Newsletter antitrust law: Ninth amendment of the GWB in force
The ninth amendment of the German Act Against Restraints of Competition (Gesetze gegen Wettbewerbsbeschränkungen, GWB) will enter into force on 9 June 2017. The German cartel law experiences one of the most profound changes for a long time.
During the last moments in the legislative procedures it was a matter of urgency, as, by means of the amendment of the GWB, it was also intended to implement the so-called EU directive on cartel damages in due time by 27 December 2016. However, it was for some time foreseeable, that it was not possible to meet the deadline. This was not so much due to facts concerning the implementation of the directive, but rather the far-reaching other amendments, the draft bill of the Federal Ministry of Economics (Bundeswirtschaftsministerium) provided for.
1. Overview of the amendments
With the implementation of the EU directive on cartel damages there are now numerous new regulations, a major part of which is plaintiff-friendly in respect of the enforcement of private claims for compensation concerning cartel damages.
The introduction of a corporate liability and the closure of the so-called "sausage-gap" ("Wurstlücke") are intended to ensure an enforcement of the cartel law and imposed fines which is as effective as possible in the current practice of the authorities.
Within the scope of abuse of a dominant position and merger control, additional assessment criteria have been incorporated into the law, which are intended to amend the cartel law regarding the challenges of the digital age.
What was fiercely discussed in advance, was the new trigger regarding merger control which enables the German Federal Cartel Office (Bundeskartellamt) in future to decide whether to examine mergers depending on the value of the respective transaction.
With the facilitation of press cooperation below the editorial level, the legislator is reacting to the current difficult situation of the print media sector.
In the “lee” of the ninth amendment of the GWB, it is also intended to introduce a competition registry, in which, among other things, infringements against cartel law are recorded, which have a significant impact on cartel offenders in practice.
However, what is not included in the amended law, is the planned increase of the Federal Cartel Office’s competence in the area of the German Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, UWG) and consumer protection.
2. The amendments in detail
2.1 The implementation of the directive on cartel damages
By means of the ninth amendment of the GWB, the European requirements to improve the private enforcement in the area of cartel law are implemented by the German legislator. The amendment of the law provides the establishment of a variety of especially plaintiff-friendly regulations. Especially the introduction of a statutory presumption in respect of providing evidence of damage, claims of the plaintiff to procure evidence and a period of limitation which is extended to five years will improve the prospects of success of so-called follow-on-lawsuits by means of which companies may claim compensation for damages caused by a cartel.
By introducing obligations to disclose evidence in view of a possible transfer of surcharges arising from a cartel to the next level of trade, the legislator also introduces instruments which can benefit sued cartel members in legal proceedings. Furthermore, regulations have been incorporated into the law which privilege principal witnesses, and, under certain circumstances, also small and medium-sized companies vis-à-vis private compensation claims in contrast to other cartel members.
2.2 Introduction of a corporate liability and closure of the "sausage gap".
By introducing a corporate liability which is oriented to European law, fines can also be imposed on parent companies of groups - even if these companies were not members of a cartel. This new set of rules shall take into account a group parent company’s possibility to exert influence. However, it can lead to a higher level of fines in future.
Already in the course of the last amendment, the legislator had tried to prevent companies from evading the imposition of high fines by skilfully changing their group structure. However, there was still need for action after a group of companies of a sausage manufacturer recently succeeded in evading the imposition of an antitrust fine in the amount of EUR 128 million because it had carried out restructurings (this case has attained attention under the eye-catching designation "sausage gap"). In order to close existing liability gaps, companies shall be liable for fines imposed to a company it has taken over, both in the case of a (partial) universal succession, as well as in case of a pure "economic succession", as it is already enshrined in European law. If a restructuring in a group is made, this applies independent of the fact whether the company being part of a cartel legally survives or not. With this regulation it is planned to prevent evading liabilities by “selling out” a company which is involved in a cartel, for example, by means of an asset-deal.
2.3 Additional assessment criteria in respect of the abuse of a dominant market position and merger control
Criteria to evaluate markets within the scope of abuse and merger control are supplemented. In future, also free of charge service relationships shall be taken more into account on multilateral markets, such as online platforms on which free of charge usage services are in a close connection with advertised services against payment. In addition, the criteria which are considered in order to determine whether a company has a market-dominating position are adapted to the special features of digital markets and online-platforms. From now on, facts, such as network effects, access to competition-relevant data or the willingness of platform users to switch their providers will become relevant for the assessment of a company’s market position.
2.4 New trigger in respect of merger control
By introducing the ninth amendment of the GWB, a new trigger, the application of which is independent of the amount of the relevant turnover, is incorporated into law. This results in the Federal Cartel Office being able to even examine mergers of companies which include at least one party generating lower turnovers if the transaction has a value of more than EUR 400 millions for the buyer. In this respect, the legislator is reacting to a company’s importance in competition matters indicated in the transaction value (for example, in the form of a high potential for innovation). The purpose of the amendment is, in particular, to be able to examine the acquisition of companies with successful business models which are based on data and the internet.
2.5 Press cooperation / mergers of broadcasting companies
The ninth amendment of the GWB will allow newspaper publishers to closer cooperate in economic terms in publishing matters. Hereby, for example, processes regarding the joint sales and distribution, respectively the joint advertising marketing between competitors are facilitated - both in the print and internet business. Hence, it is provided for publishing houses to have the opportunity to save costs and, in the light of the fierce competition with other media companies, to lower in economic terms the competitive pressure weighing on them. What is not included in the statutory privilege, is any form of editorial cooperation between the publishing houses.
Moreover, the ninth amendment of the GWB facilitates mergers of broadcasting companies: in future the Federal Cartel Office examines mergers only if both companies together generate turnovers in the amount exceeding EUR 62.5 million (the previous threshold was EUR 25 millions). Such a regulation has been effective for newspaper publishers already since 2013.
2.6 Competition registry
In order to protect competition, the federal government has recently decided on the introduction of a competition registry to be administered nationwide at the Federal Cartel Office. In future, it shall be easier for public-sector customers to verify whether companies in the role of potential contractors have committed punishable acts or other serious infringements (for example, cartel law infringements) which would require, respectively justify an exclusion from taking part in tender procedures. In case, an estimated contract value equals or exceeds the amount of EUR 30.000 and in the period prior to the awarding of a contract, public-sector customers will be legally required to retrieve information from the Federal Cartel Office about the respective bidding company in respect of infringements it has probably committed in the past. Facts, such as final convictions and orders of punishments due to serious crimes, even violations against labour law and antitrust laws are stored in the electronic register.
As a rule, the respective records will be automatically deleted from the competition registry after a period of three, respectively five years. Alternatively, concerned companies have the opportunity to carry out a so-called "self-purification" in order to obtain the right to have the concerned entry deleted.
The federal government’s draft bill with respect to the introduction of the competition registry must still pass through the legislative process and is not yet in force.
If you have questions, please feel free to contact us.
Dr. Andrés Martin-Ehlers, LL.M.
Telephone: +49 69 707968 182
Telefax: +49 69 707968 111
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Dr. Daniel Dohrn
Telephone: +49 221 2091 441
Telefax: +49 221 2091 333
Dr. Simon Spangler, LL.M.
Telephone: +49 69 707968 183
Telefax: +49 69 707968 111