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- GCR 100
- Rating Enforcement
Germany: Federal Cartel Office
President of the Federal Cartel Office
In 2014, the Federal Cartel Office (FCO) will be working on numerous proceedings and projects across all sectors. Sectoral priorities are mainly set by the Decision Divisions on the basis of latest developments in the relevant markets. The FCO has the responsible role of referee for the German economy, which is to ensure that the rules of competition are kept. The authority is therefore very active in its main competences of cartel prosecution, the control of abusive practices, merger control and the review of public procurement proceedings.
The Eighth Amendment to the German Act against Restraints of Competition came into force in June 2013. Among the comprehensive changes was the introduction of the SIEC test into German merger control, which was smoothly incorporated into the authority’s working processes. The shift to the substantive test takes account of significant developments in the FCO’s case practice over the last five to 10 years, with a sharper focus of investigations on economic concepts and findings. The introduction was accompanied by the formation of a second economic unit in the FCO which is specialised on empirical matters and increasingly complex processes of data collection and the application of quantitative tools and methods.
Cartel prosecution remains a key area of focus in our work. In 2014, the total number of fines will be significantly higher than in previous years. We have already concluded three cartel proceedings with heavy fines in 2014, including the second and the third highest fines that were ever imposed by the authority. A total of €338 million was imposed on 11 breweries and a regional trade association for concluding price-fixing agreements for beer. The three major German sugar manufacturers had to pay €280 million for concluding anti-competitive agreements on sales areas, quotas and prices, and a price cartel between wallpaper manufacturers ended with a fine of €17 million. A protracted cartel investigation in the prepared meat sector will be finished in 2014 and new cartel investigations have also been opened.
German cartel enforcement has been strengthened recently by a decision of the German Federal Court of Justice (BGH). 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. 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 have adjusted our guidelines on the calculation of fines accordingly.
The FCO continues to work on its ongoing cases of abuse of dominance in 2014. It has ordered water supplier Berliner Wasserbetriebe to lower its water prices for three more years until 2018 as a result of a settlement between the company and the authority. In merger control, the FCO recently prohibited a merger in a regional hospital market, while earlier this year it had cleared the largest acquisition yet in the German hospital market with 40 clinics and 13 medical care centres. Among various other cases across all sectors, a large merger in the markets for printed newspapers and printed magazines has currently been cleared by the FCO. In the areas of merger control and abuse of dominance, the FCO successfully prevents critical concentrations and remedies abusive conduct by dominant companies. For this purpose, its sector-based organisational structure with a staff of highly qualified legal and economic experts is very advantageous. The administrative burden in merger control is low due to extremely limited information requirements in notifications. The flat hierarchies in the independent decision divisions further contribute to the very efficient decision-making process at the FCO, which is increasingly supplemented by cooperation with other competition authorities in Europe and worldwide.
In 2014, the FCO continues to work on its ongoing sector inquiries into the ready mixed concrete sector and the food retail market – the latter will be completed in 2014. The sector inquiry into the food retail market focuses on the competitive conditions in the markets for the procurement of food and beverages by food retailers. This will give us new insights and provide new tools to establish buyer power in our case work, and help us to deal with this issue in merger cases or other cartel law investigations. Sector inquiries are based on sound economic analysis. They support the FCO’s case work and have proven to be a valuable tool of competition advocacy for the FCO. A sector report on water supply as a follow-up on investigations in the water sector is in process.
Vertical competition restraints will remain a significant issue in 2014. We conducted a number of proceedings last year, the main focus of which were the relations between stationary and online sales. In many cases, these concerned resale price maintenance agreements or the exertion of pressure by producers on retailers. We recently terminated proceedings against price parity clauses on Amazon’s Marketplace platform after the company abandoned these clauses. In a further case, best-price clauses set by the internet booking portal HRS were prohibited by the FCO as far as these clauses affected hotels in Germany. We consequently initiated proceedings against other online hotel portals because of similar clauses in their hotel contracts. Another proceeding against food retailers and producers is still pending. We are following up suspicions that producers of branded goods and retailers selling confectionery, coffee and pet food have agreed on vertical price fixing.
A growing number of producers are introducing selective distribution systems with a vast number of sales conditions for retailers. We are currently examining the selective distribution systems of two brand producers of sporting goods. 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 on the choice of sales partners.
After the launch of a Market Transparency Unit for Fuels in 2013, another transparency unit for electricity and gas is well under way. In addition to its enforcement work, the FCO emphasises its role as an advocate of competition with a special focus on the actual redesign of the German energy markets and state-owned enterprises. New responsibilities in the energy sector will be further implemented by the formation of a Transparency Unit for Electricity and Gas, which will be jointly operated with the Federal Network Agency.
President of the Federal Cartel Office
Next Chapter: Germany: Cartels