German competition law’s 10th amendment: three key changes from a criminal law perspective

When the 10th amendment to Germany’s competition law came into effect on 19 January 2021, the public reaction seemed focused on the effects on digital markets and merger control. However, the reform also brought significant changes to cartel proceedings, with the German legislator even going beyond the requirements of Directive (EU) 2019/1 (known as the ECN+ directive).

Three changes are particularly noteworthy:

1. The Bundeskartellamt (Germany’s competition authority) now has more extensive rights to request information.
2. The ‘absolute statute of limitations’ (absolute Verjährungsfrist) in court proceedings has been abolished.
3. Having adequate compliance measures in place can now help reduce any fines.

What is striking is that the German legislator has not defined a company’s rights of defence in case of co-operation. This is particularly concerning given that the ECN+ directive requires Member States to safeguard companies’ rights of defence in all cartel proceedings.

Extension of the Bundeskartellamt’s right to request information vs. a company’s fundamental rights of defence

The reform expanded the Bundeskartellamt’s ability to request information. Previously, companies only had to comply with dawn raids and seizures of documents. And only financial information, which is used as a basis to calculate fines, had to be provided on request.

Under the new law, a company must generally provide any information regarding an alleged infringement of competition law on request – but only as long as the company is not compelled to acknowledge an infringement. This lowers the previously higher German standard to the EU level. As for individuals co-operating on behalf of the company, they can also be required to disclose facts that are likely to lead to prosecution.

Generally, the constitutional nemo tenetur principle guarantees the right not to incriminate oneself. This has changed in a way: the new law gives the Bundeskartellamt the power to grant so-called non-prosecution commitments to individuals. When such a commitment is granted, an individual has to provide information where such information only gives rise to the risk of proceedings for a fine by the authority.

Unique abolition of the ‘absolute statute of limitations’ in court proceedings

The general statute of limitations, which allows an offence to be prosecuted only within a certain timeframe, may be extended in certain circumstances (eg by a seizure or search order of the prosecuting authority). However, once that extension period has expired, offences can no longer be prosecuted under any circumstances (the absolute statute of limitations). This absolute period is usually twice as long as the general period.

Under the new rules, in antitrust proceedings, the absolute statute of limitations is nullified once a case reaches the courts. This new approach is unique compared to other German administrative and criminal proceedings. Previously, the absolute statute of limitations encouraged the Bundeskartellamt and courts to speed up proceedings, and meant companies were certain when they could not be prosecuted anymore. But now, as soon as a case reaches court, the court can essentially take as long it wants as the enforcement action will never ‘run out of time’.

Compliance measures leading to fine reductions – with unclear consequences in practice

The German legislator has standardised the criteria for assessing fines. According to the catalogue, one of these is having adequate compliance measures in place.

Previously, fines were imposed based on the Bundeskartellamt’s internal guidelines, which said that the authority would not take preventive compliance measures into account when calculating fines. Indeed, according to the Bundeskartellamt, a cartel infringement suggested that the existing compliance system was in fact inadequate.

The new rules contain binding criteria that are separate from the authority’s internal guidelines and need to be taken into account by the courts as well. The new rules are to be welcomed because the Bundeskartellamt and courts will have to recognise compliance management systems when fines are imposed.

Unfortunately, the rules do not offer any guidance on how to set up a compliance management system in a way that will help to reduce potential fines. Also, the Bundeskartellamt (different from the US Department of Justice) has not issued any best-practice guidance in this regard.

Implementing industry compliance standards (eg IDW PS 980 or ISO 19600) will not help companies much either since they offer only general guidance, are mostly process-oriented and refrain from determining the appropriate level of compliance measures. Therefore, to benefit from a fine reduction, companies should conduct a comprehensive risk assessment, base their compliance management system on these findings and thoroughly document the process.

Outlook

The German legislator has sharpened the Bundeskartellamt’s blades. From an antitrust investigations perspective, 2020 was a rather quiet year. This may most likely be attributed to effects of the ongoing COVID-19 pandemic and the fact that companies might indeed have become ever more compliant over the years.

However, it could also be due in part to companies becoming increasingly unwilling to co-operate with antitrust authorities of late. The German legislator is obviously willing to extend the Bundeskartellamt’s powers.

Companies are well advised to further boost their antitrust compliance efforts to prevent any infringements in the first place and ideally mitigate antitrust fines if things go wrong. They should also check and, if necessary, adjust their internal dawn-raid guidelines so they accord with the new rules.