A recent case involving the State of Baden-Wurttemberg in Germany means that it may be facing a fine of up to Euro 500 million after the Stuttgart Court of Appeals held that the state was liable for violating EU competition laws through its centralized sale of timber. Source: Timberbiz
The case centred on the State’s practice of bundling and jointly selling timber from forests in the area – private and state forests. The court decision was that this method, which was used from 1978 until 2015 restricted competition and pushed up timber prices. This harmed other businesses especially sawmills.
The State of Baden-Wurttemberg had already been ordered to stop this practice by Germany’s Federal Cartell Office in 2015.
Sawmills joined forces to seek damages for the cartel overcharges. Prof Rüdiger Lahme and Dr Andreas Ruster of the law firm Quinn Emanuel Urquhart & Sullivan, initiated the action on behalf of 36 sawmills representing more than 50% of the wood cutting in Baden-Württemberg.
“This is an exceptional case, because the state has for decades publicly centralized the distribution of round timber from Baden-Württemberg’s forests through its state forestry administration. Sawmills that depend on the supply of round timber have been virtually unable to avoid buying from the state. There was no significant competition on the supplier side – the high transport costs, which reduce the procurement radius, further deteriorated the sawmills’ bargaining position,” Prof Lahme said.
The case was called the “round timber cartel” and the lawsuit against the State claimed that sawmills were forced to pay inflated prices for timber. This violated EU antitrust laws according to the court and it rejected the defence put forward by the Sate that the claims were barred by the statute of limitations.
Damages have not been determined and it is expected that this will take a long time as the claims date back to 1978.
A central point in this case rests on what this decision may mean for the European Union and how competition laws may affect governmental agencies. It underlines the fact that antitrust legislation applies to all entities private and public.
