The Germany-wide digital Competition Register is up and running

Digitalisation is advancing in public procurement. In the new digital Competition Register, data on offences that can result in exclusion from tender procedures is now being collected from across Germany. Entries in the Competition Register can be retrieved by public authorities with just a few clicks, making compliance systems and cooperation with investigative authorities even more important. In the long run, the importance of the Competition Register will probably not be confined to public procurement. As is often the case with digitalisation, it can be expected that this digital transformation will also have an impact on other areas.

More than four years have passed since the German legislator decided to introduce a Germany-wide Competition Register to protect competition in public contracts and concessions. It is designed to facilitate public authorities' review of whether companies must, or can, be excluded from tender procedures due to offences attributed to them. Since 1 December 2021, German authorities have been obliged to notify certain offences to the Federal Cartel Office (Bundeskartellamt), which collects and registers this information. Simultaneously, public contracting authorities have also been able to access the Competition Register for the first time. From 1 June 2022, they will be obliged to retrieve the information stored in the Competition Register before awarding a contract above a certain value.

The offences recorded in the Competition Register include: money laundering, corruption, fraud affecting public budgets, the non-payment of social security contributions, tax evasion, violations of both the Act to Combat Clandestine Employment (Schwarzarbeitsbekämpfungsgesetz) and the Minimum Wage Act (Mindestlohngesetz), as well as cartel infringements and public procurement fraud. This list will probably be expanded further. For example, violations of the Supply Chain Act (Lieferkettensorgfaltspflichtengesetz), which comes into force on 1 January 2023, will be registered. It is also being evaluated whether the EU Commission's antitrust decisions can be included in addition to antitrust decisions taken by the Federal Cartel Office. Legal infringements of companies and company representatives are registered if there is a conviction by final judgment, a penalty order, or an unappealable decision to impose fines. Cartel infringements are an exception to the rule. Due to the typically lengthy appeal proceedings, they are registered at the same time that a fine is imposed.

No automatical exclusion from public procurement procedures

An entry in the Competition Register does not automatically result in a company being excluded from public procurement procedures. This decision will continue to be made based on the nature of the violation recorded in the Competition Register and a prediction about the respective company's legally compliant, proper and diligent performance of the contract. Corruption and money laundering offences, for instance, result in mandatory exclusion from tender procedures. In contrast, an exclusion in the event of cartel infringements is at the discretion of the public contracting authorities.

The importance of the Competition Register could extend far beyond public procurement. Companies may request access to information on the entries in the Competition Register concerning them. That information notice could become a 'certificate of good standing' for companies. It must be expected that, in preparing their audit opinions, auditors will request that an information notice be submitted and explanations be given where there are entries. Furthermore, it is conceivable that contracting partners and investors might do the same in contractual negotiations.

Information on violations of the law is digitally stored in the Competition Register for three or five years, depending on the category of offence. Companies that depend on public contracts or concessions, or which need a clean 'certificate of good standing' and therefore want to delete entries from the register earlier than provided for by law, may 'self-clean'. To delete an entry, they must provide proof that they have actively cooperated with the investigating authorities and the public contracting authorities: by comprehensively clarifying the facts and circumstances associated with the registered offence, that they have undertaken to compensate any damage, taken effective compliance measures, and remedied any default of payments of taxes, charges or social security contributions.

Compliance systems' review

Due to the cooperation requirement, companies will have to plan a course for successful 'self-cleaning' at an early stage and prepare themselves to actively cooperate in case an investigation is launched. Moreover, companies will have to review their compliance systems and adapt them to the standards required by the authorities. The Federal Cartel Office has provided some guidance. On 25 November 2021, it published guidelines on the early deletion of an entry from the Competition Register that, among other things, includes indications of compliance standards.