On 15 July, the German Federal Cartel Office (FCO) prohibited the German state Baden-Wuerttemberg from continuing joint timber marketing through the state-owned company Forst BW.
Forst BW currently jointly markets timber from state-owned forests as well as from municipal and private forests. In its decision, the FCO found the agreements on joint marketing of coniferous timber and trunk wood to infringe German and European competition law. The FCO stated that woods and forestry form an economic sector to which the competition rules apply, despite being natural and recreational in character. Agreements are only exempt from the application of competition law if the forest is no larger than 100 hectares (approx. 247.11 acres) and is owned by a public corporation, a private owner or a forestry association.
In its decision, the FCO has prohibited the state of Baden-Wuerttemberg and its employees from selling and invoicing wood on behalf of other wood farmers as well as from providing connected services such as price labelling, coordination of timber harvest, timber inventory, and list printing for wood prices. The decision does not affect any other kind of cooperation between the other wood farmers.
In its decision, the FCO distinguished between different sizes of timber plants to take into account the different challenges wood owners have to face in making the necessary adjustments to marketing:
- The prohibitive character of the decision will enter into effect on 1 January 2016 in relation to wood owners whose forest area is 100 hectare or more, and on 1 July 2016 in relation to smaller forest areas.
- As of 1 July 2017, the FCO prohibits Baden-Wuerttemberg from carrying out annual operational planning, forest engineering management, and forest ranger services if these services are carried out by the same persons who currently farm the forest and/or have access to information concerning the state’s marketing of timber.
- Moreover, from 1 July 2016 Baden-Wuerttemberg is prohibited from carrying out the services if the state does not charge cost-covering fees for them. Currently, Baden-Wuerttemberg, which as a public body does not have to work on a for-profit basis, does not charge cost-covering fees to wood owners and thereby establishes barriers to market-entry for potential competitors.
The FCO said it was forced to release a prohibition decision after Baden-Wuerttemberg rescinded from a negotiated settlement agreement in 2014. In a press release, the authority pointed out that the application of economic principles to the forestry sector works well in other German states.
The decision is not yet final and can be appealed to the Higher Regional Court of Düsseldorf. Following relevant statements by Baden-Wuerttemberg's government, the FCO is expecting the decision to be contested at court.