Cartels

 
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Originally Published by Global Competition Review

Applicable law and enforcement The legal basis for cartel enforcement in Germany is the Act against Restrictions of Competition (ARC), which has been modified by the Seventh Amendment. The changes came into effect on 1 July 2005 after a lengthy debate of more than two years. Following the Seventh Amendment, further Amendments entered into force. However, they did not change the applicable rules on cartels enforcement.

Following the entry into force of the European Commission's Modernisation Package of Regulation 1/2003, the German ARC required revision to allow for the parallel application of EU and national competition rules and for a system of cooperation within the European Competition Network (ECN). In essence, the Seventh Amendment modified the general prohibition of anti-competitive agreements and concerted practices to mirror article 81 of the EC Treaty even more closely than before and also now provides for the application of the European Commission's block exemption regulations under national law. In addition, the amendment has removed a number of national legal and administrative exemptions, and increased the level of fines that can be imposed for infringements of the ARC.

To the extent that agreements or concerted practices may affect trade between the EU member states, the ARC and articles 81 and 82 of the EC Treaty apply in parallel (section 50 of the ARC and article 3(1) of Regulation 1/2003).

The ARC is enforced primarily by the Federal Cartel Office (FCO) in Bonn and the fight against hard-core cartels (agreements between companies on the setting of prices or sales quotas and on market sharing) is one of the authority's key enforcement priorities. The FCO has 10 independent divisions which are responsible for different industry sectors and product markets. Two additional divisions are solely in charge of conducting cartel investigations and fining proceedings (with technical support from a special unit for combating cartels (SKK)). Infringements with regional effects only are dealt with by the State Cartel Offices. However, the majority of cartel cases are dealt with by the FCO.

Substantive law Section 1 of the ARC corresponds to article 81(1) of the EC Treaty and broadly prohibits agreements or concerted practices between undertakings that have as their object or effect the prevention, restriction or distortion of competition. Until 1 July 2005, when the Seventh Amendment came into force, section 1 of the ARC only prohibited anti-competitive agreements or concerted practices between competitors (horizontal restrictions). The prohibition has been extended to cover agreements or concerted practices between undertakings at different levels of the supply chain (vertical restrictions). Practices that are prohibited under section 1 of the ARC include price fixing, bid rigging, allocation of customers, quotas or territories, limiting production or distribution and the exchange of sensitive market data (eg, prices).

Section 2 of the ARC corresponds to article 81(3) of the EC Treaty and exempts agreements from the prohibition of section 1 of the ARC if they contribute to an improvement in the production or distribution of goods, or help promote technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which do not impose restrictions on the undertakings which are not indispensable to the attainment of these objectives; or afford the undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. In addition, section 2 of the ARC incorporates the European Commission's block exemption regulations, even for cases that do not have an effect on trade between member states and are therefore governed by German competition law only.

Apart from the European Commission's block exemption regulations, the only exemption available under the ARC applies to agreements that are concluded between small and medium-sized undertakings and are designed to rationalise economic processes through cooperation between undertakings without significantly limiting competition in the relevant market.

Agreements that violate the ARC are void and are therefore not enforceable before German courts. In addition, the FCO can impose fines on individuals and companies.

Proceedings The substantive law can be enforced on the basis of two different proceedings. German law distinguishes between administrative orders and administrative offences. The FCO's proceedings are governed by the ARC to the extent that the case involves only minor infringements that...

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