Review of 2004 / Prospects for 2005 Important developments in the protection of competition

Statement by the President of the Bundeskartellamt, Ulf Böge: “The Bundeskartellamt can look back on 2004 as an eventful year. Among the most important decisions of the Bundeskartellamt this year were undoubtedly the prevention of dominant positions in the German broad-band cable market and in the Berlin newspaper market (confirmed by the Higher Regional Court) and the break-up of the cartel-like corporate structure of the Dual System. Further areas of focus were the energy sector, the involvement in the 7th Amendment of the ARC and the intensification of international cooperation between the competition authorities. However several other decisions and steps taken this year by the Bundeskartellamt, which have received less public attention, have also again helped to effectively enforce the principle of competition in Germany, to the benefit of the consumer.”

In 2004 the Bundeskartellamt carried out 11 national searches at a total of 154 companies and private homes on the suspicion of illegal cartel agreements. These involved among others the construction sector and the paper industry. On the basis of information gained from cartel proceedings in the previous year against companies in the cement industry the Bundeskartellamt also initiated fine proceedings against 70 manufacturers of ready-mixed concrete. Most of the fines totalling 57.6 mio Euro, which were imposed in May 2004 on account of price agreements in the paper wholesale sector, are not yet final. In May the proceedings involving suspected agreements by industrial insurance companies were extended to further companies. An evaluation of these proceedings is likely to be concluded next year.

At 1,300 cases the number of mergers notified to the Bundeskartellamt in 2004 remained roughly at the same level as the previous year. This year the Bundeskartellamt prohibited a total of eleven merger projects, which is more than in the previous years (2003 = 2, 2002 = 5, 2001 = 2). In several other cases the companies either abandoned or modified their merger projects prior to a decision to avoid prohibition by the Bundeskartellamt.

In 2004 examinations for abusive conduct by dominant companies were conducted amongst others in the case of Deutsche Post AG, Deutsche Lufthansa AG and energy providers. The Bundeskartellamt sees long-term gas supply contracts covering 80 per cent and more of the requirements of a distributing company as having a market foreclosure effect and thus regards them as an inadmissible restraint of competition. In this connection the Bundeskartellamt will in the coming year conclude ongoing proceedings against 16 gas providers including E.ON Ruhrgas, RWE, Wingas and VNG. Furthermore, only recently, on 17 December 2004, the Bundeskartellamt initiated formal prohibition proceedings against five companies in the gas sector on suspicion of abusively excessive gas prices. In comparison the companies involved are among the most expensive gas providers within the Bundeskartellamt’s area of competence. In the proceedings the Bundeskartellamt will examine whether these companies, some of which have announced and in some cases already implemented increases of up to 0.6 ct/kWh gross or 14 per cent within six months, simply passed on increased procurement costs, also took reduced procurement costs into account in the past and whether they compensated their customers for the double effects of energy tax. In informal preliminary proceedings four other gas providers have partly already announced their intention to reduce planned price increases (by up to two-thirds) or not to implement any further increases in the current heating period and to reimburse their customers if it materializes in autumn 2005 that the proceeds from the price increases have exceeded the actual increase in gas procurement costs. For this reason and because the gas providers in question by comparison are not the most expensive the Bundeskartellamt decided not to initiate formal proceedings in these cases.

Another important area of the Bundeskartellamt’s work is the proper observation of the procedures for the award of public contracts of the Federal Republic of Germany. In the current year the public procurement tribunals of the Bundeskartellamt received over 220 applications for the review of award procedures. In 19 cases the Bundeskartellamt decided in favour of the appellants.

On 1 May this year the new European regulation on the implementation of the rules on competition (Regulation 1/2003) came into force. Since then the question as to whether cooperations between companies with cross-border significance are exempt from the prohibition of cartels is dealt with by applying the so-called legal exception. According to this the companies have to assess the eligibility of their agreement for exemption themselves since the notification and authorisation system ceases to apply. In conjunction with Regulation 1/2003 a network of the competition authorities in the EU has been established.

President Böge: “The European Competition Network (ECN) heralds a new era in the fight against cross-border restraints of competition”.  The joint Intranet of the competition authorities, onto which almost 300 cases had already been posted, the possibility of information exchange and mutual assistance with investigations in practice had already proved very successful.

Dr Böge continued by saying: “The phase of restraint in mergers and acquisitions seems to have bottomed out. On the international level first attempts at new mega mergers are now visible. The German market will not remain unaffected by this.” But his office, he added, was well equipped to prevent any undesired market power. Merger control was a very effective instrument in this context but multilateral cooperation between the competition authorities worldwide was also absolutely necessary. The Bundeskartellamt had regarded this as one of its key areas of activity during the last five years. Having assumed the chair of the International Competition Network (ICN) this year, in which the competition authorities of 76 countries are represented, the Bundeskartellamt would be able to contribute to a greater extent its experience in the area of competition. From 6 to 8 June 2005 the Bundeskartellamt will be hosting the 4th Annual Conference of the International Competition Network in Bonn.

Mr Böge concluded: “We will only be able to maintain the international recognition enjoyed by the German competition system (and for German companies this is a location advantage which should not be underestimated) if we uphold the principle of competition in our own country. The Bundeskartellamt’s role in this is that of both guardian and admonisher. The Bundeskartellamt will therefore continue to enforce the provisions of the competition law without reservation. It will however also feed in its expertise in the implementation of the European competition law directives and in the amendment of the ARC and the Energy Industry Act."