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Focus on Regulation

“Friends forever? Joint and several liability for cartel damages”

“Good friends can never be separated; good friends are never alone; for there’s one thing in life they know how to do, be there for one another…”. This timeless classic was sung by Franz Beckenbauer on the occasion of the 1966 FIFA World Cup in England. And he is right: friends show consideration for each other and they are sincere to one another. As delightful as these virtues are for interpersonal relationships; as troublesome they are for intercorporate ones. If companies are too friendly with one another, they may breach antitrust law. Yet, what about friendship, when the cartel is over and third parties are eager to claim their cartel damages?

Good friends can never be separated…

In 2014, the German Antitrust Authority (the Bundeskartellamt) imposed a fine of almost EUR 200 million on a single member of the ‘sugar cartel’. Therefore, the price for a good friendship should be well known – one would expect. But the fine is only half of the story. In addition, there exists civil liability vis-à-vis the parties damaged by the friendship. Cartel members are not only obliged to compensate for the damage they caused to their direct and indirect buyers throughout the, maybe decade-long, cartel (eg the damage caused by higher prices). They are also jointly and severally liable for these damages vis-à-vis their fellow cartel members. It is quite understandable that this may put a strain on the friendship.

…can they?

So far, joint and several liability between cartel members was governed by general provisions of German law; this caused many uncertainties. From now on, joint and several liability will be governed by the new special provision in para 33d GWB. With this new provision, for example, the discussion (inspired by American Antitrust Law), whether compensation between cartel members should be excluded for reasons of deterrence, is now cleared. Also, uncertainties on how the compensation should be conducted are resolved to some extent, because the EU Directive on Cartel Damage Claims and the reasoning of the new GWB set out certain points of reference. According to these criteria, the degree of causation will especially continue to be taken into account. But also other criteria, such as turnover, market share and actual role of the company in the cartel, will be assessed. These standards aim at insuring a fair balance between the joint and several debtors.

The free rider

What is fair, and what is not, lies in the eye of the beholder. Cartel members, for example, may not find it fair that an infringer who has been granted full immunity from a fine due to a leniency program, is now also privileged in regard of his civil liability, through para 33e GWB. His liability towards third parties is now, in principle, limited to the damage he caused to his direct and indirect buyers. An exemption will apply only if the other cartel members are unable to compensate for the remaining damage that they caused. With the new para 33e(3) GWB, the immunity recipient is also privileged in regard to the compensation between the cartel members. In this internal relationship, he is also only liable to the amount of damages he caused to his direct and indirect buyers.

He who settles, wins?

More inconspicuous than the limited liability of the immunity recipient, but no less serious, are the new provisions regarding settlements between cartel members and damaged parties (which enjoyed growing popularity anyway lately). For the sake of promoting the willingness to settle (be it out of, or in, court) the new para 33f GWB ensures substantial advantages for a settling cartel member: Firstly he is relieved from his liability not only vis-à-vis the damaged party, but also vis-à-vis the other cartel members. The relief applies not only to the actual amount of the settlement but to the amount of the actual share of liability. Secondly, the settling cartel member is entitled to agree with the settling damaged party that he cannot be held liable for the remaining damage in case the other cartel members are not able to fulfill their obligations towards the damaged party. Thus, the new provision ensures considerable motivation to settle with the damaged party.