Compliance and ringleaders: German FCO’s new guidelines on leniency and antitrust fines

Recently, for the first time in nearly a decade, the German Federal Cartel Office (FCO) revamped its guidelines on calculating antitrust fines. In doing so, the FCO intends to modernise the way it calculates antitrust fines, hoping for more flexibility. At the same time, the FCO updated its leniency programme (and issued a respective information leaflet) with a view to making it more concrete and predictable. Now, the FCO has published English versions of these three highly relevant documents. Below we summarise these developments.

New guidelines on calculating antitrust fines

With its new guidelines on calculating antitrust fines, the FCO is following in the footsteps of the legislator, which had amended Germany’s statutory provisions on the topic in early 2021 (see our English and German briefings for details). Among other things, the legislator prescribed multiple, non-exhaustive factors for calculating fines. The FCO has now outlined how it will use its discretionary power when applying these factors, and we focus on two of the most important points below.

• Percentage of affected turnover as baseline value: When calculating a fine, the FCO will from now on generally use as a baseline value a certain percentage of the company’s relevant turnover (which is the turnover achieved from the infringement). The specific percentage used to calculate the baseline value will depend on the company’s total turnover, starting at 10 per cent for a company with a total turnover of not more than €100m and increasing to more than 30 per cent for a company with a total turnover of more than €100b. Only after the baseline value has been calculated (again, by applying the percentage identified based on the company’s total turnover to the company’s relevant turnover), the FCO will look at the culpability of the company and increase or decrease the basic amount in light of aggravating or mitigating factors. The guidelines distinguish between: (i) aspects related to the infringement, such as its gravity and duration; and (ii) those related to the infringing company, such as its role within the cartel and previous infringements. This new approach brings the FCO closer to the European Commission and the German courts. On substance, the FCO believes that this new mechanism will give it more flexibility, without resulting in higher fines in practice. While the former is certainly true (coming at the expense of predictability, though), the latter remains to be seen.
• Compliance as a mitigating factor: Going forward a presumably important mitigating factor for companies is having adequate compliance measures in place, which the FCO will consider for the very first time. The FCO’s new guidelines distinguish between compliance measures taken prior to the infringement and precautions taken afterwards. Ultimately, though, the guidelines are rather abstract and vague, not offering any guidance on which specific measures are deemed to be effective. And they contain some rather unconvincing thoughts:
  • The FCO generally wants to regard compliance measures which already existed before the infringement as effective if they led to the infringement being discovered and immediately reported to the authority. The latter requirement is hardly convincing and hotly debated as there is no legal duty to report internal findings to the FCO, and companies that choose to do so may already be rewarded under the leniency programme. On a positive note, the FCO acknowledges that if genuine compliance efforts were actively circumvented by individuals, this does not prevent them from generally being effective, unless management is involved in the infringement.
  • Compliance measures introduced after the infringement can, according to the FCO, be considered as a mitigating factor when implemented effectively and genuinely. In assessing this, the FCO wants to take into account whether the company previously actively cooperated with the authority. Again, this is hardly convincing as the latter simply does not seem to have any bearing on whether post-offence compliance is taken seriously.

It remains to be seen how the FCO will react to the criticism that some of its thoughts on compliance measures are provoking. Hopefully, the authority will either be more lenient when assessing companies’ compliance efforts as a mitigating factor or amend its guidelines in due course. In the meantime, though, the guidelines do not give any meaningful guidance on how to set up a compliance management system in a way that will help to reduce potential fines. Further, implementing industry compliance standards (eg IDW PS 980 or ISO 19600) will not help companies much either because they offer only general guidance, are mostly process-oriented and refrain from determining the appropriate level of compliance measures.

So, to benefit from a fine reduction, companies should conduct a comprehensive risk assessment, base their compliance measures on these findings and thoroughly document the process.

New guidelines on leniency

Turning to the FCO’s new leniency guidelines; these reflect a couple of noteworthy changes, which are mostly in line with the respective latest changes to German competition law. In adapting the changes, the FCO has aligned its leniency programme closer with the European Commission’s leniency notice (2006/C 298/11) and the so-called ECN+ Directive.

The fundamentals of the leniency programme remain unchanged. As was the case under the FCO’s previous practice, the “first one in” may receive full immunity, while applicants “further down the queue” who still provide significant added value could be rewarded with a fine reduction of up to 50 per cent. As time is of the essence, companies can set a rank-preserving ‘marker’ with the FCO, allowing them to supplement within a specified deadline their applications with the further information required.

This process, though, received some rather important updates as summarised below.

• Ringleaders of a cartel can submit an immunity application. Previously, such ringleaders could not obtain immunity. Under the new rules, only companies that coerced others into participation are barred from obtaining immunity but may still be eligible for leniency.
• Providing the FCO with additional facts will exclude these facts from being used against the submitting company when calculating its fine, even if that company does not enjoy immunity.
• The duty to cooperate starts before blowing the whistle. As soon as a company considers approaching the FCO, to keep its hopes of a fine reduction alive it must not destroy, falsify or conceal evidence, nor disclose the fact that it is considering an application. This is especially important when conducting internal investigations.
• The company must end its involvement in the cartel immediately after filing its application with the FCO. The FCO’s former practice was understood by many to require companies to end the infringement only upon request by the authority.

Equally important is what is not in the new guidelines:

• The FCO missed the chance to take an official stance on the applicability of the programme to vertical infringements between, for instance, suppliers and distributors. The new guidelines only expressly state that they apply to horizontal infringements. In the past, the FCO had informally applied its previous leniency notice also to vertical infringements, so that companies blowing the whistle on their supplier or distributor could also receive full immunity. It remains to be seen whether the FCO will informally continue that practice – which it certainly should.
• The guidelines are silent with regard to cartel damages claims. As was the case before, only a successful immunity recipient receives some limited indemnification from cartel damages claims (by generally being liable only to its own direct and indirect customers), while all other companies remain liable for all damages jointly and severally. With a view to the leniency pipeline having dried up across Europe, many believe that only further relief from damages claims will really make leniency programmes attractive again. And if recent comments by the FCO’s officials are any indication, further changes to the law may be imminent.

Summary

While the implementation of the new guidelines by the FCO is welcomed, they leave certain things to be desired.

When it comes to the new guidelines on calculating fines, the acknowledgement of compliance efforts as a mitigating factor is a positive development. Overall, though, the new guidelines leave the FCO with much room for manoeuvre, which might lead to less predictable fines. With a view to companies’ compliance efforts, the FCO should in practice be more lenient than its guidelines currently suggest. Also, a best practice guideline with respect to compliance measures which the FCO would regard as effective should be provided.

The adoption of further guidance on the leniency programme is a positive change which generally increases legal certainty. However, the FCO left unanswered some practice-oriented questions such as the applicability on vertical infringements and civil liability. In combination with the additional layer of uncertainty from the new fining guidelines, these circumstances might very well pose a significant hurdle to companies which contemplate ‘coming clean’.