German competition watchdog concludes biggest vertical cartel case ever, involving 27 companies – Total of € 260m in fines imposed
Last Thursday a plain press release has marked the (provisional) end of what appeared to become a never-ending story in German competition law. After almost 7 years of investigations, on 15 December the German competition authority (“Bundeskartellamt”) has announced that it has sent out the final decisions in what is generally referred to as the "big vertical case" and closed all proceedings. In the final act of the saga once again retail giant EDEKA was hit with two hefty fines.
The "big vertical case" refers to a series of proceedings by the Bundeskartellamt against producers of branded goods and large retail chains in Germany. Products affected comprised of confectionary, coffee, pet food, beer and body care products. By coincidence authorities stumbled across evidence indicating that companies had on a large scale "vertically" agreed on retail prices for branded goods. In January 2010 the watchdog conducted dawn raids on sites of 15 producers and retailers, and initiated proceedings against numerous companies.
The case quickly grew in size. Ever more companies came under investigation as the authority assessed the evidence collected at the retailer's sites, and material information provided by companies willing to co-operate with the authority. The Bundeskartellamt even had to create a new unit to handle the case, which would become the biggest in the history of the watchdog, and lasted for almost 7 years. Eventually 27 companies were fined in total € 260m.
The investigations highly alarmed both retailer and producers in Germany. While the Bundeskartellamt insisted that it would only pursue clear cut cases, it also published a very strict guidance paper in which many practices common in the industry were allocated in a "grey area" of conduct, which according to paper could be problematic under certain circumstances. This obviously created a high degree of legal uncertainty, forcing companies to adapt very cautious guidelines for negotiations with their respective suppliers and buyers.
This legal uncertainty, in principle, persists until today. Having been strongly criticized in this respect, the Bundeskartellamt has reacted and started to draft guidelines for negotiations between suppliers and buyers in the food retail sector. The draft guidelines will still be published for consultation in December. Companies should carefully assess the draft, and comment where necessary. Once published, the German guidelines could set a precedent in an area in which the European Commission's guidelines are relatively silent.
Is that the end of the saga? Not completely. The Bundeskartellamt has managed to settle most of the cases. However, one retailer has challenged the fining decision, and announced that it will defend itself at the Higher Regional Court. The Bundeskartellamt's approach will therefore be reviewed in court in the next years.
