The German mediation committee, comprising the Bundestag [German Parliament] and the Bundesrat [Federal Council], agreed on a compromise of the 8th amendment of the German Act against Restraints of Competition (GWB) on 5 June 2013. The Bundestag and Bundesrat now have to approve the compromise. The law will come into force one day after promulgation. This is expected to be in mid July.
Below, we present the most important changes of the GWB.
1. Merger Control
1.1 Statutory health insurance
In future, German merger control will be applicable to mergers between statutory health insurance companies. Furthermore, if the Federal Cartel Office [Bundeskartellamt] plans to prohibit a merger, it must first inform the insurance commission responsible for the health insurance companies (e.g. the Bundesversicherungsamt) and give it the opportunity to make an assessment. The social courts will be competent for any appeal.
The prohibition of both restrictive agreements and abuses of dominant market positions, on the other hand, are not applicable amongst statutory health insurance companies. The prohibitions do still apply, however, to the relation between statutory health insurance companies and service providers.
Minimum turnover of press companies decreased for press mergers
Until now, the minimum turnover of press companies for merger control purposes has been calculated with a multiplication factor of 20. With the 8th amendment of the GWB, the multiplication factor will be only 8 (worldwide turnover of EUR 62.5 million; domestic turnover of one undertaking EUR 3.125 million; domestic turnover of another undertaking of EUR 625,000). Smaller transactions between press companies will therefore not be subject to merger control. All in all, however, press companies are still subject to strict merger control. As most small press companies generate turnover of more than EUR 625,000 and large press companies usually reach the first and second turnover thresholds without application of the multiplication factor, it is highly unlikely that the amendment will significantly facilitate acquisitions of smaller, dependent press companies by large publishing houses, which has been very critically appraised to date by the branch. Through the reduction of the multiplication factor, the de minimis market clause [Bagatellmarktklausel] in the press sector will also be raised from EUR 750,000 to EUR 1.875 million. The reduced multiplication factor will not be applied in the calculation of the de minimis clause [Bagatellanschlussklausel], however.
Facilitation of rescue mergers for press companies
The acquisition of small or medium-sized press companies within the scope of so-called rescue mergers is being facilitated. If the conditions for such a rescue merger have been fulfilled, the acquisition will not even be prohibited by the Federal Cartel Office if the merger leads to a strengthening of a dominant market position. Until now, it was a prerequisite that the acquired company would be leaving the relevant market in the short term without the merger. In the future it will be sufficient if the acquired press company had an annual deficit over the past three years prior to the merger and if its existence would otherwise be endangered. Furthermore, according to the new legal situation, it has to be proven that there is no other potential purchaser who would have found a solution less harmful to competition. The necessity of a merger can be proven by an independent consultant. Before the amendment of the GWB, rescue mergers were only approved if the market share of the acquired company would be absorbed by the acquiring company in any event if it withdrew from the market. This condition has not been adopted in the new GWB.
1.3 Further changes in merger control
German merger control is substantially approximating European merger control with regard to the so called "SIEC-test" (significant impediment of effective competition). The test will replace the former decisive factor of the creation or strengthening of a dominant market position. The dominance test will – as in European law – be a rule example for a significant impediment to competition. In this regard, representatives of the Federal Cartel Office have announced that they intend to adhere to their former decision-making practice, pursuant to which minor increases in market shares can also lead to a prohibition. It remains to be seen whether courts will accept this decision-making practice in case of appeals against prohibitions.
Increased threshold for presuming a dominant market position in merger control
As in case of the control of an abuse of a dominant market position (see section 4. below), in future a market share of 40 % will be necessary for the presumption of a dominant market position within merger control. This will presumably make prohibitions of concentrations with lower market shares more difficult.
Application of de minimis market clause to be judged by the Federal Cartel Office
In the future, a concentration within the scope of a so called "de minimis market" will have to be notified to the Federal Cartel Office. A de minimis market is a market in which goods or services have been offered for at least five years and which had a sales volume of less than EUR 15 million in the previous calendar year. Although the Federal Cartel Office now has to be notified, it cannot prohibit a concentration within a de minimis market even if the concentration significantly impedes effective competition.
Interrelated acquisition processes are treated as one concentration
German merger control considers a multi-stepped acquisition process within two years between the same persons or companies as a single concentration. This decision-making practice of the German Federal Cartel Office has now been explicitly (and clearly) laid down in the law, as in European merger control. The aim is to prevent an evasion of merger control by splitting large transactions up in several small ones.
Chance of remedy in case of a failure to notify a concentration
A concentration that has not been notified to the Federal Cartel Office, despite a notification obligation, can still be remedied: If the concentration has already been executed (infringement of the prohibition to implement a concentration prior to clearance by the Federal Cartel Office), it can be remedied by a subsequent notification. This is a welcome amendment in terms of corporate practice, as the remedial effects through the introduction of the procedure for unbundling companies are dubious according to applicable law. Hence, the legal uncertainties arising from the last amendment of the German Competition Act (2005) have now been dispelled.
2. Further changes in the press sector
Prohibition of anticompetitive agreements not applicable to press wholesaler distribution
Agreements between publishing companies and press wholesalers (in German so called "Presse-Grosso") will be exempted from the prohibition of anticompetitive agreements. This exemption will only apply to agreements governing the performance and consideration or other requirements of a nationwide and non-discriminatory distribution of newspapers and magazines by press wholesalers to the retailing sector.
3. Changes in fines proceedings and proceedings for antitrust law violations
Level of fines for antitrust law violations will be raised
The level of fines for legal persons or associations of persons for a criminal offence committed with intent has been raised to up to EUR 10 million (to date EUR 1 million) and for a criminal offence committed negligently to EUR 5 million (to date EUR 500,000). The German legislator did not deem the former level of fines to be appropriate in relation to the pecuniary benefits of economic crime. The new law will apply in particular to violations of supervisory duties in companies, the consequences of which are infringements of antitrust law.
Liability for fines of a universal or partial legal successor after transformation
With the 8th amendment of the GWB, a new legal basis has been introduced for fining universal legal successors in case of a merger, respectively partial legal successors after a partial succession by demerger pursuant to Sec. 123 para. 1 of the German Transformation Act [Umwandlungsgesetz]. This is to prevent enterprises involved in antitrust law violations from dissolving their legal entity and subsequently merging or demerging the antitrust-relevant assets in order to completely evade fines. Until now, fining a legal successor required very strict conditions. Under the new regulation, however, fines imposed on a legal successor cannot exceed the value of the assumed assets and the amount of the reasonable fine to be imposed upon the legal predecessor.
With the introduction of the 8th amendment of the GWB, the Federal Cartel Office will be explicitly authorized in cartel proceedings to obligate companies to conduct structural remedies that affect the substance of the company – such as selling certain assets – in order to stop antitrust law infringements. This is an approximation towards European law. However, specific rules in certain sectors – such as energy sectors – limit the structural remedies to be imposed by the Federal Cartel Office.
Reimbursement of economic benefits
Within the scope of its order to end an infringement, Competition Authorities will have the opportunity to order a reimbursement of the economic benefit generated through the anticompetitive conduct. Until now, the legality of such orders had not been conclusively clarified.
Constraint of the disclosure duty
Legal persons and associations of persons have extended duties of disclosure in cartel fine proceedings. These duties do not concern the act itself, but the information required to calculate the fine. The duty of disclosure covers information concerning the relevant turnover achieved from the infringement and the company's total turnover. A violation of the duty of disclosure can be fined with an amount of up to EUR 1 million.
No constraint of the disclosure duty with regard to leniency applications
In contrast to the draft legislation, the final compromise on the 8th GWB-amendment no longer constrains the duty of disclosure concerning leniency applications. Within the legislative process, the originally envisaged passage was set aside to await the preliminary ruling of the European Court of Justice (C-536/11, Donau-Chemie). The preliminary ruling procedure handled the question of whether or not a full interdiction of disclosure of leniency applications required for preparing civil damage actions is compatible with European law. This was negated by the European Court of Justice - making a fundamental exclusion of the disclosure duty impossible, in particular with respect to leniency applications, by the German legislator. Instead of introducing an abstract, strict law, the weighing and consideration of all facts in the specific case is necessary.
4. Changes in the control of abusive practices
Changes in the structure of law
The inner structure of the provisions concerning an abuse of a dominant market position has been changed. Sec. 18 GWB defines the threshold as of which a company is presumed to hold a dominant market position. Sec. 19 GWB prohibits companies holding a dominant market position from abusing such position. Sec. 20 GWB covers companies that hold a predominant market position.
Increased threshold for the presumption of a dominant market position to 40 %
A market share of at least 40 % will now be necessary for the presumption of a dominant market position. This amendment serves to bring the GWB into line with the economic findings. The thresholds for the presumption of a dominant market position in case of duopolies and oligopolies will not change. Additionally, the legal nature of presumptions of dominant market positions will not change. They still do not lead to a reversal of the burden of proof to the detriment of the enterprise concerned. They are only applicable if a court cannot state with certainty that a dominant market position exists.
Specific control of abusive practices in the energy and water sector
The application of a more severe control of abuses of dominating market positions in the energy sector (electricity and grid-bound gas) will be prolonged until 31 December 2017.
There are new provisions in the GWB concerning the water sector. The supply of water is a natural monopoly that will be subject of special abuse controls in order to prevent excessively high prices due to the lack of competition. However, if the water supplier is transformed into or already has the legal structure of an entity under public law, the fees to be levied are not subject to control of abusive practices. Hence, there is reasonable cause to fear that municipal authorities will discontinue the use of private suppliers to their own economic benefit in order to evade a control of abusive practices.
5. Establishment of market transparency units
For the wholesale trade in electricity and gas, a market transparency unit will be established. It will operate in collaboration with the Federal Cartel Office. Furthermore, a transparency unit for fuels will be established directly at the Federal Cartel Office. These transparency units will observe the relevant product market and in particular the price development. They will report any irregularities on the market directly to the competent cartel office. Companies are obliged to provide relevant market data.