Cartel damages claims in Germany – “The defendant’s burden”

The legal position of claimants bringing private damages claims against companies found to have been involved in a cartel has been strengthened by both the interpretation of the codified law in Germany and also recent case law. Although the general rule under German procedural law is that the burden is on the claimant to prove the facts of the case, the burden of proof in antitrust cases has shifted from the claimant to the defendant.

In this article we outline the provisions of section 33 of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, hereafter: GWB), which is the basis for private claims for damages. We then explain the binding effect of infringement decisions reached by competition authorities, before evaluating the courts’ position on the respective questions of evidence and, in particular, the burden of proof.  Finally, we consider the practical consequences of the burden shifting to the defendant.    

In common with other EU regimes, antitrust law in Germany is generally based on a combination of both public and private enforcement: public enforcement comprises the administrative investigation process, leading to the sanctioning of violations of the cartel prohibition (section 1 GWB; Art. 101 TFEU) and the prohibition of an abuse of a dominant market position (section 19, 20 GWB; Art. 102 TFEU), while parties that have been individually affected by unlawful conduct may bring private actions in order to be compensated.

The rules governing private claims for damages under German antitrust law are set out in section 33 GWB, which provides as follows:

1. Subsection 1 entitles natural and legal persons, who as participants in the market were affected by violations of German or European antitrust law, to receive a remedy for their loss suffered or, in the case of a risk of repetition of the violation, to obtain an injunction against the violator preventing it from further infringing such rights.
2. A claim under section 33 GWB may also be brought by certain associations with legal capacity pursuant to subsection 2.
3. If violations have been committed intentionally or negligently, a claim for compensation for the loss suffered as a result of the infringement may be available in accordance with subsection 3.
4. In a claim for compensation, the relevant court will be bound by any anti-competitive findings in the final decision of the German Federal Cartel Office (Bundeskartellamt, BKartA), the European Commission or the respective authority of a member state of the European Union (subsection 4).
5. Finally, subsection 5 provides that the limitation period is suspended where cartel proceedings are initiated by the Bundeskartellamt, the European Commission or any other antitrust authority within the European Union. In addition, the general provisions on limitation under the German Civil Code (Bürgerliches Gesetzbuch, BGB) apply to cartel proceedings. This means that claims regularly become time-barred 3 years after (i) the claim arising and (ii) the claimant having knowledge of the cartel conduct (section 195, 199 BGB). Given that the conduct on which antitrust claims are based often took place in secret, the knowledge provision is often critical.  However, German law also includes a backstop date - claims can only be brought within a period of 10 years of the conduct taking place regardless of when the claimant became aware of that conduct (section 199 subsection 3.)

The current wording of section 33 GWB partly results from a landmark change to the legal system which took place in 2005 when the seventh amendment to the GWB was implemented. Since that time German antitrust law has been based on the system of legal exception rather than the system of administrative exception. This means that the risk of negligently violating antitrust law has shifted to the company. Pre-2005 it was possible to notify arrangements to the regulator and to proceed with those arrangements unless prevented from doing so. Today companies are required to "self assess" whether or not their market conduct is in compliance with antitrust law.

In addition, in 2005  section 33 GWB was amended to significantly strengthen the position of private third parties as enforcers of antitrust law – providing under subsection 4 that authorities’ findings have a binding effect on courts in claims that follow-on from such decisions. Therefore, where there is an infringement decision, it is not possible for defendants to argue that they did not participate in the cartel.

When the German legislator implemented the binding effect provision, it was explicitly stated in the respective justification for the legislation (see Begr RegE BT-Drucks. 15/3640, p. 54) that this binding effect was limited to the violation of antitrust law. All other issues concerning the existence and causality of damages were explicitly excluded and left to the courts’ assessment of the evidence.

Consequently, any binding effect can only apply to the violation of antitrust law itself.  However, this statement is not as clear as it might appear at first. On the one hand, the authorities’ findings on the existence of a cartel infringement may lead to the conclusion that the company has participated in cartel schemes throughout the whole period of infringement, and that all respective contractual agreements concluded by that company during that time are affected. On the other hand, the binding effect may be limited to the more general finding that the company has been participating in a cartel scheme, which would not encompass a binding statement on every single agreement entered into by the company during the relevant period.

The competition authority’s fine notice is the decisive point of reference for any kind of binding effect.  As it is very unlikely that the competition authority will explicitly include findings on every single transaction that took place during the period covered by the infringement decision, (especially in cartel schemes that cover a long period of time), in the vast majority of cases the courts will only be bound by a more abstract statement on the companies’ participation in cartel schemes, leaving the extent to which individual agreements are affected as a matter for determination by the courts.

As stated above, the binding effect of section 33 subsection 4 GWB is limited by the decisive findings of the competition authority.  Applying the general principles established by German procedural law, it would be for the claimant to adduce evidence of the facts on which the claim is based, so as to prove that the disputed transactions have been the subject of cartel agreements.

However, the first decisions of Regional Courts (Landgerichte) as well as Higher Regional Courts (Oberlandesgerichte) seem to take a distinctly claimant-friendly approach to this legal test, as the following two cases demonstrate:

1. The Higher Regional Court of Karlsruhe (see OLG Karlsruhe, decision of 31 July 2013, Civil Division 6 U 51/12) took an approach based on a specific German instrument in procedural law called “Anscheinsbeweis” (prima facie-evidence).  According to this principle, which has been developed by case law, the party that would otherwise be obliged to prove a specific fact, could benefit from a presumption in certain cases (see for example the decision of the Federal Supreme Court (Bundesgerichtshof) of 18 March 1987, Civil Panel IVa 205/84).  The Higher Regional Court of Karlsruhe therefore inferred from the general existence of a cartel scheme with a broad scope that it was likely that all procurements of the company concluded during that time had been affected by the cartel.  The approach of the Court in this case was based on the assumption that a cartel scheme typically leads to an increase of prices and affects all of the agreements entered into during the period the cartel is in place.
2. The Regional Court of Berlin in its decision of 6 August 2013, Civil Chamber 16 O 193/11, p. 11 , imposed an even greater burden on the defendant. It held that in circumstances where the claimant was largely unable to present and prove the facts demonstrating that specific procurements had been affected by cartel agreements it was appropriate to apply a so-called “sekundäre Beweislast” (secondary burden of proof).  This effectively reversed the burden of proof - requiring the defendant to present substantial contradictory evidence, i.e. to prove that the respective procurement had not been affected.

Whereas an “Anscheinsbeweis” supports the claimant’s arguments, this “sekundäre Beweislast” completely shifts the burden of proof from the claimant to the defendant.

The practical effect of section 33 subsection 4 GWB, combined with the outcome of these cases (which have recently been confirmed by, inter alia, the Regional Court of Erfurt in its decision of 19 March 2015, Civil Chamber 3 O 1050/14 ) effectively limits the defendants’ arguments in most follow on damages claims to challenging the quantity of losses caused by their infringement of antitrust law, rather than whether or not any losses have occurred at all.

These cases have shifted the risks associated with violations of antitrust law. Until very recently in Germany, the biggest threat to companies held liable for violations of antitrust law was fines of up to 10 per cent of the annual turnover of that company.  Now the amount of damages payable in private claims regularly significantly exceeds the fines imposed by the authorities. However, until there has been a decision by the German Federal Court (Bundesgerichtshof, BGH) on this issue, the existing case law may yet change to reduce the burden on defendants.