On 29 July 2017, the new German Competition Registry Act (Wettbewerbsregistergesetz – WRegG) became effective. Organisations offering public tenders worth EUR 30,000 or more will have to check the register to verify whether participating undertakings are excluded from public procurement because of past offences. The new register will be hosted by the Federal Cartel Office (Bundeskartellamt – BKartA) and has to be implemented by 2020 latest.

According to press reports (PaRR of 26 September 2017), a senior official of the BKartA, indicated that the BKartA is now planning a directive on the register’s standards and procedures.

Why is this noteworthy?

The competition register is a new animal in Germany’s legal jungle, though it would be unfair to say that it belongs purely to the competition law species. It is the first centralised, federal register listing undertakings that have been devoted to various law infringements, in particular financing of terrorism, corruption, money laundering, subsidy fraud, tax evasion etc. – but also including violations of competition law. Entries into the register may lead to exclusion from public procurement for 3 to 5 years.

Why the lawyerly maybe and why three to five years?

Because cartelists have a little privilege here: cartel offences are considered as non-mandatory ground for exclusion from public procurement (i.e. the tendering organisation has discretion whether it will disqualify a cartelist) and cartel-related entries will be deleted after three years. (Different than a couple of other offences, like financing of terrorism or corruption which will remain in the register for five years.) Regarding competition law infringements, the WRegG limits itself to decisions by German authorities – foreign infringement decisions, even by the EU Commission, will not be entered.

The idea of a register is not new but Germany did not succeed in establishing a register on the federal level for many years while procuring authorities had to rely in most cases on self-declarations of participating undertakings.

So what could a directive in addition to the WRegG bring?

It is hoped that it will bring clarity. While there are a couple of open questions on the procedural side that need to be solved, there is another animal roaming the jungle which has been pretty hard to catch by practitioners in the past: the possibility of self-cleaning.

Self-cleaning is not a new idea. In particular, Art. 57 of the EU Regulation 2014/24 on Public Procurement expressly requires authorities to take such measures into account. Now it is expressly laid down in sec. 125 of the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen – GWB) and sec. 8 WRegG.

So far, self-cleaning raised more questions than it provided solutions: there was no fixed guidance what an undertaking would have to do to clean itself and what would be the benchmark for sufficient cleaning measures. The fact that now the BKartA, as the authority imposing the cartel fine, will be the one to decide on effectiveness of self-cleaning measures may have led to some raised eyebrows.

However, the WRegG provides at least a framework – and leaves the details to the BKartA’s directive:

  • an application can be made before the three year-period has expired – so there are no minimum periods to remain in the register
  • the undertaking has to credibly show an interest in the premature deletion of its entry
  • the entry has to be deleted if the undertaking has proven that
    • it compensated or agreed to compensate any damage caused by its infringement
    • it fully cooperated with the investigating and procuring authorities in order to clear facts and circumstances which relate to the infringement and the damage caused
    • it implemented concrete technical, organisational and personnel-related means which are suitable to prevent future infringements.
  • the BKartA will investigate ex officio whether the conditions are met, meaning it can but it does not have to rely on what the undertaking is submitting. In particular, it may require the undertaking to submit the infringement decision, an expert opinion or other documents suitable to assess the self-cleaning measures. Furthermore, the BKartA may use its regular investigative powers laid down in sec. 57 and 59 GWB.

According to sec. 10 WRegG, certification systems ( “systems of independent bodies which are suitable to prove appropriate measures to prevent future infringements”) may be admitted by an additional governmental regulation. This means they cannot be established merely on the basis of the BKartA’s new directive but the directive may, once they are admitted, deal with their details. The legislation (BT Drs. 18/12051) remains silent on such possible details. Taking into account that the amongst compliance practitioners well-known line “there is no one-fits-all”, it remains to be seen to what extent certification of compliance programs may work out in practice.

While in international cartel cases, it may sound comforting that foreign infringement decisions are not entered into the register, the situation, at least for mandatory exclusionary grounds, may cause some headaches regarding the practical implementation of self-cleaning in international cases. According to sec. 123 (2) GWB, the procuring authorities have to take into account foreign sanctions in cases of mandatory exclusionary grounds, e.g. corruption, financing of terrorism, money laundering or fraud, and disqualify affected undertakings. Since the WRegG does not foresee that foreign judgments and decisions are entered into the register, they will not be subject to the self-cleaning procedure laid down in the WRegG (and its accompanying directive). The question remains open, under which conditions self-cleaning can be successfully implemented by undertakings that are subject to foreign decisions leading to exclusion from German public procurement.

In summary, the trip through the legal jungle remains murky, and the new directive by the BKartA may not answer all questions. On the other hand, it is likely that we will get a clearer view of some of our new animals soon.