New German Antitrust Rules: A Positive Move for Compliance Programs
What Has Changed
On January 19, 2021, new German antitrust rules entered into force under the 10th amendment Act to the Act against Restraints of Competition (ARC) and introduced a number of significant changes.
The Act, inter alia, revised the provisions relating to fine calculation for antitrust violations, and in doing so underlined the importance of compliance programs. For further changes, please refer to our previous blogpost.
Specifically, an objectively effective compliance program can now lead to a reduced fine being calculated if the German Federal Cartel Office (FCO) concludes that certain conduct is in violation of antitrust rules, but the company had implemented appropriate compliance measures before the violation.
What This Means
Previously, FCO practice was more rigorous and only rarely accepted compliance programs to be effective. The general rules in Germany relating to sentencing meant only compliance programs that were introduced in the aftermath of a non-compliant incident could play a role in the reduction of any fines (i.e. Nachtatverhalten, good behaviour following the infringement, such as cooperating with the investigation or introducting/updating compliance programs).
Under the new law, precautionary compliance measures will count towards a fine reduction so long as the company applied the compliance program consistently. While it has previously been argued that measures implemented before a violation are ineffective, the Act signals a move towards a more favourable assessment along a sliding scale. On one end, precautionary measures before a violation will not be taken into consideration by the FCO when a director of the company is responsible for the violation, as it is clear that the compliance measures were merely illusory. On the other end of the scale, when an employee violates antitrust rules after receiving training and the company can show an objectively effective compliance program, the fine should be reduced.
In future, the FCO when considering recuding a fine, will hopefully take into account the efforts of a company in implementing the compliance program. Importantly, objectively effective precautionary measures would probably require that the compliance program is not deficient (any obvious deficiency would reduce the benefit of the reduction in fine). Therefore, a tailored approach is necessary, most likely including industry-specific antitrust compliance trainings, guidelines, and maybe also one-to-one compliance interviews.
In future, when considering reducing a fine, the FCO will take into account the efforts of a company in implementing a compliance program. This approach mirrors the shift in approach by other antitrust enforcement agencies to accept the benefits of compliance programs and reduce fines accordingly. For example, the UK CMA recently reduced the fine against a bathroom fitter by 5% due to effective compliance measures while the US DOJ published guidance on what constituted effective compliance programs.
What to Bear in Mind
While the main focus of the Act has been to equip the FCO with the tools to enforce antitrust rules in markets affected by digitalisation, the President of the FCO in his review of 2020 stated that enforcing antitrust rules generally “still remains high on our agenda” and puts a decrease in enforcement cases down to the easements concerning private damages claims which outweigh the benefits of leniency applications. As such, the codification in the Act is welcomed as it provides greater certainty for companies to benefit from compliance measures.
While the Act incentivizes companies to implement precautionary measures, it notes that the measures should be proportionate to the company. A large international company active in a sector where violations can and do readily occur will have to provide evidence of a sophisticated compliance program. In particular, the complexity of the compliance program will be dependent on the type and size of the company, the market sector, the number of employees, the number of regulations, and the risk of non-compliance. Small and medium sized companies in contrast may show that they use simpler compliance measures.
Companies would be wise to consider whether to introduce or update a compliance program or to take certain additional precautionary measures, or review and revise any existing measures in order to benefit from the change in German antitrust law in the event of an antitrust violation.