It has only been three years since the Austrian cartel law was last amended. Whereas at that time the focus was on the creation of new authorities (Federal Competition Authority and Federal Cartel Prosecutor) and procedural changes, the new amendment primarily concerns substantive issues. The present amendment is, for the time being, the last brick of alignment with EC cartel law. As regards the latter regime, EC Regulation 1/2003 had brought a complete paradigm shift in enforcement. Instead of constitutive exemption decisions by the European Commission for notified cartels, there is now a decentralized system of exemption by law on a Community level, where the undertakings themselves have to assess at their own risk, whether their practice infringes cartel law or not. The present alterations to Austrian cartel law, which have entered into force at the beginning of 2006, primarily reflect this change in the European law framework and are justified alone due to the fact that the existence of deviating substantive provisions for merely domestic cases will be by and large avoided in future. In more detail, the changes look as follows:
As is already the case on a Community level, from now on also cartels limited to Austria in their effects do no longer require an explicit approval decision (by the Cartel Court); in fact, there is no such decision anymore at all. More precisely, those cartels are automatically exempted which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which do not impose on the entrepreneurs concerned restrictions which are not indispensable to the attainment of these objectives, or afford such entrepreneurs the possibility of eliminating competition in respect of a substantial part of the products in question. The relevant provision reproduces Art 81 EC Treaty almost literally.
The new legal situation, however, also entails a reduction of legal certainty for the undertakings concerned, since they and their attorneys respectively henceforth have to assess for themselves in case of cartel agreements and concerted practices with merely local or regional effect, whether the prerequisites for justification are fulfilled. It is exactly in a field like cartel law, for the interpretation of which economic deliberations play an outstanding role, that this may – even for the specialist – be extremely difficult. In any case, due to the far-reaching alignment of Austrian with EC cartel law in this field the often hard to decide question, whether an agreement is capable of affecting interstate-trade (in which case EC cartel law is applicable) loses an essential part of its importance.
Also, the former peculiar distinction between horizontal and vertical competitive restraints is not of significance anymore. Thus, there are no special provisions for vertical distribution restraints in future. Till now, such vertical distribution restraints only had to be notified to the Cartel Court while submitting a sample agreement, but could be legally agreed upon and implemented before a possible prohibition decision. As opposed to this, horizontal cartels, i.e. agreements between undertakings operating at the same market level, were void prior to the approval by the Cartel Court and could not be implemented till then without triggering a fine. For both kinds of competitive restraints, the system of exemption by law applies henceforth. This also means, however, that vertical restraints not fulfilling the exemption requirements are prohibited, for which reason they are void and must not be implemented.
Furthermore, the differentiation between cartels by intention and cartels by effect – in the latter case a competitive restraint is not intended – has been dropped; the privileged treatment of cartels by effect – they were implementable prior to a prohibition decision – is cancelled. The special provisions regarding non-binding association recommendations have also been cancelled. A tightening compared to Community law is constituted by the fact that recommendations to observe certain prices, price limits etc. shall be forbidden even if they cannot be considered a cartel, unless these recommendations do explicitly refer to their non-binding character and no economic or social pressure is and shall be exerted for the purpose of their enforcement.
It is also under the new legal regime that the Federal Minister of Justice can determine by means of a regulation that certain groups of cartels (hitherto e.g. joint purchasing agreements, joint bidding agreements in public procurement) fulfil the exemption criteria. However, this can only be done in a declaratory manner, therefore not – as was the case so far – in a constitutive way. It remains to be seen, though, to which extent this authority will be made use of.
Apart from the exceptions already known for de minimis cartels, resale price maintenances for books, cooperatives and credit institutions, a new exception to the cartel prohibition is introduced for agricultural production businesses.
Cartels admitted under the old but forbidden under the new legal regime may be implemented until December 31, 2006 latest.
In this regard, there is especially a raising of the annual turnover thresholds for the obligation to notify. Henceforth, the threshold for the domestic annual turnover of all undertakings concerned in total is EUR 30 million (instead of EUR 15 million as hitherto). The de minimis threshold for the worldwide annual turnover of at least two undertakings concerned is raised from EUR 2 million to EUR 5 million each (the threshold for the worldwide annual turnover of the undertakings concerned in total – EUR 300 million – remains unchanged). Furthermore, certain concentrations with a negligible domestic effect are as such exempted from the obligation to notify: Only one undertaking has more than EUR 5 million annual turnover in Austria and the other undertakings concerned together do not have more than EUR 30 million annual worldwide turnover in total.
As regards joint ventures, there is an alignment with EC merger control: Henceforth, the only thing crucial for the existence of a concentration is, whether the joint venture fulfils on a lasting basis all the functions of an independent economic entity (full-functional joint venture). Therefore, it is not decisive any longer, whether this leads to a co-ordination in the competitive conduct of the founding undertakings with respect to one another or to the joint venture (co-operative joint venture). Nevertheless, effects of the joint venture fulfilling the criteria of a cartel do fall under the cartel prohibition, a non-prohibition under the merger control regime being irrelevant in this respect.
From now on, mergers shall no longer be notified to the Cartel Court, but to the Federal Competition Authority instead. The flat-rate fee for this is EUR 1.500,-. Due to the fact that – according to the new regime – the five months time period for a decision by the Cartel Court is only triggered by the motion for a closer examination through one of the Public Parties (instead of the arrival of the notification, as hitherto), the proceedings in such a case take about a month longer in practice. The right of other undertakings to issue a statement with respect to the merger within 14 days from the merger notification is maintained. If one of the Public Parties files a motion for closer examination with the Cartel Court, undertakings affected may issue statements to the Court without any deadline. The new regime, however, still does not grant third undertakings the status of a party, so that they are still not entitled to a certain treatment of their statement. Besides, the publication of the notification does not take place in the Wiener Zeitung any longer, but on the website of the Federal Competition Authority (www.bwb.gv.at).
Instead of a number of different enforcement powers of the Cartel Court, the Court now has to put an end to infringements of cartel law prohibitions and give the respective orders required in a uniform manner. Such orders may also concern changes of the structure of the undertaking, i.e. divestitures, although they must not be disproportional. As a further innovation, the Cartel Court may – instead of an order for putting to an end – declare commitments of the undertakings concerned binding, if it is to be expected that, as a consequence, there will be no further infringements.
As opposed to the existing judicial practice, the Cartel Court is now explicitly granted the authority to establish also for the past, in what way certain facts are subject to the Cartel Act, provided that there is a legitimate interest to do so. This is of importance, since – according to the old legal regime – the sued entrepreneur was able to avoid an order by the Cartel Court by simply ceasing the incriminated conduct prior to (possibly shortly before) the delivery of the judgement. Generally, the Cartel Court´s authority of establishment provides the undertakings concerned at least with some legal certainty in a system of exemption by law. However, the Cartel Court is still not granted the authority to establish the applicability of EC cartel law; the relevant monopoly, therefore, still lies with the European Commission. Yet the authority of the latter only refers to cases touching upon public interest without the undertakings concerned having legal title thereto.
In the field of sanctions, the principle of fault is now explicitly contained in the law: Only intentional or careless infringements of cartel law can trigger fines. The hitherto existing minimum amount of fines is abolished. The prescription period for the motion to impose a fine is now five instead of three years. Another novelty is the coercive penalty for enforcing decisions of the Cartel Court. The coercive penalty per diem amounts to up to 5% of the last year´s average daily turnover. The initial plan to grant the Federal Competition Authority the power to order the giving of information and the submission of documents by means of a principally unappealable decision was eventually not realized.
This new provision serves the purpose of facilitating the detection of cartel infringements. Accordingly, the Federal Competition Authority can refrain from filing a motion for the imposition of a fine, if the undertaking in question has (a) ceased its activity in the cartel, (b) informed the Federal Competition Authority of the cartel, before it has come to know about it itself, (c) co-operated with the Federal Competition Authority hereinafter in an unrestricted and speedy manner in order to completely clarify the case and (d) not forced other participants to participate in the cartel. If the Federal Competition Authority has already come to know about the cartel in question, it can file a motion for a reduced fine. Up to date, in case of forbidden implementation of a cartel, one only had to take into consideration the contribution in the detection of the infringement when assessing the fine.
Contrary to the legal situation on an EC level, the said provision does not confer a right to being treated in the above way; rather, it is within the discretion of the Federal Competition Authority, whether or not to file a motion for imposition of a fine and reduced fine respectively. Furthermore, the requesting undertaking shall only be given a non-binding notice on the granting of the leniency-status. At least it is forbidden to use information derived from the network of the Member States´ authorities originating from a request for leniency treatment as a basis for a motion to impose a fine. Beyond this, the Federal Competition Authority has meanwhile – in accordance with the statutory provisions – drawn up and published on its website a guide on its practice in terms of leniency.
As usual, the above information only gives an outline of the regime change. For detailed questions in this context, you are kindly requested to contact our law firm.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.