A German court has ruled that the State of Baden-Württemberg breached antitrust laws by managing timber contracts over a 27-year period, potentially liable for €500 million (or US $553 million) in damages.
Wood Central understands that the plaintiff, Ausgleichsgesellschaft für die Sägeindustrie GmbH, which represents 36 local sawmills, has sued the state, alleging that cartel-like practices resulted in the mills paying excessive prices – with sawmills owed €270 million in damages plus interest.
“The defendant state culpably violated the ban on cartels … through the agreements on the joint marketing and bundled sale of Roundwood, insofar as these agreements were made with municipalities with a forest area of more than 100 hectares,” the court said.
“These municipalities could have marketed the wood from their forests without the help of the state. In contrast, smaller forest owners could only market wood with the help of the defendant state, so there is no cartel violation in this respect.”
The ruling by the 2nd Civil Senate of the Stuttgart Higher Regional Court on Thursday, which has yet to be published online, claims the state was a vehicle for sawmills to breach German antitrust laws from 1978 until 2015.
According to Rüdiger Lahme, partner at Quinn Emanuel Urquhart & Sullivan LLP, one of the sawmill representatives at counsel, the judgment was the first standalone decision based on the Treaty on the Functioning of the European Union’s Article 101, which has been reached without the court relying on a competition law authority’s precedent.
Mr Lahme said the judgment showed that German states must follow antitrust laws when engaging in economic activity.
“This decision emphasises that there is no carte blanche for states in this regard; no entity stands above the law,” Mr Lahme said.
As reported by the UK-based Law360, the judgment establishes the state’s liability but not how much the state now owes back to the sawmills—the lower Stuttgart regional court will decide this. Due to the legal importance of the case, the higher regional court has allowed the dispute to be appealed to the German Federal Court of Justice.
According to court documents translated from German to English, the state sold wood on the market in uniform offers, sourcing the timber from its forests, municipalities, and private landowners. It alleges that the state’s agreements with landowners who owned forests over 100 hectares had impaired competition, with timber sold to sawmills without determining its origin when setting the price.
The higher regional court—chaired by Judge Christoph Stefani—also dismissed part of the sawmill group’s claims worth €163 million, saying they were concerned about procurement processes not handled by the defendant state and for which the group had not provided supporting evidence.
The new decision overrules the 2022 decision on “log wood cartel.”
In January 2021, Timber-Online reported that the “log wood cartel” case, the 30th civil division of the Regional Court of Stuttgart, dismissed the class action lawsuit against the state for cartel damages of around €450 million (at the time).
At the time, the division dismissed the lawsuit, claiming that the “class action collection” was inadmissible in the Antitrust Law since it violated the Legal Services Act. “The present assignment of the sawmills’ claims to the plaintiff is, therefore, void.” Consequently, the plaintiff could not take over any antitrust damages claims against the defendant, the state of Baden-Württemberg, from the sawmills and is therefore not entitled to conduct the present lawsuit.
In the case of antitrust claims for damages, “class action collection” violates §§ 3, 2 Abs. 1 RDG in connection with § 10 ABs. 1, § 2 Abs. 2, § 11 Abs. 1 RDG.