subject to the condition that he was neither the only ringleader of the cartel nor coerced others into participating in the cartel and fulfils his obligations to cooperate’.
11. Is there an optimal time to approach the regulatory authority?
As can be seen from the conditions for receiving full immunity, the optimal time to approach the Bundeskartellamt is before the cartel has become known to the Bundeskartellamt through its own investigations, through customers or suppliers of the cartel, or through a leniency application by another cartel member. However, the leniency applicant will normally not learn whether there has been such contact before. Nevertheless, a leniency application should be submitted as soon as possible in order to ensure a strong leniency position. By placing a marker the applicant gains up to eight weeks in which he can gather all the information available to him in order to safeguard its position in the leniency proceedings.
12. What guarantees of leniency exist if a party cooperates?
There is no guarantee of leniency until the final decision is adopted by the Bundeskartellamt at the end of the investigation. The Bundeskartellamt will only confirm receipt of the marker and of the complete application and it will state which rank the applicant is at and whether the applicant fulfils its duties to cooperate. Only if the undertaking fulfils the conditions for automatic full immunity, ie applies for leniency before the Bundeskartellamt has sufficient information to obtain a search warrant (see above 8), the Bundeskartellamt will issue a written, conditional assurance that he will receive full immunity. The assurance is issued on the condition that the applicant fulfils his cooperation obligations, that he was not the sole ringleader of the cartel and that he did not coerce another undertaking into participating in the cartel.
Apart from that, the leniency applicant might learn of the pre-existing cooperation of another cartel member at a later procedural stage, eg when exercising his right of access to the file. In addition, the reduction of the fine depends to a significant extent on the Bundeskartellamt’s assessment of the documents and evidence as a ‘significant contribution’. However, the Bundeskartellamt does not clearly communicate during the procedure whether the contribution of a leniency applicant fulfils this criterion. Even if the leniency applicant provides the Bundeskartellamt with all information available to him, this might not be sufficient to get an acceptable leniency position since another leniency applicant might have provided even more detailed and incriminating documents. Therefore, the leniency applicant cannot really evaluate his leniency position in the course of the investigation.
13. Is confidentiality afforded to the leniency applicant and other cooperating parties? If so, to what extent?
The Bundeskartellamt is well aware that confidentiality is an important asset as regards the applicant’s incentive to cooperate and therefore as regards the efficiency of a leniency programme. The Leniency Guidelines therefore state that, until the statement of objections is issued, and ‘within the scope of the statutory limits and regulations on the exchange of information with foreign competition authorities’ (amongst the European Competition authorities, some rules are set out in the Commission notice on cooperation within the Network of Competition Authorities) the Bundeskartellamt will safeguard the applicant’s confidentiality interests by treating as confidential the identity of the applicant and by preserving his trade and business secrets.
On the basis of section 49 Administrative Offences Act (‘Gesetz über Ordnungswidrigkeiten’) an undertaking has the right of access to the file. This provision gives the Bundeskartellamt discretionary powers to decide on the extent of this right. In the Leniency Guidelines, the Bundeskartellamt states that it will use these discretionary powers to refuse applications by private third parties for file inspection or the supply of information, ‘insofar as the leniency application and the evidence provided by the applicant are concerned’.
CONSEQUENCES
14. What effects does leniency granted to a corporate defendant have on the defendant’s employees?
In German Antitrust Law, it is important to distinguish between employees entitled to represent the undertaking or to exercise managerial functions on the one hand and other employees on the other. If the latter engage in antitrust behaviour, they do not violate ARC provisions as they are not classified as ‘undertakings’ and as their actions cannot be attributed directly to their employer. However, if their behaviour was facilitated by lack of internal supervision, the persons entitled to represent the undertaking or to exercise managerial functions have violated their duty to supervise the undertaking within the meaning of section 130 of the Administrative Offences Act. They can, thus, be fined. The violation of this duty is an administrative offence that is imputed to the respective undertaking under section 30 of the Administrative Offences Act which, then, can be fined as well.
The Leniency Guidelines explicitly state that a leniency application filed on behalf of an undertaking will also be rated by the Bundeskartellamt as one made on behalf of the natural persons participating in the cartel as former or current employees of the undertaking in question. The undertakings can, however, declare, that the application shall not be treated as representing the employees. The Bundeskartellamt leaves open the question whether an application by a natural person on his/her own behalf will also be treated as representing the undertaking in question. It is generally assumed that this is not the case.
15. Does leniency bar further criminal or private enforcement?
The Leniency Guidelines have no effect on the consequences that the participation in an illegal cartel might trigger under civil law. Customers of the cartel members can claim damages pursuant to section 33 ARC and section 823 Civil Code (‘Bürgerliches Gesetzbuch’). As customers and other injured persons generally have access to the file under section 406e Criminal Procedure Act (‘Strafprozessordnung’), the cooperation of a leniency applicant with the Bundeskartellamt can result in providing prospective plaintiffs with documents and other evidence that they can subsequently use in civil proceedings against the leniency applicant. As this might seriously endanger the willingness of a cartel member to cooperate with the Bundeskartellamt, especially since the new ARC has strengthened the legal positions of plaintiffs in damage claim proceedings, the Bundeskartellamt has announced that it will use its discretionary powers to refuse applications by private third parties for file inspection or the supply of information (see above question 14).
A violation of ARC provisions is not in itself of a criminal nature. However, if the antitrust behaviour includes criminal offences such as bid rigging (section 298 of the Criminal Code, ‘Strafgesetzbuch’), the Bundeskartellamt must refer proceedings against any natural person to the public prosecutor under section 41 of the Administrative Offences Act. Cooperation with the Bundeskartellamt may be relevant as a mitigating factor in any criminal proceedings, but generally does not prevent criminal proceedings.
RELATIONSHIP WITH THE EUROPEAN COMMISSION’S LENIENCY NOTICE AND LENIENCY POLICY IN OTHER EU MEMBER STATES
16. Does the policy address the interaction with applications under the Commission Leniency Notice? If so, how?
The Leniency Guidelines take into account that an applicant for leniency might also file an application for leniency to the European Commission. In order to be informed of such potentially concurring proceedings, the Leniency Guidelines oblige the applicant to include with the marker whether and to which other competition authority an application for leniency has been, or is going to be, filed beside the one to the Bundeskartellamt.
If the applicant has also applied, or intends to apply, to the European Commission and if the Commission is the best placed authority according to the criteria of the Commission notice on cooperation within the Network of Competition Authorities, then the Bundeskartellamt can exempt an undertaking that has placed a marker from submitting a complete application. Whether or not the Bundeskartellamt grants this exemption depends on whether the Commission actually picks up the case. This merely confirms that the Bundeskartellamt respects the priority of the proceedings at EU level in accordance with Art 11(6) of Regulation 1/2003.
17. Does the policy address the interaction with applications for leniency in other EU member states? If so, how?
The Leniency Guidelines only refer once to the possibility that other national competition authorities might also be addressed by an applicant. In order to be informed of such potentially concurring proceedings, the Leniency Guidelines oblige the applicant to include with the marker whether and to which other competition authority an application for leniency has been, or is going to be, filed beside the one to the Bundeskartellamt.
The Leniency Guidelines neither contain any indication that the application in another EU member state will have an effect on the applicant’s position in the proceedings in Germany nor in what other way the Bundeskartellamt will interpret the relationship between the German and the other proceedings. An applicant will therefore have to file its application in any member state in which the applicant can expect to be liable for a fine. It can be expected that the Bundeskartellamt will apply the Commission notice on cooperation within the Network of Competition Authorities in this respect.
The applicant has to expect that the Bundeskartellamt will share the information contained in the application with other competition authorities. However, it will treat as confidential the identity of the applicant and its trade and business secrets, but only until a statement of objections has been issued to a cartel participant.
REFORM/LATEST DEVELOPMENTS
18. Is there a reform underway to revisit the leniency policy? What are the latest developments?
In March 2002, the Bundeskartellamt set up a Special Unit for Combating Cartels (‘Sonderkommission Kartellbekämpfung’ (SKK)). The task of the SKK is to assist the relevant decision-making divisions in the Bundeskartellamt, which are competent for all antitrust and merger cases relating to specific industrial sectors, in uncovering cartel agreements by deploying specialised personnel resources.
In recent months, the Bundeskartellamt has again been restructuring the internal division of competence in order to increase the quota of uncovered cartel agreements and to speed up proceedings. It has already set up one Special Unit and is expected to set up a second Special Unit with competence for all hardcore cartels regardless of the affected industrial sector. The remaining decision-making divisions will only deal with cases concerning merger control and abuse of a dominant position.
It is not expected that a revised Leniency Regulation will be issued within the next two or three years.
