The European Antitrust Review 2014 • Section 3: Country chapters
Germany: Federal Cartel Office
In 2013, the Federal Cartel Office (FCO) will be working intensely on numerous proceedings and projects across all sectors. At the FCO, we believe that protecting competition is the best way to protect the consumer. We make sure that open markets are maintained, which in turn secures good quality and fair prices.
In July 2013, an important amendment to the German Competition Act will come into force that addresses a number of issues ranging from cartel enforcement and unilateral conduct to merger control. Arguably the most significant change concerns the substantive merger test. The dominance test will be replaced by the SIEC test, which mentions the creation or strengthening of a dominant position as an example for a significant impediment to effective competition and has been applied by the EU Commission since 2004. The shift in the substantive test takes account of the FCO’s significant development in its case practice over the last five to 10 years, with a sharper focus of investigations on economic concepts and findings. This development is already reflected in the FCO’s new merger guidelines on substantive merger control that were issued in 2012. The guidelines will be updated further on the basis of the FCO’s first experience with the application of the test.
Foreign-to-foreign mergers are another issue that will be addressed in 2013. The major shift in legislation in this area already occurred in 2009, when a second domestic turnover threshold was introduced. It dramatically reduced the number of mergers that have a limited impact on Germany and do not raise any competition issues (leading to a reduction in the total number of cases by roughly 30 to 40 per cent). After this reform the issue was raised whether there was still any room to exclude the notifiability of a merger on the basis that it lacks sufficient domestic effects or whether reaching the turnover threshold was sufficient to trigger a notification, which is still the current approach in EU merger control. The FCO plans to issue an updated guidance document that sets out in which cases (that reach the turnover thresholds) a sufficient effect on markets in Germany can be excluded ex-ante.
Cartel prosecution will remain a key area of focus in our work in 2013. We have already concluded several protracted cartel proceedings with heavy fines – for example, price agreements for confectionery and drugstore products, which we punished with substantial fines. Several companies in the milling industry were also fined. New cartel investigations have also been opened – for example, earlier this year we conducted dawn raids in the steel industry and sanitary wholesale sector.
The FCO’s cartel enforcement has been reinforced recently by a decision of the German Federal Court of Justice (BGH). The court largely upheld the fines imposed against the members of a cement cartel – the highest ever imposed by the FCO. In the proceedings, the BGH also confirmed that the key provisions on the fining of cartel law violations in Germany are in line with German constitutional law, which has been disputed by several companies and lawyers for quite a long time. In our work we can now rely on a clear statement from the highest criminal court on a variety of questions concerning the method of calculating fines. On this basis, we will adjust our guidelines on the calculation of fines accordingly.
Current activities show that vertical competition restraints will be a significant issue this year. We already conducted a number of proceedings last year, the main focus of which was the business relations between producers and retailers. In many cases, these concerned price maintenance agreements or the exertion of pressure by producers on retailers. We are working intensively on a cartel proceeding against food retailers and producers. Here we are following up suspicions that producers of branded goods and retailers selling confectionary, coffee and pet food have fixed end consumer prices.
Price maintenance is not necessarily always the key issue. A growing number of producers are introducing selective distribution systems with a vast number of sales conditions for retailers. In principle, producers have great freedom in how they conduct their distribution activities. Their distribution systems must not, however, involve inadmissible restraints of competition. Such restraints can either take the form of the restriction of internet sales, such as banning sales via third-party platforms such as eBay or Amazon, or anti-competitive rules concerning the choice and implementation of quality criteria for product presentations and the choice of sales partners. In this context, we are currently examining the sales conditions of several sporting goods manufacturers.
We are also currently conducting a major sector inquiry into the food retail sector. The examination focuses on the competitive conditions in the markets for the procurement of food and beverages by food retailers. The increasing consolidation in the food retail sector leads to a high level of concentration in favour of the leading retail companies, in both the sales and procurement markets. The four leading retail companies have come to control around 85 per cent of the total sales market in Germany. With the sector inquiry we intend to take a closer look at buyer power in the food retail sector and base the current debate on a solid body of data.
Finally, last year we were given new competencies for our work in the energy sector. Together with the Federal Network Agency, the FCO will assume new monitoring competencies on the production and wholesale markets for electricity and natural gas.
The launch of the Transparency Unit for Fuels is a key project this year that has already made substantial progress. At the end of 2012, we set up a project team whose task is to prepare the launch of the unit. This new unit will enable consumers to inform themselves on up-to-date fuel prices in Germany. Via the internet, a smartphone or navigation system, motorists will be able to gain information on the current fuel prices or the cheapest petrol station in their vicinity or along a specific route. This will allow for a better overview of prices and an informed choice which will increase competition.
The transparency unit will not lead to lower prices from one day to the next. However, consumers will have access to current, comprehensive and reliable information on prices at petrol stations in their vicinity. and thus be able to select the one offering the best price.
Next Chapter: Germany: Cartels