In 2006, we reported on the 2005 reform of the German competition and antitrust law to bring it closer in line with the corresponding EU legislation. We believe an update at this time is appropriate.

The reform of the German Act Against Restraints of Competition (GWB) that came into effect on July 1, 2005, was intended to reduce the administrative bureaucracy often associated with antitrust cases in Germany. As a replacement for prior approvals, it imposes a system of self-assessment. In addition, company mergers that impact the German market may require merger control clearance by the Federal Cartel Office (FCO) or the EU Commission before the closing of the transaction. Noncompliance can be costly.

Harmonization With EU Law Regarding Restrictive Agreements And Concerted Practices

The central provision of the general prohibition against restrictive agreements and practices was extended to mirror Article 81 (1) of the EU Treaty. Previously, only agreements and arrangements between competitors (horizontal agreements) were covered. Agreements between companies and their suppliers or distributors (vertical restrictions), on the other hand, were only prohibited under certain specific provisions found in the GWB. Its revised Section 1 simplifies this regime and prohibits all agreements, arrangements and concerted practices between undertakings which have the object or effect of preventing, restricting or distorting competition, making no distinction between horizontal and vertical restrictions. The special provisions on vertical restrictions have been deleted. A general exemption provision, which is almost identical to Article 81 (3) of the EU Treaty, was introduced into Section 2 of the GWB. It contains a direct reference to the EU block exemptions on the application of Article 81 (3) of the EU Treaty. Consequently, the EU block exemptions now also apply to agreements that are purely domestic and have no effect on trade between the EU member states.

In addition, new rules on the parallel application of German and EU antitrust law have been introduced. For agreements which affect the trade between member states (and thus fall under EU rules), German law may be applied alongside its EU counterpart. However, in any case of conflicting provisions, EU law will prevail. These changes align Germany's antitrust law with the EU rules and with the national rules of most other EU member states. They also contribute to a level playing field in the EU and remove the risk of conflicting standards within the EU in the assessment of agreements and practices of international relevance.

German Statutory Exemptions Abolished

Under the prior German competition law regime, a number of statutory exemptions allowed companies to obtain individual clearances from the FCO for certain agreements or cooperative ventures. This bureaucratic system was abolished with the reform and replaced by a system of EU-style self-assessment. Agreements that fulfill the conditions of the general exemption in Section 2 of the GWB are now automatically valid and enforceable without an administrative decision. The onus has been placed on companies and their advisers to assess whether the conditions of the general exemption are fulfilled.

"No-Action Letters"

The new German system of legal exemptions and self-assessment has resulted in some increased legal uncertainty for undertakings with respect to the compliance of agreements and cooperative ventures with antitrust law. This uncertainty applies in particular when large investments are contemplated and in such cases where companies intend to enter into new forms of agreement for which no precedents or administrative guidance exist.

In limited recognition of these risks, the FCO has been granted the authority to decide in writing that no administrative measures in a particular case are necessary (the so-called "no-action letters"). However, the decision of whether to issue a no-action letter is entirely within the discretion of the FCO; no applicant has any legal right to such a letter. Actual practice has shown that fewer requests for the issuance of a "no-action letter" have been made than was initially anticipated. Although at the time some commentators also suggested that the FCO should use the no-action letters as an instrument in order to establish a system of model decisions, there is little evidence that this advice has been followed by the FCO. The legal profession and its clientele seem to have adjusted to the new responsibilities without the need to resort to either a direct request for a no-action letter or to a databank of "precedential" letters.

In other cases where it was always clear that a no-action letter would not be appropriate—for example, because the FCO is entitled to publish them—it was thought that it might still be possible to discuss the admissibility of an agreement with the FCO in order to obtain some informal guidance. The FCO indicated at the time, however, that it was not prepared to take over the role of a consultancy institution nor to assume the tasks and responsibilities of legal advisers. The FCO has held rather firmly to its expressed intentions.

Extended Powers For Authorities And Higher Fines

The abolition of the system of prior notification and administrative clearance has made it necessary to extend the FCO's powers to enable them to monitor the behavior of undertakings more effectively. The armory for cases of misbehavior now includes:

  • The power to impose active measures upon companies
  • The right to impose injunctive measures in cases of urgency where irreparable damage must be prevented
  • The ability to declare commitments offered by companies as remedies against cartel violations legally binding
  • The power to revoke by administrative decision the application of an EU block exemption to an individual agreement
  • The power to impose fines

The maximum fine limits have been increased substantially. The previous total maximum of three times the additional revenues generated from a cartel violation has been abolished. Instead, fines of up to 10 percent of the annual revenue of the relevant undertaking can now be imposed. This means the authorities no longer have the burden of proving that the anti-competitive conduct has actually generated additional revenues, which was often very difficult to ascertain.

Civil Remedies

In a speech at the French Supreme Court on October 17, 2005, in Paris, EU Competition Commissioner Neelie Kroes stated, "The first advantage of private enforcement is direct justice, which allows the victims of illegal anticompetitive behaviour to be compensated for the loss they have suffered." These sentiments have been somewhat slow in their realization.

Only relatively recently has this possibility been actively pursued by private litigants, and even then one must concede that the EU is still in its infancy as to such cases in comparison to the United States. What has changed most in Germany and the EU is the imposition of tougher administrative sanctions. In Germany, in what may be somewhat inspired by the U.S. legal system, the legislature has strengthened civil remedies. For example, the right to sue and claim damages based upon antitrust law violations has been considerably extended. Anyone "affected" by a violation of antitrust law now has standing to sue. Furthermore, the revised act now provides for alleviation of the burden of proof and other procedural changes to encourage private antitrust enforcement.

For the concrete producers Cemex, Dykerhoff, Heidelberger Cement, Holcim, Lafarge and Schwenk, the filing of a private action for damages means additional liability exposure to the already record fine (at the time) of €660 million, which was imposed by the EU Commission for price fixing. The private action seeks damages for up to €350 million, including interest.

This private action was filed in 2006, accepted by the Higher Regional Court of Düsseldorf in 2008 and is pending. A unique element to the private action is that the claim was not filed by the aggrieved parties themselves but by the Belgian enterprise Cartel Damage Claims (CDC) on behalf of the aggrieved parties. CDC's business model consists of acquiring outstanding claims from customers who have been affected by third party cartels, as in the case against the concrete producers in which they filed the action. According to the competition authorities, the cartel agreed on price fixing, distribution channels and sales quotas from 1993 to 2002. In allowing a "subrogation model" for the financing of litigation for antitrust damages, this decision of the Düsseldorf court to generally accept the filing of a private action by CDC may have a groundbreaking effect. The individual damages suffered by a company from an antitrust infringement are usually rather low in comparison to the costs of pursuing a separate legal remedy. Through a pooling of their claims and resources, a damages action can then make economic sense from the individual plaintiff's perspective.

Civil action lawsuits against oligopolies for damages resulting from antitrust violations were possible before these reform developments in Germany. However, the claims were difficult to prosecute and prove. Mostly such lawsuits resulted in settlements, without court proceedings, because the legal procedures on burden of proof, evidence of damages, joinder of parties and claims were uncertain. With the 2005 reform, it has become significantly easier for the injured party to prevail under the same facts. Whereas prior to the reform, claimants would generally have maybe a 25 percent chance of success, now the chance appears more like 75 percent.

If the pooling of claims in a single action, such as in the cement case, prove successful, it would seem likely that more companies like CDC may look for further "business" opportunities in Germany to consolidate and to prosecute the claims of injured parties. CDC itself is rumored to have turned its attention to an elevator cartel involving the companies Kone, Otis, Schindler and Thyssen-Krupp. In this case the EU Commission levied a (new) record fine of €992 million in February 2007 against the participants. In a surprising turn, and in addition to the imposition of that fine, the EU Commission announced in 2008 that it had filed a civil lawsuit against the members of the elevator cartel claiming damages as a third party based upon the argumentation that the EU had paid inflated prices when purchasing elevators for EU buildings. This civil action by the EU Commission has been widely reported in the European press and is regarded as open encouragement to any company affected by anticompetitive behavior to actively consider the filing of an action for damages.

Compliance With German Merger Control Rules

In contrast to the cartel law changes, the revisions to the merger control regime appeared relatively minor at first sight and related only to procedural aspects. Hence, the 2005 reform was not expected to have a large impact on merger notifications.

However, the FCO appears to have taken the reform as an opportunity to monitor merger notification compliance more closely than ever before. Historically, FCO fines imposed for failure to obtain merger clearance before closing a deal were reported only sporadically. Even if imposed, the fines for noncompliance appeared "reasonable." In the aftermath of the 2005 reform, the FCO issued new guidelines on fines in 2006, indicating to the market by increased levels in possible fines that it was changing its overall approach and that it would henceforth closely monitor merger notification compliance. This "message" appears to have been overlooked by some market participants. Since 2008, the FCO has followed through with its new approach. In December 2008, it imposed a fine of €4.5 million on the U.S. candy and pet food giant MARS for closing on a transaction before merger clearance was granted. In early February 2009, the FCO levied a fine of €4.13 million against the German publishing house DuV (Druck- und Verlagshaus Frankfurt am Main GmbH) because the FCO realized in one of DuV's recent merger applications that the company had failed to file a notification for another transaction concluded in 2001, even though it had been obvious to DuV that the transaction required clearance.

In short, not all applicable law to a transaction is found at the EU level. National laws must be consulted and their ramifications considered with respect to any transaction. Companies which conduct a transaction in Germany are well advised to consider German merger control rules closely. In case of doubt, a merger notification should be filed.


Overall, the 2005 reform of the GWB has been a positive step forward toward the implementation of comparable antitrust law standards throughout the EU. In adopting the EU antitrust rules in both substance and procedure, German law helps eliminate uncertainties otherwise associated with the dual regulation of agreements with international relevance. However, the higher risk inherent in a system of self-assessment for legal conformity, coupled with the easing of procedural restraints against the pursuit of private actions for damages, will make it ever more important for companies active in Germany to regularly include antitrust and competition law assessments in their overall legal compliance reviews. Given the EU Commission's and the FCO's increased scrutiny of potentially anticompetitive practices, companies are likely to conduct antitrust and competition law audits on a regular basis in order to comply with "good business practice" and foreclose liability risks.

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