Germany won’t join jurisdictions with criminal competition penalties
The head of the federal cartel office, the Bundeskartellamt’s Andreas Mundt, reportedly dismissed the idea of introducing criminal sanctions for competition-law offences. Speaking at the GFR Society for Law and Policy’s event, he called imprisonment a “severe weapon” that had no place in the “rarely  crystal clear matter” of cartel violations, where “the lines are often blurred.”
Among the countries that do have a criminal antitrust regime (usually only for “hard-core” offences, such as price-fixing or bid-rigging and market allocation among horizontal competitors), the most well-known is of course the United States, whose Sherman Act made cartel violations a criminal felony as far back as 1890. Among the more recent acolytes of criminal penalties are newer competition-law jurisdictions, such as South Africa and Kenya.
International precedent-setting institutions and enforcers’ recommendations tend towards identifying the positive effect of criminal antitrust penalties:
OECD, 3rd Hard-Core Cartel Report (2005):
- Recommends that governments consider the introduction and imposition of criminal antitrust sanctions against individuals to enhance deterrence and incentives to cooperate through leniency programmes.
U.S. Department of Justice, Tom Barnett (2008):
- “Jail time creates the most effective, necessary deterrent.”
- “[N]othing in our enforcement arsenal has as great a deterrent as the threat of substantial jail time in a United States prison, either as a result of a criminal trial or a guilty plea.”
Cornerstones of a successful criminal antitrust regime commonly include the following:
- Crystal-clear demarcation of criminal vs. civil conduct
- Highly effective leniency policy also applies to individuals
- Standard of proof must be met beyond a reasonable doubt
- No blanket liability for negligent directors – only actors liable
- Plea bargaining to be used as an effective tool to reduce sentence
- Clear pronouncements by enforcement agency to help counsel predict outcomes
Either the Bundeskartellamt is missing something, or yours truly is — …
…but why is the 8. amendment to the German antitrust statute (allegedly in effect since 1 July 2013) not mentioned anywhere on the BKarta/FCO’s web site? A reference to the revised law is nowhere to be found.
For starters, let’s just take one example from the German legislature’s amendments (the “8. GWB-Novelle”): the change-over from the “creation or strengthening of a dominant position” test in German merger control to the common “significant impediment to effective competition” (SIEC) test used by the European Commission since 2004. Arguably, this change is not quite substantive in nature, and the former is still used as a prime example (“Regelbeispiel”) of the latter, but the change is — sorry to say — in the law, and the FCO doesn’t even mention it?! Not even in its “news” archive? Nor does it update its online reprint of the governing law?
If you look at the FCO’s web page dealing directly with its merger control regime, you will see no reference whatsoever to the new SIEC test. Equally (or more) troubling is that its related “Merkblatt” (roughly, guideline) on merger control is completely out of date, being asterisked with a cute “(wird derzeit überarbeitet)” (“is currently being revised”) note, which has been there for at least a year if not more.
Someone, please tell me that I am wrong and that the Bundeskartellamt actually has things under control. What am I missing here?
(Note: this post is valid as of 10 July…)
What stands out to me is that the BKartA/FCO initiated only 28 second-phase reviews of notified mergers in 2011 and 2012 (out of 1108 and 1127, respectively). That’s merely 1.25% of in-depth reviews. 6 proposed deals were prohibited and 2 allowed with “strict conditions imposed.”
On the cartel front, the agency found infringements in 34 cases, yielding fines of 190m and 360m Euros in 2011 and 2012, respectively. By far the highest fine was doled out in the rail track cartel, amounting to 124.5m Euros thus far (with further investigation in related markets ongoing).
The Bundeskartellamt also investigated 67 abuse-of-dominance cases and initiated several sectoral inquiries, as well as pushing forward its central “gasoline price transparency” project.