In a judgment of 26 February 2013, the German Regional Court of Cologne rejected an action for damages in the amount of more than € 1.1 billion by Danish hearing-aid manufacturer GN Store Nord A/S against the German Federal Cartel Office (FCO). GN Store sought compensation from the FCO for the latter's 2006 prohibition of the merger of GN Store's hearing-aid business with Phonak Holding AG.
In 2006, GN Store decided to sell its worldwide hearing-aid business to Phonak. In April 2007, the FCO prohibited the proposed transaction as it considered that the concentration would create or strengthen a dominant position (based on a presumption of collective dominance provided for by the German Competition Act). On appeal, The Higher Regional Court of Düsseldorf upheld the FCO's decision. However, in April 2010, the German Federal Court of Justice reversed at last instance that the FCO's decision had been unlawful (see VBB on Competition Law, Volume 2010, No. 5), finding substantial competition between Phonak and its two biggest competitors, thus rebutting the presumption of collective dominance relied upon by the FCO in its prohibition decision.
GN Store subsequently lodged a damages claim against the FCO before the Regional Court of Cologne, arguing that the FCO officials had breached their duties and that this conduct should be presumed to have the required intent or negligence to give rise to liability for damages.
The Court of Cologne confirmed that the FCO officials breached their official duties because the prohibition decision had been unlawful. However, the Court decided that GN Store had not demonstrated the required intent or negligence on the part of the FCO officials as there was no indication that they had arrived at their conclusions without careful examination of the legal and factual bases. The Court ruled that if an official takes a view after careful examination, and his view is legally defensible, he cannot be considered at fault if this view is later disapproved by the courts. In this regard, the Court recalled that at the time of the FCO's decision, the interpretation of the German provisions on collective dominance had not yet been clarified by the German Federal Court of Justice.
In addition, the Court considered that the FCO officials could not be considered at fault given that the Higher Regional Court of Düsseldorf had upheld their decision in 2008. According to the Cologne Court, FCO officials cannot in principle be expected to have better knowledge of the law than a specialised panel of judges.
This judgment by the Regional Court of Cologne is the first case in Germany in which the FCO has been confronted with an action for damages.
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