The new Competition Register – what enterprises need to know

The introduction of a nationwide German Competition Register is a “done deal”. The Bundesrat has passed the bill to set up and run a register to protect competition for public contracts and concessions (German Competition Register Act [Wettbewerbsregistergesetz, WRegG]). From a contract value of 30,000 euros upwards all public contracting authorities are obliged to retrieve information on bidders from the Competition Register before awarding the contract. The Register is therewith a “blacklist” of enterprises which are to be excluded from public procurement proceedings because they have acted improperly in the past. Besides criminal offences, breaches of cartel law, employment law or social law can lead to exclusion.

1. Use of the Competition Register

2. How is a registration made?

3. Measures to end the registration

4. Practical consequences

1. Use of the Competition Register

The WRegG entered into force on 29 July 2017. The reason underlying this Act is that only reliable candidates and bidders are to come into consideration in the procurement proceedings of public contracting authorities. This means that enterprises can be excluded from public procurement contracts and concessions if they have committed economic crimes or have seriously violated the law in some other way.

The “blacklist” provides contracting authorities with an automated procedure to retrieve entries on the enterprises to be awarded contracts. The Competition Register, which is centrally run by the German Federal Cartel Office [Bundeskartellamt, BKartA] as the register authority, encompasses criminal judgements and summary punishment orders, especially on grounds of the establishment of criminal associations, money laundering, fraud to the detriment of the public sector, bribery and corruption in business transactions, the granting of advantages, human trafficking and tax evasion. Also registered are violations of environmental, social or employment obligations as well as rulings on fines imposed by the cartel authorities of at least 50,000 euros.

As of an estimated contract value of 30,000 euros without value added tax, public ordering parties are obliged to request information on the preferred bidder from the Competition Register before awarding the contract. Sectoral contracting entities and concession grantors are obliged to request such information if they reach the applicable EU threshold value.

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2. How is a registration made?

The law enforcement authorities and the authorities for the pursuit of regulatory offences inform the German Federal Cartel Office of non-appealable criminal judgements and summary punishment orders as well as non-appealing rulings on fines. If the register office is aware of judgements passed abroad, these can also be included in the Competition Register.

A registration can only be made in case of non-appealable judgements or final and absolute rulings on fines. A relevant exception exists for breaches of antitrust law, however: here, declaratory judgements on breaches which have not yet become non-appealable and final and absolute already suffice.

Moreover, the breach or criminal act must be attributable to the enterprise. This is the case if it was a responsible officer for the management of the enterprise who acted. Breaches by any other natural persons are only attributable to the enterprise and thus capable of registration if the enterprise’s management breached one of its obligations. This also and in particular includes supervisory and organisational obligations.

If a responsible officer of a subsidiary acts, the conduct of the responsible officer of the subsidiary can only be attributed to the group parent if he likewise acted as responsible officer for the group parent. If this is not the case, the registration is entered only in respect of the subsidiary.

However, enterprises are not at risk of being faced with a fait accompli. Before registration the enterprise in question must be heard with regard to the intended entry. The enterprise can comment on the intended entry and raise objections to the registration within a deadline of two weeks. Should the information turn out to be false, its registration can be averted or erroneous data corrected.

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3.  Measures to end the registration

Registrations are automatically deleted from the Competition Register after the expiry of a certain period (three or five years). Registrations on criminal acts are deleted at the latest five years after the date on which the decision became non-appealable or final and absolute. Registrations on rulings imposing fines are deleted at the latest after three years.

Registrations can also be prematurely deleted from the Competition Register through so-called “self-clearance” measures. However, in order for an enterprise to successfully clear its name, three conditions must cumulatively be fulfilled by proving

1. that it has compensated for the damage incurred or has undertaken with binding effect to do so,
2. that it has cooperated in the clarification of the situation in active collaboration with the investigative authorities and the public contracting authority, and
3. that concrete technical, organisational and personnel measures have been taken to avoid further criminal acts or misconduct.

If an enterprise successfully clears itself, the public contracting authorities are bound by the decision of the register authority. If the German Federal Cartel Offices refuses the premature deletion of an entry, the enterprise can have the decision reviewed by filing a complaint to the Higher Register Court [Oberlandesgericht, OLG] of Düsseldorf. The complaint does not have suspensory effect.

Irrespective of the decision of the German Federal Cartel Office on the deletion of a registration, it remains at the discretion of the public contracting authority to acknowledge a self-clearance measure for the concrete procurement proceedings and to allow the enterprise’s participation. If a public contracting authority excludes the enterprise from the procurement proceedings despite its self-clearance, the enterprise may strive legal redress in review proceedings before the contract award chambers.

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4. Practical consequences

The public contracting authority decides pursuant to the provisions of procurement law on the exclusion of a registered enterprise from participating in the procurement proceedings. If a mandatory exclusion ground within the meaning of Sec. 123 German Act against Restraints of Competition [Gesetz gegen Wettbewerbsbeschränkungen, GWB] exists, the enterprise will be excluded from participating in the procurement proceedings. Mandatory exclusion grounds are, in particular, serious criminal offences such as money laundering, terrorist funding, fraud or bribery.

Although breaches of antitrust law represent an optional exclusion ground pursuant to Sec. 124 Subsec. 1 No. 4 GWB, because of their major economic-political significance they will regularly also lead to an exclusion from procurement proceedings.

With the deletion of the registration from the Register, the criminal act or regulatory offence underlying the registration may no longer be used to the detriment of the enterprise concerned.

For enterprises, the introduction of the Competition Register additionally means an increased focus on establishing or reviewing their internal compliance organisation in order to prevent criminally relevant conduct or regulatory offences such as cartel breaches, and thus to avoid an entry in the Competition Register from the outset. Compliance measures can also help to credibly substantiate the self-clearance process.

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