Right to equal treatment in cartel cases…or not?

One or the other company that has been investigated in a cartel case may know the feeling: In more or less informal discussions with the authority, one is overcome by the impression of not being fully informed about the status of the investigation, while other affected companies could have received more information. Whilst this is most of the time accepted as some sort of procedural tactics, a company fined by the German FCO did not want to leave it at that and filed an official liability claim against the German FCO – without success. In this blog, we provide a brief overview of the peculiarities of the case and possible learnings for the future.

Recently, the German FCO announced that an official liability action brought by BayWa AG against the German FCO had been finally rejected by the German Federal Court of Justice. This decision was preceded by antitrust proceedings against, inter alia, said company and a move through the instances to assert the claim.

How it started: Cartel proceedings and fining decision

In 2020, the Bundeskartellamt imposed fines of EUR 154.6 million on seven wholesalers active in the areas of plant protections products for agreeing on prices lists and discounts on some individual sales as well as prices to retailers and end customers in Germany. One of the seven wholesalers was Munich-based BayWa who cooperated with the German FCO (like all the other wholesalers involved) under the leniency regime but still received the highest individual fine amounting to EUR 69 million. As it is quite the standard in proceedings with various leniency applicants, the proceedings ended with a settlement decision. BayWa initially (or rather apparently) accepted the fine and did not appeal the actual decision.

Sound like usual practice – so how got the courts involved

However, BayWa felt that the Bundeskartellamt went beyond its investigative powers by, inter alia, violating the principle of equality during the investigation. As a consequence, it brought an public liability action against the German FCO before the Regional Court in Bonn, claiming damages in the amount of roughly EUR 73 million (consisting of the EUR 69 million fine and EUR 4 million lawyers fees). After the Regional Court dismissed the claim, BayWa appealed to the Higher Regional Court in Cologne, which confirmed the ruling of the Regional Court in Bonn and did not allow for an appeal.  The appeal against non-admission before the Federal Court of Justice (which BayWa limited to the lawyers’ fees) was dismissed – as usual without any substantiation on the merits.

According to the published decisions of the courts, at the end of 2014, the German FCO had received an anonymous tip relating to illegal cartel conduct among producers of plant protections products. At the beginning of 2015, the case handler contacted two companies active in the sector, mentioning that the German FCO had received said notice according to which companies in the sector had been involved in illegal cartel activities. Apparently, the case handler further stressed that there was still the chance of receiving full immunity from fines by submitting a leniency application. The case handler only prepared a note to the file one month after the calls had taken place. Little surprisingly, two companies applied for leniency in the following (a third company which was also contacted did not cooperate with the regulator at first).

The parties views

In the court proceedings, BayWa argued that a “request” to submit a bonus application is already legally questionable, especially since the anonymous tip was not very substantiated. Furthermore, the selection of the companies contacted by the case handler had been arbitrary and violated the principle of equal treatment. The German FCO should have either contacted all the companies allegedly involved in the cartel or should have refrained from contacting anyone at all.

The German FCO, on the other hand, said that BayWa had been portrayed by the anonymous source as the driving force behind the cartel, being the only company explicitly named. It would have been far-fetched from an investigative point of view to inform BayWa, as the possible main perpetrator, about the tip-off. From a legal point of view, it stressed that there was no equality in injustice. Further. there was no causality between the conduct of the German FCO and the damage incurred. After all, the cartel could have been uncovered and fines imposed in another way. Last but certainly not least, BayWa could have defended itself against the fine and should not simply have (tried to) liquidated its damages later on.

The courts largely followed the Federal Cartel Office’s argumentation. They not only confirmed the activities of the Bundeskartellamt being within its investigative powers but also made it clear that liquidating damages is subsidiary to legal actions against the fining decision.

Lessons learnt?

First of all, the case confirms that the courts grant the German FCO a wide margin of discretion in its investigations. They also seem to accept that the German FCO uses the prospect of immunity from fines tactically and can treat the companies concerned differently in this respect. Finally, it becomes evident, that companies may only stay in the driver seat regarding leniency applications, when they act fast (even if this can of course also be associated with a number of disadvantages), since they can never be sure when the Bundeskartellamt calls its co-cartelists what might motivate their co-cartelists to apply for leniency.

Photo by Mark Galer on Unsplash