Position paper (Translation)
European Commission consultation on “Empowering the
national competition authorities to be more effective
enforcers”
A. Introduction
The Federation of German Industries (Bundesverband der Deutschen
Industrie e.V. – BDI) sets out below its position on the European
Commission’s questionnaire “Empowering the national competition
authorities to be more effective enforcers”.
Law, Competition
and Consumer Policy
Document Nr.
D 0763
Transparency register
1771817758-48
Date
17. Februar 2016
Page
1 von 10
A market-oriented regulatory framework with open markets and functioning
competition is an essential precondition and the best guarantee for growth,
innovation and jobs in an economy. Because competition keeps market power
in check, rewards entrepreneurial engagement and innovative skill, opens up
opportunities. The principle of competition is an expression of our liberal
economic order. German industry is therefore in favour of effective and
rigorous enforcement of European competition rules. Infringements of
competition law must be punished.
In recent years, regulation 1/2003, the parallel competence of European
competition authorities and close cooperation in the European Competition
Network (ECN) have led to an approximation of national systems for
enforcement of EU competition law. Nevertheless, at many points there are
inconsistencies which make enforcement more difficult, especially in cases
where several antitrust authorities are active, and which can lead to legal
uncertainties for companies. For instance, this applies for leniency applicants
who lose their privileged leniency status when a case is referred to another
competition authority. BDI has repeatedly called for more coherent
procedural rules in particular for leniency applicants. Here the Commission’s
initiative could lead to a welcome dismantling of procedural obstacles – the
introduction of a one-stop shop for leniency applications would be
advantageous. However, interference with established legal concepts in
Member States such as the question of how group liability is organised should
not be enabled via an approximation of enforcement provisions. The national
legislator alone has competence here.
A fundamental aim of the consultation is to strengthen the independence, the
resources as well as the investigation and enforcement powers of national
competition authorities. However, a strengthening of the enforcement powers
of antitrust authorities must always go hand in hand with appropriate
procedural rights for the affected companies. When competition breaches are
investigated, the principles of proportionality, justice in individual cases and
Bundesverband der
Deutschen Industrie e.V.
Mitgliedsverband
BUSINESSEUROPE
Phone
T: +3227921005
F: +3227921030
Internet
www.bdi.eu
E-Mail
[email protected]
a fair procedure must be ensured in decisions on and punishment of
infringements.
B. Comments
1. Resources and independence of national competition authorities
BDI agrees with the European Commission that adequate financial and
human resources as well as the independence of national competition
authorities are preconditions for effective competition supervision in Europe.
But just as important as the independence of competition supervision is also
judicial surveillance and a duty of accountability on the part of the authorities.
Most competition authorities in the EU are simultaneously prosecutor and
judge, and have far-reaching decision-making powers. To satisfy the
principle of a division of powers and the fundamental right to a fair trial, it is
important to enable at least comprehensive and effective surveillance of
decisions by the courts.
To ensure a more rules-based procedure and as a first step towards an
effective division of powers, a stricter separation of investigation and
decision-making powers could be provided for within the competition
authorities, for instance with fact-finding being carried out by an
investigation department and the findings subsequently being evaluated and
decisions being taken by a legal department which is completely independent
in terms of both organisation and personnel. It must be possible to verify the
strict separation of the two departments through the courts.
2. Enforcement toolbox of national competition authorities
a) Fundamental right to a fair trial
In its communication on ten years of regulation 1/2003 dated 10 July 2014,
the European Commission set out its view that the investigation powers of
some national competition authorities need to be strengthened in order to
ensure effective enforcement of antitrust law. A strengthening of
enforcement powers must also go hand in hand with appropriate rights of
defence for the companies affected and the fundamental right to a fair
procedure.
Among other things, this includes the protection of confidential documents
and the protection of legal privilege, a guarantee of appropriate timeframes
for responses and information requests, appropriate defence rights such as a
statement of objections, access to files and the right to a hearing,
proportionate sanctions tailored to the individual case in question and
adequate judicial surveillance. Authorities’ existing powers must be
structured transparently and be legally certain in order to ensure an
appropriate defence.
In 2011 the European Commission published a working paper on best
practices in its own antitrust investigations (“Commission notice on best
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practices in the conduct of proceedings concerning articles 101 and 102
TFEU”). Even if German industry is critical of some points of the
Commission’s procedure, the paper nevertheless sets out fundamental
procedural guarantees. If possible, the Commission should declare the notice
legally binding. In so doing, it would clarify its own commitment to a fair
procedure even more strongly. In addition, the Commission should
encourage the other antitrust authorities in ECN to publish comparable
guidelines in order to guarantee fair implementation of procedures and a
uniform standard across the entire network.
b) Need to accelerate procedures
In the view of German industry, there is no fundamental need for a
strengthening of the German competition authority’s enforcement powers.
However, some procedural streamlining should be considered in antitrust
procedures heard in the courts insofar as this does not impinge on the defence
rights of companies. The procedural timeframes in antitrust procedures have
reached a worrying scale in Germany. Inter alia, this is linked to the fact that
court procedures are aligned on the standards of criminal law – the principles
of oral presentation, immediacy and publicity apply before the courts. For
example, the principle of oral presentation means that economic expert
reports have to be read out in full including any tables and formulas they may
contain. Depending on the length of the report, this can take up several days
of court time, without this producing any new information for the parties to
the proceedings. As a general rule, petitions and positions on petitions as well
as the pleadings – in which the entire subject matter of the main hearing is
set out – also have to be read out. Here, too, long documents can be involved
with the corresponding high time investment. It would also be useful to
reorganise the treatment of electronic data which, in the current legal
situation, can be submitted to the court only with great difficulty, namely in
printed form. Such ad hoc adjustment of individual criminal law principles
to the particularities of antitrust cases would help to accelerate procedures.
Not every criminal law principle is essential in antitrust court procedures.
These questions are problems of national procedural law which should be
resolved by the national legislator. However, the Commission could make
recommendations to the Member States along these lines.
3. Powers of national competition authorities to impose fines
a) Civil liability/transposition of the European concept of an
undertaking
In its consultation the European Commission addresses the issue of liability.
More particularly, it raises the possibility of EU-wide application of the
European concept of an undertaking whereby a parent company is essentially
also liable for the competition infringements of its subsidiaries on the basis
of the so-called “single economic entity” between companies operating in a
group, as well as issues around legal succession in fines.
In the framework of the upcoming 9th amendment of the German law on
restrictive practices (GWB), there are also currently discussions in Germany
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on a possible transposition of the European concept of an undertaking in
order to rule out circumvention situations. With the exception of one single
member federation1, BDI is opposed to the transposition of the European
concept of an undertaking and hence against the introduction of collective group
liability independent of fault, which is alien to German company and antitrust
law.
The principle of legal entity has traditionally applied in German antitrust law
whereby exclusively the legal person or business association (legal entity)
that has committed the antitrust infringement is liable. Introduction of the
European concept of an undertaking – and the associated liability of the
“single economic entity” – into German antitrust law would mean a clear
movement away from the German principle of legal entity and would have
far-reaching consequences for liability in groups. The principle of fault
specified in German constitutional law, the principle of personal
responsibility – which requires an infringement on the part of the parent
company in the current understanding – as well as the principle of nulla
poena sine lege would no longer be adequately satisfied.
Group liability for fines under European law is broadly based on recent case
law handed down by ECJ. By allowing mere ownership to suffice for
assignment of liability, it departs from the primary law liability principles set
out in article 101 et seq. TFEU which address anti-competitive behaviour and
not only the ownership situation. This has not yet been tested with respect to
constitutional aspects (article 6 ECHR). Under the standards of German
constitutional law (principle of fault), liability could at best obtain if deficient
compliance supervision by the parent company is taken as the grounds for
liability through an extension of § 130 OWiG (German law on organisational
irregularities) to groups. The principle of personal responsibility would then
also be maintained.
Transposition of the European concept of an undertaking is currently being
discussed above all against the background that circumvention situations
should be ruled out. The German federal government would like to prevent
companies avoiding a fine through purely formal restructuring operations, as
has happened in isolated cases in recent years. BDI agrees with the German
federal government that fines imposed should be paid and not come to
nothing, for instance through a restructuring, merger or disposal of individual
components of an undertaking. However, this is an issue which should not be
resolved through introduction of the European concept of an undertaking.
Rather, circumvention situations can be deterred through clear rules of legal
succession. In the framework of the most recent amendment of GWB, only
mergers or splits were covered in relation to the legal succession of liability
for fines (§ 30 paragraph 2a OWiG). The law could outline further case
constellations in closer detail here. Such an extension of § 30 paragraph 2a
OWiG would be preferable to group liability via the European concept of an
undertaking and the concept of “single economic entity”. Accordingly, in
BDI’s view, transposition of the European concept of an undertaking into
national legal orders is neither necessary nor desirable. The national legislator
has other possibilities to prevent circumvention situations.
1 Agv MoVe (Arbeitgeber- und Wirtschaftsverband der Mobilitäts- und Verkehrsdienstleister e.V.)
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b) Main features of fining policy should be regulated in GWB itself
BDI calls on the German legislator to incorporate the fundamental
characteristics for the assignment of fines in antitrust law, as set out in the
German fine guidelines (Guidelines for assignment of fines in antitrust
procedures of 25 June 2013), in GWB itself. The enabling provision in § 81
paragraph 4 GWB merely establishes that any fines imposed may not exceed
10% of total turnover realised in the financial year preceding the authority’s
decision and that the seriousness and duration of the infringement should be
taken into consideration when the level of the fine is set. This gives the
German competition authority virtually unlimited discretion to set fines in
concrete cases. The closer design of the sanctions system is specified only in
implementing provisions.
Given the ever higher level of fines and the principle of division of powers,
it would be appropriate for the fundamental characteristics of the sanctions
system to be determined by the legislator. The reference to “seriousness” and
“duration” of the infringement is likely to be regarded as being insufficiently
defined – incidentally, also in European law.
The constitutional objections that have always existed with regard to
specifying the antitrust sanctions system almost exclusively in administrative
provisions have recently been further intensified by the ruling of the
European Court of Human Rights in the Menarini case. The court found that
the law governing antitrust fines materially falls within the ambit of criminal
law within the meaning of the European Convention on Human Rights
(ECHR) – even if the applicable law may formally regulate otherwise.
According to this ECHR ruling, the antitrust fine procedure should meet the
requirement of the right to a fair trial as stipulated in article 6 (1) ECHR.
c) Methodology for calculating fines in Germany
It is right that cartel offenders are confronted with high fines with a view to
deterrence. However, fines must be assessed in accordance with the
fundamental constitutional principles of proportionality and fairness in the
individual case. The German fine guidelines were amended in 2013 in the
wake of a ruling by the Federal Supreme Court (BGH) on the question of the
maximum fine level of 10% of a company’s annual turnover. The Federal
Supreme Court found that the constitutional interpretation of the 10% limit
stipulated in § 81 paragraph 4 GWB is that this is a cap rather than an upper
limit for the fine (BGH, 26.2.2013, KRB 20/12- Grauzement cartel).
According to this ruling, up to 10% of the consolidated annual turnover of
the company involved in the cartel can be imposed as a fine. The German
competition authority’s guidelines had previously interpreted the 10% rule
differently from BGH as a capping limit, as the European Commission also
does.
The new guidelines are more strongly oriented on the size of the company.
Thus, the fine takes into account firstly the consolidated annual turnover of
the company and secondly the turnover which the company has generated in
the market covered by the cartel and the duration of its existence, and sets
this in the context of the size of the company. Under this procedure, the fine
is established within this framework taking the profit and injury potential into
consideration. In this regard, the German competition authority assumes a
profit and injury potential at the level of 10% of the company’s cartel-related
turnover generated over the duration of the infringement. The cartel-related
turnover is the turnover generated on the market covered by the cartel; it can
be estimated using general rules. Should the overall assessment of 10% of the
cartel-related turnover prove to be too low due to an obviously much higher
profit and injury potential in an individual case, the discretion for reaching
the assessment can be moved upwards in exceptional cases. Subsequently,
depending on the size of the company, a multiplication factor of two to three
(total turnover below € 100 million) up to a factor of six (total turnover above
€ 100 billion) is applied to the profit and injury potential established in this
way. In cases where the value calculated after the multiplication is below the
statutory maximum fine, as a rule this value constitutes the upper limit for
further assessment of the fine. In all other cases, there are no restrictions on
the discretion for calculating the fine within the statutory framework. Lastly,
the concrete fine is established within the (restricted) fine framework using
infringement-related and infringer-related criteria on the basis of an overall
balance of exacerbating and mitigating factors.
In BDI’s view, the German guidelines result in too great a weight being
assigned to company size as an infringer-related assessment criterion as
compared with the infringement-related criteria. This in turn unfairly
disadvantages large companies.
Thus, the fine guidelines assign undue weight to the total turnover of a
company, both in the framework of the maximum fine and in the framework
of the profit and injury potential (multiplication factor). In extreme cases, a
fine for a large company can be more than three times the fine for a smaller
company, despite the same involvement in the offence. As a justification for
the strong consideration of group turnovers, the fine guidelines cite the
“punishment sensitivity” of the companies in question. This implies that the
punishment sensitivity of a company decreases proportionately as its
turnover increases. However, this justification does not stand up to scrutiny,
since the total turnover of a group in no way leads to a direct conclusion about
punishment sensitivity. Especially among companies active in business
sectors characterised by high turnovers but narrow margins, i.e. in particular
trading companies, punishment sensitivity is not dependent on turnovers but
rather on margins/profit. As a result, the principle of making the punishment
fit the crime takes second place behind the idea of deterrence. The German
competition authority pursues the dubious principle of “big is bad”.
Lastly, BDI is also critical of the unpredictability of fines. When setting fines,
the German competition authority has very wide discretion (multiplication
factor for company size, assignment criteria, etc.) whose application can be
appraised in advance only with difficulty without more concrete indications.
Yet, for companies, the predictability of a fine is of essential importance, for
instance in connection with procedures already opened by competition
authorities such as the question of whether a procedure should be ended in
the framework of a settlement with the competition authority. Similarly,
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companies must be able to set aside reserves for expected fines in the
framework of capital market law and company law. This also calls for a prior
appraisal of expected fines. In BDI’s view, the assignment criteria to be
applied should therefore be regulated in primary legislation and not
determined exclusively within the discretion of the competition authority.
d) Take effective compliance into consideration as a mitigating factor for
fines
Cartel infringements are often first uncovered and reported thanks to in-house
corporate compliance systems. In BDI’s view serious efforts that a company
makes to prevent competition infringements should be regarded as a
mitigating factor when fines are set. The competition authorities in ECN
should ensure lower fines for compliance programmes which have been
effectively implemented, as is already the case in Great Britain, France or
Italy but also in other legal orders such as Canada, Australia or, more
recently, the USA (United States of America vs. Kayaba Industry Co. Ltd.).
BDI therefore argues for an adjustment of the German and European system
to reflect the emerging international standard. Cases in which the
management level of a company has grasped all possibilities to implement a
functional compliance programme and in which a competition infringement
by an employee nevertheless occurs should be assessed less severely than
cases in which company management has taken no steps to prevent possible
breaches or was even involved in the infringement.
In addition, positive consideration of compliance measures would offer a
clear incentive effect for the introduction of such programmes and thus place
pro-competitive behaviour at the heart of every corporate strategy. Effective
compliance increases the probability that an infringement within a company
is uncovered and hence not only has positive effects on the exposure and
prosecution of existing cartels but also from the angle of prevention –
compliance programmes have a high deterrence potential within companies.
Recognition in this area could show that competition authorities are serious
in their quest to strengthen pro-competitive behaviour. It is the duty of
competition authorities not only to investigate and sanction individual
infringements but also to steer the behaviour of undertakings in the light of
the principles of competition law (as expressly set out in point 4 of the
European Commission’s guidelines for setting fines). Despite this, the
corresponding recognition by the German competition authority or the
European Commission has hitherto been absent.
When fines are being set, the behaviour of the infringer prior to and
subsequent to the infringement should be taken into consideration under both
German and European fine guidelines. This also includes the implementation
or subsequent introduction of serious compliance programmes which can be
regarded as a clear commitment to compliance by a company’s management.
Under no circumstances should the existence of compliance programmes
have the effect of increasing fines, since this would clearly reduce the
motivation to introduce such programmes and to form employees regularly
on compliance with competition rules. Also counterproductive in this
connection is assignment of liability to the parent company in the case of
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infringements by a subsidiary due to the mere existence of a group-wide
compliance programme.
e) Against the introduction of criminal fines
Moreover, BDI is sceptical about the introduction of criminal fines in
German antitrust law. The introduction of sanctions under criminal law
would have significant negative consequences for the incentive effect of
leniency programmes and hence for the effectiveness of cartel prosecution as
a whole. With the threat of prison sentences, markedly fewer managers and
sales employees than today would be prepared to cooperate with the
companies and the competition authorities in clearing up serious competition
infringements. There is a danger that this would lead to a serious reversal in
the prosecution of cartels.
4. Parallel competences
Regulation 1/2003 introduced the principle of parallel competences. A
competition infringement can be prosecuted by national competition
authorities and by the Commission. BDI is in favour of close cooperation
between the Commission and the national competition authorities, since this
promotes coherent decisions in the individual Member States and a uniform
European competition culture. However, it would also like the one-stop-shop
principle to be more firmly enshrined in order to rule out companies being
subjected to several parallel antitrust procedures and the associated multiple
sanctions in different Member States, in particular because fines imposed in
other Member States are often not taken into account. The one-stop-shop
principle not only reduces the great effort required of companies but also
leads to an economic division of work among competition authorities in
Europe.
It is often not possible to foresee which authority will take on a case. The
purely appellative character of the Commission’s notice on cooperation
within the network of competition authorities whereby competence should
where possible be assigned only to a “well placed” or “particularly well
placed” authority does not substitute for clear competence rules and does not
constitute adequate protection for companies. BDI therefore recommends
that detailed criteria for clear assignment of cases are set out in regulation
1/2003 itself. If competence is disputed, it is essentially the Commission
which should decide. Furthermore, national authorities should not only have
the right but rather the obligation to close their proceedings if another
competition authority is dealing with the same case (article 13 of regulation
1/2003).
5. Leniency programmes
Uncertainty about which authority is competent for a case has a deleterious
effect on the effectiveness of leniency programmes. Leniency programmes
indisputably play an important role in uncovering competition infringements.
Insofar as there is no extension effect, whether or not a leniency application
is submitted to the right authority is often a matter of chance due to unclear
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and variable competences of authorities. Alongside this, there is uncertainty
about whether the first applicant covered by a leniency programme of a
Member State whose authority proves not to have competence can maintain
its position as a “whistle-blower” in the Member State whose authority finally
processes the case. ECJ recently rejected this for leniency applications before
the Commission and a national competition authority since the organisation
of leniency programmes in the ECN is fully autonomous (judgment in case
C-428/14 of 20 January 2016, DHL Express).
Hence, a leniency application must be submitted individually and if possible
simultaneously with every authority which might be competent for the case.
In practice, this has proved to be a major obstacle. This is because hardly any
company can think through in advance all the eventualities of how a case may
be assigned and then still simultaneously be the first to submit a leniency
application in different Member States, in the relevant national language and
in line with the legal particularities that apply there. This is time-consuming
and expensive, since the corresponding conditions need to be evaluated and,
if necessary, specialised legal experts consulted in each potentially competent
Member State. In particular for small and medium-sized enterprises, this
often constitutes a clear obstacle to making applications. Leniency
applications are impeded in this way, which cannot be in the interest of
competition authorities or of potential whistle-blowing companies.
If there is not at least the possibility of placing a marker, the effort is out of
proportion when set against the uncertain benefit. The circumstance that a
company’s application for a national leniency programme is unlikely to be
regarded simultaneously as an application for the corresponding leniency
programmes under other national competition laws insufficiently takes into
account the interests of companies in legal certainty. Nor does the ECN
model leniency programme provide an adequate remedy, since it is not
binding on national competition authorities.
What is needed here is at least a marker system, but ideally an extension
effect along the lines of a one-stop shop. To this end, there should be a central
contact point (Commission) and uniform requirements for leniency
applications – for which the ECN model leniency programme offers a good
starting point. BDI regrets that the European Commission was in the past held
back by national competition authorities in its efforts to bring about greater
harmonisation of leniency programmes and a one-stop shop; it is companies
that have suffered.
The consequences of a leniency application are also currently still highly
variable. Whereas some Member States give the first applicant full immunity,
only a reduction of the fine is sometimes offered in other systems – for
instance, the German bonus rule in cases where the applicant was the leader
of the cartel. Sometimes it is only the first applicant who is accepted as an
informant and no further fine reduction is foreseen for the second or third
applicant.
Lastly, the conditions for submitting an application can vary considerably
and are sometimes contradictory. In Germany, the competition authority can
require the whistle-blower to continue its cartel activities for a certain period
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in order to collect evidence, whereas in other Member States a cessation of
the cartel activities is a condition for acceptance of the leniency application.
The scope of application can also differ. Thus, not all leniency applications
also include vertical competition infringements.
Insofar as the European Commission seeks stronger convergence between
leniency programmes in ECN, these aspects should be taken into
consideration.
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