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The German government has published a draft bill that will amend
the German Act on Restraints of Competition (Gesetz gegen
Wettbewerbsbeschränkungen, GWB). According to the draft, the
government believes that current version of the GWB has proved
itself effective in practice and only minor modifications are
required. In fact, however, the changes proposed in the draft bill
are significant and will affect all businesses active in
Germany.
Perhaps the most striking change relates to the standard for
prohibiting mergers. Currently, German merger control uses a
dominance test. The Federal Cartel Office (Bundeskartellamt,
BKartA) must prohibit transactions that are likely to create or
strengthen a dominant position. Under the draft bill, the
BKartA would prohibit transactions that "significantly impede
effective competition" (SIEC). The dominance test will
survive only as an example of SIEC.
The new standard would mirror the SIEC test that has been in place
under the EU merger regulation since 2004. When the EU itself
changed from "dominance" to SIEC, the German government
fiercely opposed the change. One of its arguments at the time was
that the SIEC test is too difficult to apply in practice,
particularly where it requires complex economic analysis. In
this draft bill, the government now claims that the BKartA has
acquired sufficient economic expertise over the past few years to
be able to work with the SIEC test efficiently. The change is also
said to be necessary in order for the BKartA to be able to prohibit
certain situations which it is not able to prohibit under the
current law (such as unilateral effects of oligopolies). As
to this alleged "enforcement gap," it remains doubtful
whether there are really enough of these relevant transactions to
prompt a change in the law.
Additionally, the draft bill takes the position that the change
from the dominance to the SIEC test is required to bring German law
into line with EU law. While this is plainly wrong (EU law does not
make it mandatory for member states to harmonize their merger
control systems), it is quite clear that the German
"dominance" test has become an oddity in the area of
international merger control. Not only the EU, but also a number of
member states use SIEC or similar criteria as a test for
prohibition. It was only a matter of time until the German
Government would feel the need to close that particular gap.
Should the SIEC test become part of German merger control, only the
future will tell if the BKartA will use the new test to step up its
enforcement level even in situations unrelated to SIEC or whether
it will follow the EU's more cautious approach.
Important as it is, the change of the standard for prohibition
should not distract from the many other changes the German
government is proposing, relating to merger thresholds, enforcement
and investigative powers, and private litigation. Most of
these changes will make the German law more aggressive.
A German version of the draft bill is available here and a high-level summary of the proposed
legislation is available
here.
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