The State of Baden-Württemberg faces potential liability of up to Euro 500 million following a precedent-setting ruling by the Stuttgart Court of Appeals in one of Germany's most significant antitrust cases. On August 15, 2024, the court held the state liable for violating EU competition laws through its centralized sale of timber, in a decision that marks the first time a German court has established civil liability in a major cartel case without a prior decision from an antitrust authority.
The case, referred to as the "round timber cartel" (Rundholzkartell), centers on Baden-Württemberg’s decades-long practice of bundling and jointly selling timber from state, municipal, and private forests. The court found that this arrangement, which took place between 1978 and 2015, restricted competition and led to inflated timber prices, ultimately harming sawmills that depended on the state as a dominant supplier.
Ausgleichsgesellschaft für die Sägeindustrie GmbH, a legal services provider representing 36 sawmills, initiated the lawsuit, arguing that Baden-Württemberg’s timber distribution practices forced sawmills to pay inflated prices, resulting in significant financial losses. The court's ruling confirmed that the state's actions violated EU antitrust laws and upheld claims dating back to 1978, rejecting the state’s defense that these claims were barred by the statute of limitations. Additionally, the ruling validated the bundling of claims through a third-party vehicle, overturning previous lower court decisions that had dismissed this approach.
Quinn Emanuel Urquhart & Sullivan, LLP, an American white-shoe law firm headquartered in Los Angeles, California, represented the plaintiffs in the case. “This is a groundbreaking ruling that sends a clear message: state entities are not above the law when it comes to antitrust violations,” said Prof. Dr. Rüdiger Lahme, one of the lead attorneys from the firm.
The court’s ruling does not settle the financial aspects of the case, as the exact damages remain to be determined in subsequent proceedings. The Stuttgart District Court will now assess the quantum of damages, a process expected to take several years given the complexity of the case and the potential financial impact on the state.
This decision comes after years of legal challenges and scrutiny from Germany’s Federal Cartel Office (Bundeskartellamt), which had previously ordered Baden-Württemberg to cease its centralized timber sales in 2015. The state's appeal against this order was rejected by the Düsseldorf Court of Appeals in 2017, although the Federal Supreme Court overturned the decision on procedural grounds in 2018. Despite this, the antitrust violation remained unresolved until now.
The next phase of the legal battle will focus on determining the exact compensation owed to the sawmills. The plaintiffs have indicated that their damage estimates are conservative, suggesting that the final sum could be substantial. Many of the sawmills struggled financially due to the inflated timber prices, with some even going out of business.
Legal experts see this ruling as a turning point in German and EU competition law, especially in cases involving state entities. The decision reinforces that antitrust rules apply equally to public bodies engaged in commercial activities, potentially reshaping the legal landscape for future cases involving similar practices.
The ruling is open to appeal before Germany's Federal Court of Justice (Bundesgerichtshof), which will review legal aspects of the case. However, legal analysts believe the core principles of the decision will likely stand, setting a precedent for holding state entities accountable for antitrust violations.
With Baden-Württemberg potentially on the hook for Euro 500 million, this case has already made history. Its broader implications, however, may ripple across the European Union, reshaping how competition laws are enforced against state entities and setting the stage for similar litigation in the future.
