Cartel damage

Judges at the higher regional court in Dusseldorf have ruled that the fine structure employed by the Federal Cartel Authority needs to be amended, according to a report by the financial daily newspaper Handelsblatt. As a result, many of the fines that the authority has charged companies in the past three years could be up for appeal.

Fines for illegal price-fixing agreements between companies are currently capped at 10 percent of the offending company's turnover from the previous year. The report said that while the Cartel Authority habitually demands the maximum fine, courts often set the fines lower after extenuating circumstances - such as the offending company's cooperation with the investigation - are taken into account.

Dusseldorf court spokesman Ulrich Egger confirmed the report to Deutsche Welle, but warned that the ruling did not require a complete overhaul of the fine system. "The decision affects the criteria by which the 10 percent cap is calculated," Egger said. "It is obviously not an automatic process - each case is evaluated separately." He added that the maximum fine should only be imposed in particularly grave cases.

Tendency to lower fines

"It's true that the decision will mean a tendency towards lower fines," Egger said, explaining that fines that were not yet legally binding could be appealed - including the 160-million-euro ($218-million) fine imposed on four major coffee companies in December last year. Coffee giants Tchibo, Melitta, Dallmayr and food company Kraft were found guilty of routinely agreeing on coffee prices since 2000. All four companies declined to comment on Tuesday's report, since they have already appealed the fine and the court case is ongoing.

The Dusseldorf court's decision was sparked by a complaint from a group of cement companies, including Heidelberg Cement, which was slapped with a 650-million-euro fine last year. Following an appeal, the fine imposed on the alleged cartel was reduced in June 2009 to 330 million euros.

The Cartel Authority has established a history of imposing heavy fines since a new fine structure was introduced in 2006. It demanded 165 million euros from a group of six companies and eight individuals in the roofing industry in December 2008, and in 2007, seven liquid gas companies were fined a total of 208 million euros for agreeing not to compete for each other's customers.

Altogether, in the past three years since the new fine regulations were introduced, the Cartel Authority has demanded roughly one billion euros in fines - more than ever before.

Not so drastic

But the Cartel Authority strongly refuted the Handelsblatt report, denying that it had ever reached the 10 percent cap when imposing fines, and that most were significantly below the limit.

Speaking to Deutsche Welle, Cartel Authority spokesman Kay Weidner said: "We were very surprised at how negative today's Handelsblatt story was, and to be honest it was slightly bad form not to give us the opportunity to explain."

"In the majority of cases the court agrees with our calculation of the fine," Weidner said.

"We base fines on how much the offending companies would have made if the prices had not been agreed. If that figure exceeds 10 percent of the turnover, then we impose the cap. As you can imagine, these calculations are extremely complicated, and in some cases, as in the case of the cement cartel, economic experts dispute our assessment. In that case the court decided to reduce the fine."

A bracket, not a cap

Weidner said that the Dusseldorf court did make the subtle but important decision to change the 10 percent cap into a bracket - in other words, fines will end up somewhere between zero and ten percent, depending on a range of factors - as when sentences are passed in normal criminal court cases.

"The objective truth is no-one knows what effect this decision will have - it's just as likely that many fines will be higher as that they will be lower," Weidner said.

Although some anti-trust lawyers said that the decision would have a big effect on how the Cartel Authority works, no actual changes can be made until the ruling has been referred to Germany's constitutional court. It is hoped that a final ruling will be made some time this year.

In a press statement, Cartel Authority president Andreas Mundt said: "Until there is a final decision from the constitutional court, the Cartel Authority sees no reason to change its fine policy."

Mundt added that the authority's fine structure was in line with the policy of the European Commission and most EU member states.

Author: Ben Knight
Editor: Sam Edmonds