Quite right: Fines for cartel proceedings included in the price?

Recht gesprochen

Are fines in cartel proceedings included in the costs of influencing the market priced in by the companies from the outset? And does the legal department know about this?  This question could be asked if one reads the list of fines imposed by the European Union for breaches of competition law.

The most recent example is the €4.34 billion cartel fine imposed on Google for abusing its market power in Android mobile devices, and before that the judgment against Google or Alphabet for deliberately exploiting its supremacy in the search engine market for online shopping searches (the group has appealed in both cases).

In the latter case, the Commission accuses Google of listing its own price comparison offer first in the search results for online shopping, thereby placing its competitors at a disadvantage. The fine of EUR 2.42 billion is a substantial fine, more than twice as high as the highest ever cartel fine of EUR 1.06 billion imposed on the chip company Intel in 2009 for its abusive discount models. Other cartels of the recent past, such as the Libor cartel or the truck cartel, are in current perception due to the intensive press coverage.

Competition agreements seem attractive for many companies. They guarantee manufacturers and dealers reliable prices and higher margins.

How does the legal department position itself in this context? Does it point out the risks and leave the field of entrepreneurial risk to the decision-makers or that of sanctions to the competition authorities? Or does it perform the management function of law in the company in such a way that it initiates and maintains a discourse among decision-makers about the implied ambivalence between the legal and illegal strategies for securing and expanding the market position?

In the case of many competition law infringements it remains unclear whether the legal department is even involved in the processes that ultimately lead to the decision on these – regularly occurring – ambivalences. Sometimes it remains open whether it is involved at all. If this were not the case, the legal department would not be directly represented by the legal department in these very critical issues.  Provided that the decision-makers involved are sufficiently aware of the law, i.e. that the law is an integral part of top management’s decision-making processes as a key decision-making category, the company is generally well positioned. The number of legally sanctioned competition violations suggests that the reality is often different.

Where does responsibility lie?

Is the risk management process not working? The legal department cannot point this out. The identification and avoidance of legal risks and their legal handling is the traditional task of the legal department (see Ebersoll/Storck in: Beck`sches Formularbuch für die Rechtsabteilung, G. Risikomanagement; ed. Vaagt/Gross). This department is not only responsible for the examination, evaluation and design of legal issues. In terms of comprehensive risk management, risks must be systematically identified, made manageable and incorporated into the business decision-making processes. The responsibility for ensuring that legal auditing is an integral part of business decisions cannot be delegated by the legal department.

Hasn’t the company declared its commitment to a legal culture in the sense of the United Nations Code of Conduct, elevated it to the guiding principle of legal action in the company and secured it organizationally as a guideline for management action? The legal department cannot delegate its responsibility in this respect either. The formation of a legal culture is part of the organizational management task of legal affairs in the company. This management task focuses on the contribution of law to the success of the company, to the achievement of the company’s goals, to the implementation of the strategy and, in the long term, to the vital operation of the organization in the market environment (see also Groß in: Beck’s Form Book for the Legal Department, B. IV. 2).

It would certainly be a lot shorter to blame the legal department for the legal breaches of their companies.  Rarely is there a very clear, deliberate violation of law by the entire management. Especially the facts of the “defeat devices” show how difficult it is to stand up against almost the entire industry and to interpret and technically exploit the possibilities of interpretation of the exception of the so-called thermal windows rather widely.

In the case of Google, for example, it is also a matter of weighing up whether the company should opt for the law in case of doubt or use the opportunity for a competitive advantage, even if it has some “money” iSv. antitrust fine. Law in a company is primarily the responsibility of the company

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