Peter Stauber, LL.M. / Berlin, Germany 10 February 2015 Sanctioning Antitrust Infringements in Germany – Administrative & Criminal Sanctions for Individuals and Companies International Competition Network – Cartel Working Group Subgroup 1 Peter Stauber, LL.M. / Berlin, Germany

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

Administrative sanctions Date General principles (1) Administrative sanctions Criminal sanctions Competent authority Federal Cartel Office Federal States’ Cartel Authorities Public Prosecutor  prosecution Criminal courts  sentencing Relevant Law Act against Restraints of Competition (ARC) Administrative Offences Act Criminal Code Offences Violation of antitrust provisions of: ARC Art. 101, 102 TFEU Bid-rigging (possibly also: fraud, breach of trust, bribery) Sanctions Fines Monetary penalty & imprisonment Discretion? Principle of discretionary prosecution Wide discretion at: Initiation of proceedings Imposing of sanctions Purpose of sanction: Deterrence and/or skimming off of the illegal profit (uncommon) Calculation of fines for undertakings predetermined by FCO’s Fining Guidelines of 2013 Principle of legality General rule: Prosecution obligatory if enough evidence at hand Statutory exemptions: Criminal charges insignificant / no public interest for prosecution State interests of higher priority (e.g. political offence; offence committed abroad)

Administrative sanctions Date General principles (2) Administrative sanctions Criminal sanctions Individuals Directly involved No distinction between forms of involvement (perpetrator, instigator, accessory) Regardless of direct involvement: Organs, representatives, authorised proxies of a company, business owners Liable for offences committed by employees Reason: violation of supervisory duties distinction between forms of involvement (perpetrator, instigator, accessory) Undertakings Undertaking liable if: Involvement of company representatives in antitrust infringement, and Company gained / should gain profit from it (Currently) no criminal sanctions on undertakings

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

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

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

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

Sanctions for antitrust infringements by individuals Date Sanctions for antitrust infringements by individuals Administrative sanctions Criminal sanctions Range of sanctions Minimum 5 Euro Maximum 1 mln Euro Monetary penalty or prison sentence (up to 5 years) Aspects in sanctioning Gravity of the offence Degree of fault Financial situation of the offender (minor importance) Subjective factors (motives, objectives etc.) In practice Basic fine = gross annual income Adjustments (increase / decrease) according top specifics of case Possible: symbolic fine for “small fry” to avoid appeals and thus safeguard sanctioning of undertaking Sanctions for bid rigging (2013): 35 individuals All prison sentences suspended Monetary fines: mostly below 90 daily fines

Calculation of antitrust fines for undertakings (1) Date Calculation of antitrust fines for undertakings (1) Federal Cartel Office‘s Fining Guidelines (25 July 2013) Statutory framework of fines Statutory minimum: 5 Euro Statutory maximum 10% of worldwide group turnover Case specific maximum: 10% of the offence-related turnover multiplied with a factor based on worldwide turnover of undertaking Example: Cartel Corp. has worldwide turnover of 3 bln Euro. German subsidiary Kartell- GmbH participates in price fixing concerning sale of product X in Germany. Duration of price fixing is 5 years; Kartell GmbH’s annual turnover with product X in Germany was 100 mEuro. Statutory maximum: 300 mln Euro (= 10% of 3 bln Euro) Case-specific maximum: 200 mln Euro (= 10% of [100m Euro x 5years] x 4) < 100 m€ 100 m up to 1 b€ 1-10 b € 10-100 b€ > 100 b€ 2-3 3-4 4-5 5-6 >6

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

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