B. PUBLIC MARKET SURVEILLANCE
IV. L EGAL TOOLS TO MEET THE LEVEL OF DETERRENCE
1. Changes with regard to the damage from government fines D G
Since section II. of this chapter has identified too high and misdirected government fines DG as one reason for the deviation from the optimal level of deterrence, this section will treat different approaches that are suited to set fines to the right level. It will also be discussed which of the changes is most effective and most efficient in fighting the manip-ulation incentive.
The following approaches will be discussed:
▪ A departure from the dogma of prohibitive government fines (a),
▪ the shift of liability from firms to individuals including the discussion of criminal sanctions (b)(aa) and (bb)), and
▪ an additional, nonmonetary damage variable that increases CD without further di-minishing the financial basis of undertakings: debarment from the employment market (b)(cc).
853 Monopoly Commission, Sondergutachten 72 - Strafrechtliche Sanktionen bei Kartellverstößen, 2015, 42-43 Ref. 175 et sqq.
a) A new reference for the calculation of public fines de lege lata
First and most importantly, the reference for the calculation of government fines needs to be adapted to the efficient level. To date, both the EC and German guidelines on fines for antitrust infringements refer to the turnover achieved from the infringement.854 In many cases, this policy violates the liability condition for firms:
CD ≤ πi(p) + Ai.855
As a consequence, firms being subject to a fine in antitrust cases face the danger to be-come insolvent.856 The economic analysis has shown that this result is neither an effec-tive deterrent for potential manipulators, nor an efficient tool to fight manipulations from the point of view of society.857 With regard to profits, both EU and German law contain a cap. Accordingly, fines may not be higher than 10 percent of last year´s sales.858 Both guidances do furthermore contain provisions for the case of inability to pay of a firm.859 Yet, the ex post reduction of fines corresponding to the firms´ ability to pay lowers the deterrent effect below the level required to meet the optimum.860
Therefore, the calculation of fines both under EU and German law has to be subjected to a revision that takes account of the probability of punishment pP and other damages that an infringer faces in the event of antitrust violations, e.g. private damages claims and fines from other fields of law.861
From a legal point of view, the EC and FCO approaches in their guidelines do also meet with criticism. The following legal analysis will treat concerns with regard to violations of higher-ranking European and German law through excessive fines. It will be shown that under EU law, the current level of fines violates Art. 23(5) Regulation N° 1/2003 if fines
854 See e.g. Wernhard Möschel, “Geldbußen im europäischen Kartellrecht”, Der Betrieb Vol. 63, no. 43 (2010), 2378.
855 For the derivation of this correlation, please refer back to section II.1.a) cc) in this chapter.
856 A recent case was the fire-fighting vehicles case. FCO decision from February 10, 2011. B12-11/09. As a consequence of the 8 Million Euro fine, the firm filed bankruptcy. See Südwest Presse from August 17, 2011.
http://www.swp.de/unternehmen/news/Insolvenz-Kartellstrafe-Geschaeftsbetrieb-Insolvenzverwalter-Ein- schraenkung-Jakarta-Kroatien-Zagreb-Winschoten-Rendsburg-Muenchen-Giengen-an-der-Brenz-Indonesien-Niederlande-Muehlau-Heidenheim-Giengen-Aalen;art1168007,1079386.
857 Similar Monopoly Commission, Sondergutachten 72 - Strafrechtliche Sanktionen bei Kartellverstößen, 2015, 41 Ref. 171.
858 For EU law, see Felix Engelsing, “Die Bußgeldleitlinien der Europäischen Kommission von 2006”, WuW Vol.
57, no. 5 (2007), 471. Refer to Andreas Mundt, “Die Bußgeldleitlinien des Bundeskartellamtes”, WuW Vol. 57, no. 5 (2007), 458, 465 with regard to German law.
859 See Felix Engelsing, “Die Bußgeldleitlinien der Europäischen Kommission von 2006”, WuW Vol. 57, no. 5 (2007), 481 for the case of the EU. See also Wouter P.J. Wils, “Optimal Antitrust Fines: Theory and Pratice”, World Competition Vol. 29, no. 2 (2006), 22. For the practical experience with the provisions refer to Andreas Weitbrecht and Jan Mühle, "Europäisches Kartellrecht 2010," EuZW Vol. 22, no. 11 (2011), 420.
860 Wouter P.J. Wils, “Optimal Antitrust Fines: Theory and Pratice”, World Competition Vol. 29, no. 2 (2006), 19. 861 Jürgen Schwarze, Rainer Bechtold and Wolfgang Bosch, Deficiencies in European Community Competition Law. Critical analysis of current practice and proposals for change. (Stuttgart: GleissLutz, 2008), 9.
have the quality of criminal sanctions.862 Consequently, DG needs to be reduced below this threshold de lege lata (section aa)). Under German law, the current level of antitrust fines conflicts with the constitutional guarantee of legal certainty codified in Art. 103(2) GG (section bb)). Hence, just as for the case of EU law, fines may not exceed the threshold to criminal sanctions. De lege ferenda, the legislators both in the EU and Germany need to define precise criteria for the calculation of fines and reorganize the administrative pro-cedures for the fining (section cc)).
aa) Violations of higher-ranking European Law
The legal predecessor of the current guidelines from 1998 has been subject to judi-cial litigation at the European Court of Justice in 2005.863 The court came to the conclusion that the guidelines do not violate primary Community law.864 Concerns with regard to a violation of the protection of legitimate expectations (Ref. 171-173, 187-188 and 228) and the prohibition on retroactivity (Ref. 202, 216-219, 222-224, 227-231) were negated in the judgment.865 The court emphasized the predictability of changes in fining and the wide discretion of the Commission in defining both the method of calculation and the scope of fines.866
Concerns with regard to the requirement of legal certainty, the principles of proportionality and equal treatment and the prohibition of arbitrary procedures were not treated in the decision.867 These objections continue to be raised against the revised guidelines effective since 2006.868 In order to determine whether the EC guidelines violate higher-ranking European law, the legal character of the guidelines has to be defined in a first step.
Art. 103(1) TFEU empowers the European Council to adopt directives and regulations that aim at the realization of the EU competition rules set forth in Art. 101 and 102 TFEU. With
862 Ibid, 82.
863 Felix Engelsing, “Die Bußgeldleitlinien der Europäischen Kommission von 2006”, WuW Vol. 57, no. 5 (2007), 471.
864 Dansk Rørindustri v Commission. Cases C-189/02 P, C-202/02 P, C-205/02 P, C-208/02 P, C-213/02 P.
European Court Reports 2005, I-5425.
865 Ibid.
866 Ibid, Ref. 252, 254, 258, 260-261, 267.
867 For an overview of the objections against the 1998 guidelines please refer to Hans-Joachim Hellmann,
“Vereinbarkeit der Leitlinien der Kommission zur Berechnung von Bußgeldern mit höherrangigem Gemein-schaftsrecht”, WuW Vol. 52, no. 10 (2002), 944 et sqq. With regard to the requirement of legal certainty also refer to Ulrich Soltész, Christian Steinle and Holger Bielesz, “Rekordgeldbußen versus Bestimmtheitsgebot. Die Kartellverordnung auf dem Prüfstein höherrangigen Gemeinschaftsrechts”, EuZW Vol. 14, no. 7 (2003), 202 et sqq.
868 See e.g. Jürgen Schwarze, “Rechtsstaatliche Defizite des europäischen Kartellbußgeldverfahrens”, WuW Vol. 59, no. 1 (2009), 6 et sqq.
regard to fines, Art. 103(2) lit. a) TFEU emphasizes the role of public fines in the enforce-ment of the abuse prohibition. Hence, primary Community law basically refers to fines as part of the sanctioning system.869
Art. 23 regulation N° 1/2003 contains details on the scope of public fines. Since it is itself secondary Community law, it does however have to fulfill the requirements of higher-ranking EU law.870 These are:
▪ The Charter of Fundamental Rights of the EU871,
▪ the European Convention on Human Rights (ECHR),872 and
▪ common constitutional principles and traditions of the member states according to Art. 6(3) and Art. 2 TEU.873
Violations of these statutes may not be justified by Art. 23 (5) of Regulation N° 1/2003 which is itself secondary to higher-ranking Community law.874 Therefore, the European method of levying fines has to be in accordance with the above-listed sources of primary Community law.875
The following sections will show that:
1. De lege lata, only fines below the threshold of criminal law are in accordance with primary EU law (2)-(5), and
2. criteria allowed for setting fines are only the gravity and the duration of the in-fringement; where gravity is interpreted as a reference to the gain firms realize through cartelization (6).
869 Wernhard Möschel, “Geldbußen im europäischen Kartellrecht”, Der Betrieb Vol. 63, no. 43 (2010), 2378.
870 Jürgen Schwarze, Rainer Bechtold and Wolfgang Bosch, Deficiencies in European Community Competition Law. Critical analysis of current practice and proposals for change. (Stuttgart: GleissLutz, 2008), 13.
871 According to recital 37 of the preamble to Regulation N° 1/2003, the fundamental rights particularily recog-nized in the Charter of Fundamental Rights of the EU are respected by the Regulation. See Koen Lenaerts,
“Due process in competition cases”, NZKart Vol. 1, no. 5 (2013), 175.
872 Kurt Stockmann, "Stellungnahme zum Zwischenbericht des Bundeskartellamtes zum Expertenkreis Kartellsanktionsrecht," ZWeR Vol. 13, no. 3 (2015), 191.
873 Wernhard Möschel, “Geldbußen im europäischen Kartellrecht”, Der Betrieb Vol. 63, no. 43 (2010), 2378.
874 Ibid.
875 Koen Lenaerts, “Due process in competition cases”, NZKart Vol. 1, no. 5 (2013), 175.
(1) The guiding principles of EU law
The European Union law needs to comply with general constitutional principles, in particular the guarantee of the rule of law, Art. 2 TEU. This includes from a formal view-point the principle of the division of powers, priority and reservation of the law and the principle of a regulated procedure. From a material viewpoint, the rule of law guarantees the protection of fundamental rights and the principle of proportionality.876 By the case law of the European Court of Justice, concrete legal principles resulting from the rule of law have been formulated: The protection of legitimate expectations877, the prohibition on retroactivity878, the principle of legal certainty879 and procedural guarantees880. The com-pliance of Art. 23 Regulation N° 1/2003 and the European Commission guidelines on fining with these basic legal principles will be examined in subsections (2) to (5).
Furthermore, the European Union acceded to the ECHR, Art. 6(2) TEU. This convention contains requirements for the right to a fair trial and the principle of “no punishment with-out law”, which also apply to sanctions that are not of strictly criminal nature, but compa-rable to administrative offences.881 Hence, fine proceedings under competition law have to satisfy these requirements of the ECHR.882
According to its preamble, the Charter of Fundamental Rights of the EU is part of the European treaties and has full legal effect since the Treaty of Lisbon in December 2009.
According to a verdict of the European Court of Justice (ECJ) from 2006, it has relevance for the interpretation of European competition law.883 Regulation N° 1/2003 is to be inter-preted and applied in accordance with the rights and principles from the Charter of Fun-damental Rights.884 The charter contains fundamental rights with relevance for undertak-ings, such as the freedom to choose an occupation (Art. 15), the freedom to conduct a business (Art. 16), the right to property (Art. 17), the principle of equality before the law (Art. 20), and the guarantees of fair administrative proceedings and a fair trial (Art. 41 and 47). The imposition of fines according to Art. 23 Regulation N° 1/2003 might affect
876 Christian Calliess, EUV/AEUV. Das Verfassungsrecht der Europäischen Union mit Europäischer Grund-rechtecharta. Kommentar, 4th ed., ed. Christian Calliess and Matthias Ruffert (München: C.H. Beck, 2011), Art. 2 EUV 25.
877 De Compte v Parlament. Case C-90/95. European Court Reports 1997, I-1999 Ref. 35 et sqq.
878 Racke. Case 98/78. European Court Reports 1979, 69 Ref. 20.
879 Gondrand Freres. Case 169/80. European Court Reports 1981, 1931 Ref. 17.
880 Unectef v Heylens. Case 222/86. European Court Reports 1987, 4097 Ref. 15.
881 Öztürk v Germany. Case 58544/79. ECtHR NJW 1985, 1273 Ref. 56.
882 Jürgen Schwarze, Rainer Bechtold and Wolfgang Bosch, Deficiencies in European Community Competition Law. Critical analysis of current practice and proposals for change. (Stuttgart: GleissLutz, 2008), 24-25.
883 European Parliament v Council of the European Union. Case C-540/03. European Court Reports 2006, I-5769 Ref. 38.
884 See recital 37 of Regulation N° 1/2003. Koen Lenaerts, “Due process in competition cases”, NZKart Vol. 1, no. 5 (2013), 175.
these legal guarantees. As a consequence, Art. 52(1) first sentence of the Charter of Fun-damental Rights states the necessity of the legislator himself having to regulate all mate-rial issues with regard to any limitation on the exercise of rights and freedoms recognized by the Charter.885
(2) Fines above the threshold of criminal law violate the principle of legal cer-tainty
In its current form, Art. 23 of Regulation N° 1/2003 violates the principle of legal certainty. This section will start with a short illustration of the contents of the requirement of legal certainty (a) in general and for the case of criminal law in particular. The applica-bility of the certainty standards (b) and the necessary level of certainty for the case of Art. 23 of Regulation N° 1/2003 (c) will be deduced. It will be shown that the current Art. 23 of Regulation N° 1/2003 does not satisfy the standards identified before (d). A justification for the lack of legal certainty may not be found (e). As a result, the norm needs to be interpreted restrictively (f).
(a) The rule of law and the principle of legal certainty
The requirement of legal certainty under EU law results from the rule of law.886 Also legal entities may rely on this principle.887 The European Court of Justice interprets the requirement of legal certainty as a fundamental principle of EU law that demands clear and foreseeable Community legislation.888 These requirements of clearness and fore-seeability are of particular importance in cases with potential financial consequences. The
885 Jürgen Schwarze, Rainer Bechtold and Wolfgang Bosch, Deficiencies in European Community Competition Law. Critical analysis of current practice and proposals for change. (Stuttgart: GleissLutz, 2008), 22.
886 Christian Calliess, EUV/AEUV. Das Verfassungsrecht der Europäischen Union mit Europäischer Grund-rechtecharta. Kommentar, 4th ed., ed. Christian Calliess and Matthias Ruffert (München: C.H. Beck, 2011), Art. 2 EUV Ref. 25.
887 Ulrich Soltész, Christian Steinle and Holger Bielesz, “Rekordgeldbußen versus Bestimmtheitsgebot, Die Kar-tellverordnung auf dem Prüfstein höherrangigen Gemeinschaftsrechts”, EuZW Vol. 14, no. 7 (2003), 204.
888 See e.g. Criminal proceedings against X. Cases C-74/95 and C-129/95. European Court Reports 1996, I-6609 Ref. 25. See also Gerda Kloppenburg v Finanzamt Leer. Case 70/83. European Court Reports 1984, 1075 Ref. 11 and Amministrazione delle finanze dello Stato v Srl Meridionale Industria Salumi and others. Joined Cases 212-217/80. European Court Reports 1981, 2735 Ref. 10.
Court of Justice of the European Communities consistently established that parties con-cerned by Community law need to be able to assess the scope of their liabilities.889 Thefore, any act of secondary Community law must be in accordance with the primary re-quirement of legal certainty.890
Besides the general requirement of legal certainty, the European Court of Justice recog-nizes a more far-reaching requirement of legal certainty for criminal proceedings891, which finds its dogmatic basis in the principle of legality (nulla poena sine lege).892 This principle of legality is also rooted in the above-introduced Art. 7(1) ECHR and Art. 49(1) Charter of Fundamental Rights of the EU, which are both binding law according to Art. 6(1), (2) TEU.
Furthermore, it is part of the common constitutional traditions shared by the EU Member States, e.g. Art. 103(2) of the German Constitution.893 The principle of nulla poena sine lege entails two specifications: The ban for the jurisdiction to punish without legal basis and the demand to the legislator to define criminal sanctions clearly (nulla poena sine lege certa).894 The requirement of clarity means for the part of the elements of an offense that the precise consequences and the scope of application need to be deductible from the wording or through interpretation of the text of the criminal provision.895
(b) The standards of clarity applicable to Art. 23 of REG N° 1/2003
The requirement of certainty is therefore applicable to the provisions of Regulation N° 1/2003. This result is independent of the legal classification of the sentencing provision in Art. 23 of regulation N° 1/2003 as criminal sanction or as pure administrative offense.896
889 Commission v French Republic. Case C-30/89. European Court Reports 1990, I-691 Ref. 23; Ireland v Commission. Case 325/85. European Court Reports 1987, 5041 Ref. 18; Kingdom of the Netherlands v Com-mission. Case 326/85. European Court Reports 1987, 5091 Ref. 24; Belgian State v Banque Indosuez. Case C-177/96. European Court Reports 1997, I-5659 Ref. 27; The Queen v National Farmers´ Union and others. Case C-354/95. European Court Reports 1997, I-4559 Ref. 57; Administration des douanes v Société anonyme Gondrand Frères and Société anonyme Garancini. Case 169/80. European Court Reports 1981, 1931 Ref. 17 et sqq., Commission v French Republic and United Kingdom of Great Britain and Northern Ireland. Joined Cases 92/87 and 93/87. European Court Reports 1989, 405 Ref. 22.
890 CNTA v Commission Case 74/74. European Court Reports 1975, 533 Ref. 44.
891 Criminal proceedings against X. Joined Cases C-74/95 and C-129/95. European Court Reports 1996, I-6609 Ref. 25.
892 Ulrich Soltész, Christian Steinle and Holger Bielesz, “Rekordgeldbußen versus Bestimmtheitsgebot, Die Kar-tellverordnung auf dem Prüfstein höherrangigen Gemeinschaftsrechts”, EuZW Vol. 14, no. 7 (2003), 204.
893 Ibid, 205. With reference to the constitutions of other Member States in reference 36. See also Criminal proceedings against X. Joined Cases C-74/95 and C-129/95. European Court Reports 1996, I-6609 Ref. 25.
894 K.-H.W. v Germany. Case 37201/97. Reports of Judgments and Decisions 2001-II Ref. 45; Streletz, Kessler and Krenz v Germany. Cases 34044/96, 35532/97 and 44801/98. Reports of Judgments and Decisions 2001-II Ref. 50; S.W. v United Kingdom of Great Britain and Northern Ireland. Case 20166/92. A335-B Ref. 35; Tol-stoy Miloslavsky v United Kingdom of Great Britain and Northern Ireland. Case 18139/91. A316-B Ref. 37.
895 Voet van Vormizeele, EU-Kommentar, 3rd ed., ed. Jürgen Schwarze (Baden-Baden: Nomos Verlag, 2012), 2735 Ref. 7.
896 Ulrich Soltész, Christian Steinle and Holger Bielesz, “Rekordgeldbußen versus Bestimmtheitsgebot, Die Kar-tellverordnung auf dem Prüfstein höherrangigen Gemeinschaftsrechts”, EuZW Vol. 14, no. 7 (2003), 205.
The European Court of Justice has repeatedly decided that sanctions may only be imposed where they are based on clear and unambiguous provisions.897 Since the level of fines is in dispute with regard to legal clarity, this requirement must also be applicable to the legal consequences of the sentencing provisions.
Since the requirement of legal certainty intends to enable the addressee of a sentencing provision to foresee the impending sanction, this legal principle does necessarily include the clarity of the legal consequences, thus the scope of the fine.898 The European Court of Justice refers to this requirement in its fundamental decision of 1996 as the “prin-ciple of legal certainty of criminal offenses and sanctions”.899 The jurisdiction of the Euro-pean Court of Human Rights (ECtHR) established basic criteria for the necessary quality of a law in this regard: It needs to be formulated with sufficient precision, such that the persons concerned may foresee the consequences which a given action entails to a degree reasonable in the circumstances. A discretion does not per se preclude foreseeability if its scope and manner are indicated with sufficient clarity that provides protection against arbitrary interference.900
Eventually, the tightened standards of clarity for criminal provisions apply to Art. 23 of Regulation N° 1/2003. Art. 23(5) of Regulation N° 1/2003, stipulating that sanctions according to sections 1 and 2 of this article have no criminal character, is not qualified to preclude this judgment of the rules. The classification of a provision as criminal does not depend on its denomination, but solely on its actual legal character, Art. 263(4) TFEU.901 The European Court of Justice decided in the case Alusuisse Italia SpA v Council and Commission of the European Communities with regard to the identical predecessor of Art. 263(4) TFEU, Art. 173(2) TEEC:902
“The second paragraph of Article 173 of the treaty makes the admissibility of proceedings […] dependent on fulfillment of the condition that the contested measure, although in the form of a regulation, in fact constitutes a decision
897 Könecke v BALM. Case 117/83. European Court Reports 1984, 3291 Ref. 11; Maizena v BALM. Case 137/85. European Court Reports 1987, 4603 Ref. 15.
898 Ulrich Soltész, Christian Steinle and Holger Bielesz, “Rekordgeldbußen versus Bestimmtheitsgebot, Die Kar-tellverordnung auf dem Prüfstein höherrangigen Gemeinschaftsrechts”, EuZW Vol. 14, N° 7 (2003), 205.
899 Criminal proceedings against X. Joined Cases C-74/95 and C-129/95. European Court Reports 1996, I-6609 Ref. 25.
900 Margareta and Roger Andersson v Sweden. Case 12963/87. A 226-A Ref. 75; Tolstoy Miloslavsky v United Kingdom of Great Britain and Northern Ireland. Case 18139/91. A316-B Ref. 37.
901 Jürgen Schwarze, Rainer Bechtold and Wolfgang Bosch, Deficiencies in European Community Competition Law. Critical analysis of current practice and proposals for change. (Stuttgart: GleissLutz, 2008), 22.
902 Alusuisse Italia SpA v Council and Commission oft he European Communities. Case 307/81. European Court Reports 1982, 3463 Ref. 7. See also Engel and others v The Netherlands. Cases 5100/71, 5101/71, 5102/71, 5354/72, 5370/72). A 22 Ref. 81 with regard to the conditions, especially the ECHR, under which the Member States are free to establish a distinction between criminal and disciplinatory law.
which is of direct and individual concern to them. The objective of that
which is of direct and individual concern to them. The objective of that