The German competition authority can impose fines on undertakings that have violated European competition law by forming a cartel.  Under German law, if the undertaking ceases to exist, for example by merging with another undertaking, only in exceptional circumstances can the legal successors be held liable for the violation of Article 101 TFEU.  For the legal successor to bear any liability for the anti-trust infringement, the restructured company must be identical, or nearly identical, to the company that committed the infringement, such as in the case of a mere change of the company’s name or its legal structure.

This has created a loophole that can be exploited by internally restructuring the legal entity that has committed the infringement so it ceases to exist and no other legal entity within the group is (nearly) identical.  Companies may thus escape cartel fines by, for example, redistributing their assets to affiliated companies within the corporate group, or by merging with a sister company, even if the original company’s assets remain within the same group and under the control of the same ultimate parent company.  This loophole has been confirmed explicitly by the German Supreme Court.  Although Germany is currently amending its competition legislation, it is not yet clear whether the proposed changes will be sufficient to solve the problem.

In the European Union, due to the broad interpretation of the concept of an “undertaking”, as well as the possibility of holding parent companies jointly and severally liable, the European Commission has broad discretion when it comes to imposing fines on parent companies, so an internal restructuring does not present a solution for infringing companies.

Reallocation of Cases

According to the Commission Notice on cooperation within the Network of Competition Authorities, reallocation of cases should normally take place within a period of two months, starting from the date of the first information sent by the relevant national competition authority to the European Competition Network.  In general, the competition authority that is dealing with a case at the end of the two month period should continue to handle the case until completion of the proceedings.  Reallocation of a case after the two month period should only occur where the facts known about the case change materially during the course of the proceedings.  After the two month period, the Commission should in principle initiate proceedings only in exceptional cases.

If the  Commission initiates proceedings, the relevant authorities of the Member States are relived from their competence to apply Article 101 TFEU and Article 102 TFEU.  This means, once the Commission has opened proceedings, national competition authorities cannot act under the same legal basis against the same agreement or practices by the same undertaking on the same relevant geographic and product market.

Despite these procedural concerns, the Commission seems to be willing to accept a late reallocation of cases in cooperation with the German competition authority.  It is not clear how this principle could or will be extended to other Member States and whether it could be applied under different circumstances where a Member State is prevented from fining a cartelist due to the application of a national law.