(Internal) liability of the management body for anticompetitive agreements

Directors' and officers' liability for stock corporations (AG) and limited liability companies (GmbH): Management bodies are not liable for antitrust fines imposed on the company. However, this does not constitute a "free ticket" under liability law. This is the result of a decision by the Düsseldorf Higher Regional Court.

Facts of the case

The judgment of the Düsseldorf Higher Regional Court (OLG) was based on the following facts: The defendant was chairman of the board and managing director of the plaintiffs, a (holding) stock corporation ("AG") and its operating subsidiary, a limited liability company ("GmbH"). In this function, he was involved in several business agreements which, among other things, involved the disclosure of price-relevant information. The German Federal Cartel Office imposed fines totaling EUR 355 million on all companies involved, including the plaintiffs, for violations of antitrust law. The GmbH then sued the defendant by way of recourse for payment of the fine imposed on it while the Holding AG claimed IT and legal costs incurred. In addition, the plaintiffs sought a declaration that the defendant could be held liable for all damages resulting from the violation of competition law. The Düsseldorf Regional Court granted the declaratory judgment, but rejected the recourse claims. Both the plaintiffs and the defendant appealed against the respective unfavorable grant.

The decision of the OLG Düsseldorf (6th Cartel Senate) of 27.07.2023 - 6 U 1/22 (Kart)

The OLG dismissed the appeals and confirmed the first instance decision.

In regard of the first instance decision that the defendant was not liable for the cartel fine imposed, the court stated that allowing recourse would compromise the purpose of the fine. The risk of a (financially) severe fine is intended to deter the company from violating antitrust law. This purpose would be thwarted by the possibility of recourse; particularly if a (solvent) D&O insurance exists. The fact that the fine should only affect the company is also reflected by the system of sanctions under antitrust law: one assessment point of the fine is the turnover associated with the violation (“offence-related” turnover). This “offence- related” turnover - completely independent of the actions of the management body - can lead to an enormous fine. A claim against the defendant for payment of the fine, which was multiplied solely due to the size of the company, was unjustified. The same also applies to the IT and legal costs incurred in this context.

In contrast, the court ruled that the defendant was liable for all (future) claims for damages by competitors against the plaintiffs, as he had violated his duty to act lawfully (so-called "duty of legality"). This was not altered by the fact that he had acted in the alleged interests of the company, as there was no entrepreneurial discretion to commit "useful violations of the law".

Practical note

The judgment of the OLG Düsseldorf is the first higher court decision on this topic. It is to be welcomed that the OLG has come to a clear conclusion (no liability for cartel fines per se) and has refrained from a case-by-case casuistry. However, it is questionable whether this legal issue has been settled permanently. Shortly before, the Regional Court of Dortmund ("LG"), decision of June 21, 2023 - 8 O 5/22 (Kart) had decided in favor of the compensability of cartel fines. Even after the decision of the OLG Düsseldorf, the LG Dortmund adhered to its decision (see LG Dortmund, decision of August 14, 2023 - 8 O 5/22 (Kart)) and expressed its incomprehension about the decision of the OLG: According to the LG the purpose of the fine would also be to deter the shareholders and managers, as the company can only act through them. Therefore, the preventive purpose would only be achieved through the possibility of recourse.

The ruling also offers a good opportunity to reflect once again on how companies and in particular managing directors (GmbH) or board members (AG) must organise and manage their company in order to prevent liability cases and "negative press":

Firstly, board members should consider setting up a risk and compliance management system. Such a system helps to identify and analyse economic or legal risks in advance and take preventive countermeasures to ensure that the risk does not materialise. Secondly, the Business Judgement Rule (the “categorical imperative” of corporate law) is of great importance for members of the company management. In order to comply with the Business Judgement Rule corporate decisions must always be made in accordance with due discretion, on an informed basis and for the benefit of the company. However, the discretion must not be exceeded in an incomprehensible manner (irrationality test).

Both internal risk and compliance management systems and the Business Judgement Rule serve two important purpose: Firstly, to find the best possible decision in the interests of the company, and secondly, to prevent the management body from being held personally liable. Correct application is therefore essential. The answer to the question of whether the opinion of the LG Dortmund or that of the OLG Düsseldorf will ultimately prevail can then be awaited out of mere interest - and without any personal involvement.