B) Antitrust law
Competition and free market economy are essential elements of a free society. Their protection is in the interest of our company. All directors, officers and employees who are in contact with competitors, customers or other business partners must comply to competition (antitrust) laws at all times.
Violation of competition laws may result in serious sanctions for KRAIBURG. In the past, antitrust authorities have imposed drastic fines upon companies that amounted up to 10% of their annual group turnover. Additionally, customers and suppliers can claim compensation for their damages. Under German law, drastic fines can also be imposed against individuals involved in the violation. In the U.S. and in some European countries misconduct can be penalized with imprisonment.
1. Restrictive agreements among competitors
Restrictive agreements among competitors are usually violating competition (antitrust) laws and therefore prohibited. The term „agreement“ is interpreted extensively. Even informal conduct and mere exchanges of information are included. The most important restrictive agreements are:
• Fixing and coordination of prices, mark-ups or other pricing matters
(e.g. discounts, allowances, terms of credit) with competitors
• Agreements among competitors that determine capacities or procurement quantities
• Partitioning of markets, particularly allocation of customers and territories
• Non-compete obligations, which restrain a company from supplying customers of a competitor
• Exchange of non-public sensitive industry information, as for example turnovers, prices,
strategies, customer data or market shares
Provided that an economic cooperation among competitors is beneficial for the public, it may be exempt from competition (antitrust) regulations under strict conditions. Among others, this includes purchasing cooperations, research-, development- and production cooperations as well as agreements on technical standards.
2. Agreements with customers and suppliers
Apart from agreements among competitors, agreements with customers or suppliers may be subject to competition (antitrust) legislation as well. Alongside the risk of the imposition of a fine, distribution and purchasing agreements that violate competition (antitrust) regulations are at risk of being invalid and thus unenforceable. The following agreements may be affected:
• Agreements that obligate the customer to resell at minimum or fixed prices
• Supply agreements that bind the customer to buy 100 percent of its demand of a certain product
from a single supplier
• Exclusive distribution agreements
• Agreements that restrain customers or suppliers from buying certain products or supplying
specified goods to ascertained companies
3. Abuse of a market dominant position
Market dominant or strong companies must not abuse their position to weaken competition at the expense of competitors, customers or suppliers (as long as there is no objective justification). A market dominant position is usually supposed at 33%-40% market share.
The following examples may constitute an abuse of a dominant market position:
• Discrimination between similarly situated customers or suppliers
• Refusal to supply (e.g. delisting of customers)
• Demanding excessive prices
• Predatory pricing (i.e. pricing goods below costs)
• Loyalty rebates that reward the customer retroactively for pooling their purchases at
a market dominating company