The Kölsch saga – Klüngel? Or even more?

The German beer cartel with all its tweaks and twists has been broadly covered both by legal magazines and “normal” newspapers. Unsurprisingly, beer manufacturers agreeing on price increases for one of Germany’s vital products definitely makes for good headlines in the news. Still, I would be remiss if I did not use the chance to share my locally coloured thoughts at least on the “Kölsch” part of this saga.

At the beginning of the month, Germany’s Federal court of Justice confirmed a landmark decision by the Higher Regional Court of Düsseldorf of September 2021 annulling fines of EUR 8 million on three Kölsch manufacturers (I will explain momentarily what that is) which the Bundeskartellamt had imposed on them back in 2014.

We know that at our readership has at least a basic understanding of antitrust and its key terms, so we can normally jump into the cases and questions without further ado. Here, we might have to take a step back and clarify two terms close to my heart maybe not essential for the legal but for the “cultural” aspects of the case.

Setting the scene – Terminology

The decision of the Federal court of Justice only relates to fines on three Kölsch manufacturers which formed a sperate part of the overall beer cartel. Kölsch is a style of beer which has a protected geographical indication within the European Union, according to which the beer has to be made within 50km of the city of Cologne and brewed according to the “Kölsch Konvention (as defined by an association of Kölsch brewers). From the author’s experience, tasting notes vary from “coloured water” (no comment) to “light-colored, highly fermented, hop-accented, bright top-fermented full-bodied beer” (ok, that’s the associations official description).

The Kölsch cartel also attracted so much attention because, to a certain extent, it seemed to confirm some of the widespread prejudices against the “Kölner Klüngel” – again a term understood in very different ways. In the everyday life, the term has a naïve positive connotation, basically meaning to help each out and to have a reliable and strong personal network. In the business world, it can be trickier. Especially when personal, political and corporate interests are mixed, there is only a thin line between “helping each other out” and corruption.

Having said all of that, Kölsch producers sitting together and discussing prices over a nice glass of Kölsch did not seem to be a far-fetched idea in the eyes of the general public.

Courts confirming innocence  

The fining decision of the Bundeskartellamt in 2014 was largely based on statements by leniency applicants of other (non-Kölsch) brewers claiming that the Kölsch manufacturers were also involved in illegal activities and in particular agreed on price increases in a meeting of the Brewery Association North Rhine-Westphalia in 2007. The three Kölsch companies appealed the Bundeskartellamt’s decision and ultimately succeeded before the Higher Regional Court and, following an appeal by the Bundeskartellamt, also before the federal Federal court of Justice .

Court decisions annulling fines imposed by the Bundeskartellamt are rare. One of the reasons is that the reformatio in peius does not apply under German law (see also here), meaning that courts can even increase the fines imposed by the Bundeskartellamt. As German courts seemed to have a track record of confirming or increasing cartel fines, companies have to carefully outweigh the pros and cons of going to court.

The court decisions annulling the fines in this case are particularly noteworthy, because the courts basically confirmed the innocence of the companies involved. They highlighted that of the 14 witnesses questioned in total, only two could remember the alleged cartel meeting. Overall, the courts held that the statements of the witnesses remained vague, confused and contradictory.

(Alleged) Cartelists can still cooperate

On a different but somewhat related note, it is worth highlighting that in 2020, presumably in the middle of the court proceedings, the Bundeskartellamt assessed and did not object to a cooperation between two companies allegedly involved in the Kölsch and beer cartel respectively.

The aim of the cooperation was for one company to take over the brewing for the other company. The FCO “cleared” the cooperation, inter alia highlighting that it would result in significant savings which would outweigh the information flow and cost transparency, both of which had to be limited to what is absolute necessary for implementing the cooperation.

Impact on future cases

For me, three observations stand out:

  • When it comes to leniency applications more generally, the case might be a good example for applicants pointing fingers in various directions to provide the Bundeskartellamt with added value, which is one of the key prerequisites for benefitting from the leniency system. The court decisions seem to remind the Bundeskartellamt of that risk, so that future leniency applicants could be required to substantiate their allegations better than before and provide additional clear-cut evidence.
  • It would be going too far to interpret the court decisions as a more general trend. But when weighing the pros and cons of going to court after a fining decision, the Kölsch cartel will be a case to keep in mind, especially if the evidence of cartel conduct seems to be rather thin.
  • Lastly, the Bundeskartellamt does not seem to be biased when assessing cooperations between competitors, even if the parties are (alleged) former cartelists. This was also shown last year when the Bundeskartellamt greenlighted a cooperation of German sugar manufacturers.

Picture from Kevin Martin Jose on Unsplash