Germany: Newsletter Antitrust Law - November 2011

Changes by the 8th ARC-amendment (Draft bill of the BMWi)

The Federal Ministry of Economics and Technology (Bundesministerium für Wirtschaft und Technologie – BMWi) released its draft bill for the 8th amendment of the German Act against Restraints of Competition (ARC) on 10 November 2011. The most important planned changes of the ARC are as follows:

Increase of threshold for assuming market dominance to 40%:

The draft bill raises the threshold for assuming individual market dominance from a market share of at least one third to 40%. Thereby the ARC shall be adapted to the state of the economic findings. In addition the development of the practical experience by the Federal Cartel Office shall be taken into account. In this respect the legislator takes up the recent criticism that was increasingly voiced by the practice. The thresholds for assuming collective market dominance remain unchanged.

The draft bill provides for a prolongation of the intensified abuse control for suppliers in the energy sector (electricity and grid-bound gas) until 31 December 2017. Originally, this regulation was supposed to expire by the end of 2012. The BMWi deems this change necessary as there are still certain areas of energy supply where the transition from monopolistic markets to competitive markets did not sufficiently work out.

SIEC-Test:

The merger control is subject to an essential adaption to European law. The so-called "SIEC-Test" (significant impediment of competition) shall replace the current prohibition criterion which is the creation or strengthening of a dominant market position. This aims at achieving a widely synchronous material assessment of mergers at German and European level. However, the test for market dominance remains, as in European Law, a presumptive example. In this respect it remains to be seen whether the Federal Cartel Office will stick to its prohibition practice, according to which a strengthening of an existing dominant position gives rise to a prohibition of a proposed merger even in cases where the strengthening of the dominant position is insignificant.

The increased threshold of 40 % at which individual market dominance is assumed, shall also be applicable in the merger control. This might make it more difficult for the Federal Cartel Office to prohibit proposed mergers in case of lower market shares.

In the German merger control two or more transactions that take place within a two-year period between the same persons or undertakings, shall be qualified as one single concentration. This procedure already corresponds to the practice of the Federal Cartel Office, but is now – for the sake of clarity and corresponding to the provision of the European merger control – clearly established by legislation. The provision aims at preventing a circumvention of merger control requirements by splitting bigger transactions into several smaller ones.

Under applicable law, the turnover threshold in case of mergers of press companies accounts for the twentyfold amount of the respective company's turnover. According to the proposed new regulation the eightfold amount of the turnover shall be taken into account (world-wide EUR 62.5 million; domestic turnover of at least one undertaking EUR 3.125 million; domestic turnover of another undertaking EUR 625,000). However, the reduced multiplication factor shall not be applicable for the calculation of the de minimis clause (formerly known as the "affiliation clause"). On these markets, the twentyfold of the sales revenue is still determining (i.e. EUR 10 million). The minor market clause is still not applicable in case of mergers of press companies. The new regulation will exclude smaller transactions in the field of press from the merger control. On the whole, there is still a strict press merger control. Essential demands of the sector (e.g. rescue merger", application of the minor market clause in the press merger control) have not been considered in the draft bill. Since the turnover generated by most of the even smaller magazine and newspaper publishers accounts for more than EUR 625,000 and larger magazine publishers, also without application of the multiplication factor, usually meet the first and second turnover threshold, the amendment will most likely not make it easier for larger publishing companies to acquire smaller independent newspaper publishers. In the past, such acquisitions have been considered to be critical in the press sector.

The invalidity of a merger in case of the omission of a notification (violation of the obligation to suspend implementation) shall be cured retroactively in case of a subsequent notification. From a business practice perspective this change is to be welcomed, since the curative effect through the implementation of the divestiture proceedings is doubtful under the applicable law. The far-reaching uncertainty for companies that resulted from the last amendment of the ARC in 2005, is now removed. This is an absolutely overdue removal of a mistake of the applicable law.

Interference into the corporate substance:

With regard to antitrust proceedings the draft bill explicitly authorises the Federal Cartel Office to oblige the companies concerned to take even structural measures so as to terminate infringements of antitrust law. Thereby, German law is adjusted to European law. Former difficulties of interpretation of the law shall be terminated. However, the sector-specific provisions, for example in the German Energy Act, limit the structural measures that can be prescribed by the Federal Cartel Office.

Cartel authorities shall, via an order to bring the infringement to an end, have the possibility to order a repayment of financial advantages that have resulted from antitrust violations. Under the applicable law the legality of such order is contested. However, the Federal Court of Justice has, in an "obiter dictum", not expressed any principle concerns regarding an order to repay financial advantages resulting from an abusive conduct (Federal Court of Justice, judgement of 10 December 2008, docket no. KVR 2/08).

The draft bill provides for a restriction of the existing right to refuse the disclosure of information regarding certain company- and market-related facts. Such facts can, for example, comprise company agreements, shareholder agreements and information on the voting behaviour at the shareholders' meeting as well as sales revenues. However, only legal persons and associations of persons are concerned. The disregard of a request for information is punishable by the imposition of fines (up to EUR 1 million).

The draft bill provides for a restriction of the access to leniency applications and documents relating to such applications. This has far-reaching consequences for potential parties injured by cartels. In a civil action, they can not base their claims on the information provided in leniency applications. Only recently, the potential disclosure of a leniency application before a US court (subject are companies from the so-called "air-freight cartel") has caused Alexander Italianer (chief executive of the DG competition) to urge the court, in view of the European Commission's interests, to prevent the competent judge from disclosing the leniency applications. It remains to be seen whether or not this far-reaching restriction of granting access to leniency applications to third parties will be opposed by the European Court of Justice (ECJ). Only recently, the Austrian Cartel Court has made a reference to the ECJ for a preliminary ruling whether the Austrian provisions on granting access to files infringe European law due to their strict conditions (ECJ, case C-536/11 – Donau Chemie).

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