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Bathroom fittings cartel: Ex members of BoD are not liable for company's cartel fines

In two decisions the Regional Court of Saarbrücken (Landgericht Saarbrücken) has rejected the lia-bility of management bodies for cartel fines imposed on the company (7 HK O 6/16 and 7 HK O 21/19 - not yet published). The bathroom equipment manufacturer Villeroy & Boch claimed dam-ages from four ex members of the company's management board with regard to a fine imposed by the Commission for the claimant's participation in the bathrooms fittings cartel (2010) as well as legal fees.


Management not liable for cartel fines

The claimant Villeroy & Boch had based its damage claims on the allegation that the defendant ex board members breached their prevention and supervision obligations because, inter alia, they failed to set up a compliance system that prevents cartel infringements effectively. 

In addition to the cartel fine, the company also claimed damages for legal fees caused by the cartel infringement. In the result, the claims were rejected due to limitation. Contrary to the claimant's submissions, the limitation period already started before the Commission's decision in 2010.

The first attorney's bill issued in connection with the Commission's investigation constitutes the first relevant partial damage in the sense of the so-called principle of the damage unit (Schadenseinheit) - and is decisive for the beginning of the limitation period. 

Besides the specific question of limitation, the Court further raises fundamental doubts as to the liability of management bodies for the company's cartel fines. According to the Court, the Commis-sion's decisions imposing fines under competition law are directed at undertakings only and not at individuals.

According to German company law company representatives can be held liable in cases of breach of obligations. However, a pass on of fines resulting from an infringement of competition law to management bodies and as a result, probably to D&O insurance companies, would be in contradiction to the provisions and objectives of European law.

Whether the claimant will appeal against the decisions of the Regional Court of Saarbrücken and continue the proceedings in the next instance is open.

Background of the proceedings

In June 2010, the claimant was fined by the European Commission for its participation in sales price agreements in the so-called bathroom fittings cartel. In total, the Commission had imposed fines totalling EUR 622 million on 17 bathroom equipment suppliers.

Comment

Although of considerable practical relevance and interest, the issue of liability of management bodies for cartel fines has hardly been the subject of German court decisions so far. Several proceedings are currently pending, so further decisions can be expected in the near future.

However, the two decisions of the Regional Court of Saarbrücken are likely to attract a high level of interest. They not only belong to the first decisions ever on the issue of liability but also because of the fundamental doubts expressed by the Court against the liability of management bodies for cartel fines. 

The Regional Labour Court in Düsseldorf has recently come to a similar result in connection with fines from the rail cartel complex and generally rejected management's liability for cartel fines. However, the Federal Labour Court (Bundesarbeitsgericht) overruled the decision later - due to the lack of jurisdiction of labour courts. The decision is now pending before the District Court of Dortmund.

That companies can claim damages for legal fees resulting from the breach of the obligation to set up a compliance system was subject to a decision by the Regional Court Munich I (Landgericht München I), 10.12.2013 - 5 HK O 1387/10 ("Neubürger") – concerned bribery payments). Whether this must be regarded differently with regard to legal fees arising from infringements of competition law in the future cannot yet be assessed.

However, attention should be paid to the statute of limitation of such claims, especially if proceedings - as is not unusual in competition law - drag on over a longer period. If necessary, timely measures should be taken to suspend the limitation period in order to secure claims without endangering the success of internal company investigations.

Links

European Commission press release of 23 June 2010

ECJ, Case C 625/13 P, judgment of 26 January 2017

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