Transparency or pillory? FAQs about the new German Competition Register
In 2021, the new German Competition Register will start in Germany. Following the establishment of the German Transparency Register, this means yet another public register for companies to deal with. If you are a manager of a company that bids for public contracts, take note as you read on.
1. What is the Competition Register?
The new Competition Register is a uniform, Germany-wide database designed to protect public tenders and the public authorities issuing them. If there are reasons not to award a public tender to a company (grounds for exclusion), that company will be entered in the Register.
2. Who will the new Competition Register affect?
All companies which bid on a public tender with a value of more than EUR 30,000. During the formal procurement proceedings for the tender, the public authority must check the new register and confirm that the company is not entered in the Register. If there is such an entry, the company will normally be excluded from the tender procedure.
3. What information does the Competition Register contain?
The Competition Register will be administered by the Federal Cartel Office (Bundeskartellamt). If there are grounds for exclusion from tender procedures, details about the company and the offence will be entered in the Register. The imposition of certain penalties by the courts or authorities against the company or related parties or persons constitute grounds for exclusion.
Blatant wrongdoing for offences such as terrorism financing or the formation of a criminal organisation will result in an entry in the Register. However, even a judgment imposing a fine of only EUR 2,500 can suffice for an entry in the Register. Money laundering, fraud that affects public budgets, tax evasion or even infringements of the German Act to Combat Undeclared Work or the Minimum Wage Act could result in an entry in the Register. Prior infringements of environmental, social or employment law obligations may also lead to an entry in the Register.
4. What’s new?
Until now, public authorities and companies in the public sector had to undertake a comprehensive review of the corruption register of the applicable state (Land), as well as the central Commercial Register when assessing a tender. Given that German authorities award public contracts valuing around EUR 500 billion annually, legislators recognised that they had to provide a more practical solution, despite being quite late to do so.
Another novelty is that offences which previously had to be recorded in the corruption register of the relevant Land now only have to be entered in the Competition Register. This significantly increases the potential for an offence to be entered in the Register. Previously, not all Länder had a register and those that did only included offences that had been committed in the Land in question.
5. What consequences does the entry in the Register have?
Although the authorities have some discretion, if there are grounds for exclusion the company will almost always be excluded from the procurement procedure.
From an economic perspective, this means that many companies are de facto excluded from being awarded public contracts, meaning a loss of significant business opportunities. This frequently results in the economic downfall of the company in the medium-term.
6. Can entries be deleted, or when can they be deleted?
Depending on the gravity of the offence, an entry will be automatically deleted after three or five years. Where an entry has been made about a company, it can apply to have the entry deleted before this period expires. For an application to be successful, the company must show that it CLEANED ITSELF UP. In addition to working closely together with the authorities and providing restitution for any damages caused, the fact that the company has adopted measures that will prevent further wrongdoing or at least measures that are designed to impede any further wrongdoing will be a decisive criterion for a successful application. The only way to fulfil this condition is to implement a legally watertight compliance system.
7. Can something be done about impending or existing entries in the Register?
A company will be heard before an entry is made about it in the Register and will have the opportunity to raise objections. If the objections are dismissed, the entry is made. If an application to have the entry deleted (see above) is denied, the company can claim legal protection before the Higher Regional Court (Oberlandesgericht).
8. Do I need to do something now?
If you have not already done so, you need to adopt suitable compliance measures. This is particularly true for publicly traded companies, as compliance with capital market law requires particular attentiveness to the specific day.
Compliance measures can reveal misconduct within the company at an early stage and can even prevent it from occurring. However, they can also help avoid convictions and reduce the amount of any fines imposed (and thus also avoid an entry in the Competition Register). This may even be possible when the misconduct occurs despite there being an appropriate compliance system in place. The compliance measures must only be capable of preventing misconduct. Companies will never be able to prevent every unfair act. They do not need to. To this extent, the legislators reward goodwill. Certainly, half-hearted or even flimsy efforts are insufficient. This is even more true given the fact that effective compliance systems are not rocket science.
Should you have any questions about this issue, please contact Dr Maximillian Degenhart under firstname.lastname@example.org.
Dr Maximilian Degenhart
Lawyer, Compliance Officer (TÜV)