German Supreme Court repeatedly quashed Higher Regional Court of Düsseldorf's cartel fine judgements.
Supreme Court disagrees with Court of Appeal in the Rossmann and Confectionary cases
Within the last two months, the German Federal Supreme Court (Bundesgerichtshof, “Supreme Court”) set aside two judgments of the Higher Regional Court of Düsseldorf (Oberlandesgericht Düsseldorf, “Court of Appeal”) in cartel cases and referred both cases back to the Court of Appeal for a second review due to procedural flaws.
Both cases have in common that the Court of Appeal significantly increased the original fines imposed by the German Federal Cartel Office (Bundeskartellamt, “FCO”). This increase results from different calculation methods applied by the Court of Appeal and the FCO (while the FCO calculates fines on the basis of the turnover that is related to the alleged infringement, the basis for the Court of Appeal’s calculation is the global group turnover). This discrepancy is widely criticised as it discourages companies to appeal fines imposed by the FCO. The high degree of legal uncertainty may de facto deprive companies from judicial review. For this reason, many companies have withdrawn complaints against FCO-decisions in recent years. The Supreme Court in its decisions does not focus on the different calculation methods but generally criticizes procedural defects. It remains to be seen whether these decisions ultimately result in the Court of Appeal adjusting its approach.
The decisions come at a time, where the legislator also became active in this regard. Companies have high hopes of the upcoming reform of the German Act Against Restraints of Competition (“GWB”) that might bring more clarity. A first draft of the reform is expected to be published in early autumn.
The Rossmann case
On 31 July 2019, the Supreme Court overturned the Court of Appeal’s judgement by which Dirk Rossmann GmbH was fined EUR 30 million at the beginning of 2018 for vertical pricing arrangements between Rossmann and coffee maker Melitta. Because there is no prohibition of reformatio in peius, i.e. the court’s decision may result in an even less favourable outcome than the appealed decision, the Court of Appeal was able to impose a fine six times higher than the FCO’s original fine of EUR 5.25 million. The case is part of investigations against several German retailers of goods such as beer, coffee and sweets. In the coffee case - in addition to Rossmann – the FCO imposed fines totalling EUR 44.7 million on Edeka, Rewe, Metro and Kaufland. All four companies entered into settlements with the authority, but only Rossmann filed an appeal. What first seemed to be a change for the worse, could now turn into the opposite. While the Supreme Court’s judgment has not been published yet and the specific reasons for the decision are still unknown, we understand that the sheer discrepancy in the amount of fines imposed was one of the reasons the Supreme Court motivated to call the Court of Appeal’s procedure into question.
The Confectionary case
A few weeks earlier, on 21 June 2019, the Supreme Court had already quashed a ruling of the Court of Appeal in the Confectionery case and referred it back for a second review. The FCO’s original case dates back to 2013, when it imposed fines of EUR 14 million for information exchange within the so-called “conditions association” of the confectionary industry. The Court of Appeal had again increased the fines imposed on confectionery manufacturers Bahlsen, Griesson de Beukelaer, CFP Brands and Feodora from EUR 14 to 21 million.
In the published judgment, the Supreme Court mentions that the Court of Appeal’s assessment of evidence was “incomplete” and therefore does not support the alleged infringements. Further, the Supreme Court held that only incriminating witness statements were taken into account but not the statements of all parties involved, which was found to be unbalanced and, thus, a flawed analysis. In view of the Supreme Court, witness statements could be motivated by the hope to get a fine reduction or even a termination of the proceedings. The Court of Appeal had not dealt at all with the statements of the companies on which fines were imposed.
It is noteworthy that even the case of participants who had not lodged an appeal at all with the Supreme Court must be renegotiated. This applies in particular to the Federal Association of the German Confectionery Industry (BDSI).
Signal for an adequate right to legal review
Both judgements have a clear message: Although they do not remove the discrepancy between the Court of Appeal’s and the FCO’s approach to calculating cartel fines (which is the task of the legislator in the first place), the Supreme Court generally requests the Court of Appeal to adhere to the procedural diligence when reviewing cartel fines, e.g. by assessing all available evidence. The two decisions require a full and self-contained investigation of the case by the Court of Appeal and strengthens the rights of companies involved in cartel proceedings to be adequately heard in the appeal proceedings. Against this background, the decision of the Court of Appeal in a vertical case involving two regional Edeka companies, which is expected in September 2019, is highly anticipated.