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.
1.2 Press
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
SIEC-test
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.
Structural remedies
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.
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.