ACPC

Calculation of fines
November 2010

Christof Vollmer
Bundeskartellamt
Rapporteur 11th Decision
Division
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5/4/16

Overview
2

Introduction
Fining guidelines in EU and Germany
Coffee cartel: A practical case
Main differences between EU and Germany
Leniency in EU and Germany
Settlements in EU and Germany
Drugstore products cartel: Role play

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Introduction
3

Ideal world (OECD, ICN, literature):

take away the financial gains by considering

expected gains from the cartel (cartel
overcharges)
probability of detection

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Introduction
4

Analysis of cartel overcharges

Analysis of price-fixing overcharges
Werden (13 cartels after 1974): 21% median
OECD (12 cartels 2001/2): 15,75% median
Connor (Meta-Analysis of 674 cartels after
1770): 25% median overcharge for all cartels
(18% domestic and 32% international cartels)
JFTC (analysis of surcharge cases): 16,5%
average, at least 8%
Data show: at least 15% median cartel
overcharges
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Introduction
5

Analysis of probability of detection

More difficult to assess as cartels are secret
Bryant/Eckard (184 cartels before 1988):
estimation of detection between 13 and 17%
Probability of detection seems to have
increased a lot after the introduction of
leniency programs and Global move to impose
much higher fines
No close-to-reality figures available

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Introduction
6

Risk of over-punishment if corporate fines are

excessive
Cumulative effect of fines and damages
Principle of proportionality (constitutional right)
Spill-over effects on shareholders/employees
Risk of bankrupting companies: leads to elimination
of a competitor
But: most jurisdictions take into account the ability
of a company to pay the fine

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Introduction
7

Fining guidelines important for transparency

Transparency and predictability positive for
deterrence and enhancing leniency applications if
predicted amount of fine exceeds calculated gains
by cartel (and probability of detection)
Fining guidelines
EU-Commission: Guidelines 2006
Germany: Guidelines 2006
US Sentencing Guidelines
Japan: Surcharge system
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Fining guidelines in EU and

Germany
8

EU

Germany

Two-step-methodology

Two-step-methodology

1. Basic amount (Para. 12-26)

Up to 30% of value of sales related
to infringement

1. Basic amount (Para. 4-11)

Up to 30% of value of sales related
to infringement

2. Adjustment factors (Para. 27-31)

a) Aggravating circumstances
b) Mitigating circumstances
c) Deterrence

2. Adjustment factors (Para. 14-17)

a) Aggravating circumstances
b) Mitigating circumstances
c) Deterrence

3. Legal maximum / Capping (Para. 32.,

33)

3. Legal maximum / Capping (Para. 1821)

4. Leniency (Para. 34)

4. Leniency (Para. 23)

5. Ability to pay (Para. 35)

5. Ability to pay (Para. 24)

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Coffee cartel
9

Handout

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Main differences between EU and

Germany
10

Legal Framework
Main difference to situation in Europe:

Clear distinction between punishing the infringement and

skimming off the economic benefit (on the one hand the
skimming off of the economic benefit is tax-relevant, on the
other hand successful private damages claims reduce the
economic benefit) -> Three possibilities:
Not to skim off the economic benefit
To skim off the economic benefit with the imposition of fines
(not covered by the guidelines)
To skim off the economic benefit by a separate
administrative procedure

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Main differences between EU and

Germany
11

Scope
Main differences to COM Guidelines:

Only punitive element is covered (it is possible to add to

the fines calculated on the basis of the guidelines the
economic benefit if it should be skimmed off, see previous
slide)
Infringements in the area of merger control are covered

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Main differences between EU and

Germany
12

Basic amount
Main differences to COM Guidelines:

No extrapolation, i.e. calculation of the turnover achieved with

the products or services connected with the infringement
(turnover from the infringement) for the whole period of the
infringement (but possible: estimation)
Explicit provision on fictitious turnover from the infringement
(COM Guidelines cover only (worldwide) market sharing
agreements)
Explicit provision on internal turnover from the infringement
No entry fee, but minimum basic amount
In cases of negligence: Only half of basic amount

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Main differences between EU and

Germany
13

Adjustment factors
Main differences to COM Guidelines :

Deterrence factor is limited to 100% increase

Aggravating factors:
Repetition is a less important aggravating factor in
German law because it can only be taken into account if
a previous fining decision/ruling to be taken into
account dates back no longer than 5 years
Obstruction is no aggravating factor (in general)
Mitigating factors:
Negligence is no mitigating factor

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Main differences between EU and

Germany
14

Legal maximum / Capping:

Main differences to COM Guidelines:

In cases of negligence: Only 5% of total turnover

Turnover of affiliated undertakings is taken into account
when calculating total turnover, but liability of mother
companies only in cases of direct involvement (Sec. 14
AFA) or of violation of their duty of supervision (Sec. 130
AFA)
Calculation of total turnover follows merger control rules
Estimation possible

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Leniency in EU and Germany

15

EU

Germany

1. Immunity type A und B (Para. 8-11)

-> coercer (Para. 13)

1. Immunity type A and B (Para. 3, 4)

-> coercer / ringleader (Para. 3, 4)

2. Reduction of fines (Para. 23-26)

2. Reduction of fines (Para. 5)

3. Cooperation (Para. 12, 24)

3. Cooperation (Para. 6-10)

4. Procedure
a) Marker (Para. 15)
b) Oral applications (Para. 31-35)
c) Acknowledgement of receipt (Para.
17, 28)
d) Conditional immunity (Para. 18, 20)
e) Final decision (Para. 22, 30)

4. Procedure
a) Marker (Para. 11, 12)
b) Oral applications (Para. 15)
c) Acknowledgement of receipt (Para.
18)
d) Conditional immunity (Para. 19)
e) Final decision (Para. 20)

5. Access of third parties (Para. 40)

5. Access of third parties (Para. 22)

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Leniency in EU and Germany

16

Important differences:
Immunity: the ringleader issue
Reduction of fines: full discretion in Germany
concerning the amount of reduction independent of
sequence of applications
Marker: in Germany also in cases of reduction of fines
and no discretion for the competition authority to grant
a marker
Oral applications: Full regulation in COM-Notice.
Access of third parties: The ECJ soon will decide on the
German legislation.
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Settlements in EU and Germany

17

A Settlement is an agreement on the consequences

of a fines procedure between a competition

authority and the parties concerned.
On the side of the parties concerned it requires a
confession. The competition authority indicates
the maximum amount of the fine the parties
concerned foresee to be imposed including a
reduction of fines as reward for the settlement (up
to 10% in addition to a leniency reward).
A settlement never implies the waiver to file an
appeal.
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Settlements in EU and Germany

18

Favourable circumstances:
Serious and honest negotiations, in particular by the defendant
Compelling evidence; basic facts of the case are known
Fair and transparent treatment of all the undertakings concerned
Sanction if settlement fails
Unfavourable circumstances:
Claims for damages
Likelihood of lower fines in case of court appeals
Refusal to exempt certain individuals from fines
Settlement fails for some; others may withdraw from settlement
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Settlements in EU and Germany

19

Different approaches: Settlement Notice (EU) or

informal approach (Germany)?

Pros:
- Legal security
- Transparency
- Detailed rules on procedure

Cons:
- Lack of flexibility
- Risk of bureaucracy and burdensome procedure
- Consistency can also be established on an case-by-case basis

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Settlements in EU and Germany

20

EU approach:
Commission offers settlement before / with the statement of
objections
Settlement requires recognition of facts / legal assessment/
responsibility / amount of fines
Settlement rebate: up to 10 %; concession on language of
the case; short form-s/o; decision

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Settlements in EU and Germany

21

Settlement principles in FCO cartel cases:

Settlement possible as early as the facts are clear

that could be a short time after the inspection
Settlement requires recognition of the facts and the
amount of fines, but not of the legal assessment
Settlement rebate: up to 10%; short form decision; in
certain cases no hearing and no access to file

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Settlements in EU and Germany

22

Very important:
Strict equal treatment of all parties concerned!
Transparency of the procedure to all parties concerned!
Avoid any delay in the procedure!

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Settlements in EU and Germany:

Recent cases in Germany
23

Date of press release

Case

Amount of fines

30/11/2007

Marketing of TV
advertising time

216 million

05/02/2008

Decor paper

62 million

20/02/2008

Drugstore products

37 million

28/05/2008

Bayer Vital

10,34 million

12/11/2008

Road salt

15,6 million

08/04/2009

Software

9 million

25/09/2009

Ciba Vision

11,5 million

15/10/2009

Phonak

4,2 million

21/12/2009

Coffee

159,5 million

09/06/2010

Coffee AFH

30 million

10/06/2010

Ophtalmic lenses

115 million

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Drugstore products cartel

24

Handout

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ACPC
25

Calculation of fines
Thank you for your attention!

Christof vollmer
Bundeskartellamt
Rapporteur 11th Decision
Division
www.bundeskartellamt.de

5/4/16