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Germany: Amendments to Competition Act (“Gesetz gegen Wettbewerbsbeschränkungen”, GWB) now in force: "Focused, Proactive and Digital"?

  • Germany
  • Competition, EU and Trade

01-02-2021

The Act to Amend the German Act on Restraints against Competition (Gesetz gegen Wettbewerbsbeschränkungenor “GWB”) “for a focused, proactive and digital competition law 4.0” (the “Amendment Act”), entered into force on 19 January 2021.[1]  The Act aims to “digitize” German competition law, relieve “smaller” transactions from merger control, improve the procedures regarding cartels, facilitate cooperation with competitors and implement Directive 2019/1 (EU), which is intended to empower the competition authorities of the Member States. In this briefing we would like to highlight some changes, without being exhaustive.

1. Digitalization and New Rules for Companies with Market Power

One rationale of the Act is to adapt German competition law to the challenges of digitization and globalization:

  • The Federal Cartel Office (“Bundeskartellamt” or “FCO”) has been granted the power to declare a company with significant activities on multilateral and network markets to be “of paramount cross-market importance”(§ 19a GWB).  On the basis of such a declaration, the FCO may forbid such a company, when it provides its customers access to sales or buying markets from giving preferential treatment to its own offering, which competes with the goods or services of the customer on the upstream or downstream market, hindering competitors, raising barriers to market entry by use of data, and/or from limiting interoperability of products or portability of data, unless there is an objective justification.  The FCO may combine the declaration of paramount cross-market importance and the prohibitions in one decision.

    The “Digital Markets Act”, the draft Regulation on contestable and fair markets in the digital sector proposed by the Commission (COM [2020] 842 final of 15 December 2020), may result in full harmonization of provisions for behavior of “gatekeepers” in the EU.  Companies of “paramount cross-market importance” will often qualify as such; the German provisions will then be of limited importance.
  • Abuse of a dominant position by refusing to allow use of essential facilities includes access to data and, as before, networks and other infrastructure which are necessary for acting on an upstream or downstream market (§ 19 par. 2 No. 4).
  • Companies which have market power may not hinder unfairly or discriminate against other companies which are dependent on them (§ 20 par. 1).  This prohibition no longer applies only in relation to “small and medium-sized” companies (digital or otherwise), and it applies to intermediaries as far as other companies depend on their intermediation service.
  • Market power for the purposes of the prohibition of unfair hindrance and discrimination may now also result from control of data by one company on which another company depends, even if such data has not yet been made available to other parties in business (§ 20 par. 1a).
  • A company which has superior market power on a multi-sided or network market may not impede a competitor in achieving network effects and thereby cause a serious danger of restricting competition on the merits; this is considered as unfair hindrance (i.e. in the relevant markets, § 20 par. 3a).

    This provision is meant to prevent the tipping namely of platform or network markets.  The Government bill for the Amendment Act[2] mentions the prevention of multi-homing or the prevention of changing to a different platform as examples of such unfair behavior.  Claims for interoperability of platforms and “ecosystems” would, according to the bill, rather be an issue for orders under § 19a GWB.

Apart from § 19a, the new provisions may be enforced both by the competition authorities and in private litigation. It remains to be seen how many cases these authorities, namely the FCO, will take and whether the courts will enforce these prohibitions effectively.

2. Increased Thresholds for Merger Control and Obligation to File Concentrations upon Decision of the Federal Cartel Office

The thresholds for reportability of a transaction have been raised significantly, so that numerous “small” transactions need not be filed anymore and will no longer be subject to merger control.  In turn, the FCO has been granted a right to oblige companies in specific sectors to file transactions, even if the new thresholds are met in part only.

  • A concentration will have to be filed to the FCO if all undertakings involved have passed aggregate worldwide turnover of € 500m, at least one undertaking involved has realized turnover in Germany in excess of € 50m (formerly € 25m) and at least one other undertaking involved has made turnover of more than € 17.5m (instead of € 5m), each in the last financial year completed before the transaction.
  • If the aggregate worldwide turnover of all parties involved is higher than € 500m and at least one undertaking involved has turnover in Germany of more than € 50m (formerly € 25m), the target and any other undertaking involved, however, have not reached € 17.5m of domestic turnover, a filing is required if the consideration for the transaction exceeds € 400m and the target has significant domestic activities (§ 35a par. 1a).
  • A concentration may not be blocked if the requirements for a prohibition – “significant impediment to effective competition, namely by the creation or strengthening of a dominant position” – are fulfilled on a de minimis market only (§ 36 par. 1).  “De minimis markets” are markets on which goods or commercial services have been offered for at least five years and whose sales volume in the last calendar year was lower than € 20m (instead of € 15m).
  • The FCO may oblige an undertaking by way of decision to file concentrations in one or more sectors if the undertaking realized worldwide turnover of more than € 500m, there are “objective” indications that future concentrations may significantly impede effective competition in such sectors, and the undertaking concerned has a share of at least 15 % of the sales or demand of goods or services in the relevant sectors in Germany, provided that the target realized sales of € 2m in the last financial year and realized more than two thirds of its turnover in Germany (§ 39a).  The FCO may issue such “invitations to file” only after having conducted a sector inquiry in one of the sectors involved.

    This provision aims to prevent undue concentration in specific sectors by takeovers that are not subject to merger control.  It may become toothless if candidates for such decisions can use the time needed for completing a sector inquiry for taking over some competitors quickly, or if powerful incumbents, i.e. candidates for decisions under § 39a GWB, are allowed to devour potential competitors with high turnover in other countries before such competitors can enter markets in Germany and attack them..

It remains to be seen whether the new regime will keep the promise to relieve the FCO of “small” concentrations and to allow it to focus its resources on truly critical cases.

3. Changes to Procedures Conducted by Competition Authorities

The hurdles for imposing interim measures to address (possible) infringements of competition law have been lowered.  The FCO’s practice of giving guidance to businesses on issues of competition law has been codified in part; companies may have, in view of a cooperation with competitors, a right to be issued a decision by the competition authority that there are no grounds for action.

  • The FCO and the state competition authorities are entitled to impose interim measures if an infringement to competition law is more likely than not and the measure is necessary for protecting competition or because of imminent serious harm for another undertaking.  The addressee may object on the grounds that the interim measure entails undue hardship not justified by an overriding public interest (§ 32a GWB).  The Act thereby departs from the standard of “serious and irreparable damage to competition” required in the EU competition procedure (Art. 8 of Reg. 1/2003).

    The Government bill refers to the need for quick action by the authorities on digital markets and to the experience in France and in the United Kingdom, where thresholds for interim measures are already lower than on the EU level.
  • As under EU competition law, the German competition authorities – most often the FCO – have power to decide in their discretion that there are no grounds for action.  The Amendment Act adds that companies have a right to such a decision if they have a substantial legal and economic interest in such a decision in view of a project to cooperate with competitors (§ 32c par. 4).

    That right, according to the Government bill, may facilitate innovative “digital” forms of cooperation, product or industry-specific sales platforms or joint use of specific data by competitors.  A “substantial interest” may be assumed if a cooperation project raises novel legal issues or implies significant investment.

The Government bill emphasizes the margin of discretion which the FCO and the state competition authorities still have, and that companies affected by (allegedly) anti-competitive behaviour may move for injunctive relief, even by way of preliminary injunction, in court.

4. Further Amendments

The Act aligns the procedure of German competition authorities with European rules and practice.  We would like to mention some changes regarding fines for infringements:

  • Fines against associations of undertakings for infringements of competition law may be fixed taking into account the turnover of their members which were active on the market concerned by the infringement.  They may reach up to 10 % of such turnover, however, not considering turnover of those members which are themselves fined for the violation or which benefit from a waiver of the fine (§ 81c par. 4, cf. Art. 23 par. 4 of Reg. 1/2003).

    To the extent the association is unable to pay the fine, it is required to request additional fees from its members within a deadline set by the competition authority (§ 81b par. 1).  If it is unable to collect such fees, the authority may claim such fees directly from members of the association (§ 81b par. 2 and 3).  Such members may raise a defence on the grounds that they were unaware of the decision of the association which gave rise to the fine, distanced themselves actively from that decision or did not implement it (§ 81b par. 4).
  • Fines for breach of obligations of companies in competition law procedures, such as not answering to a request for information or hindering a competition authority in a dawn raid, may now reach up to one per cent of the worldwide annual turnover of that company (§ 81c par. 3, see also Art. 23 par. 1 of Reg. 1/2003).

    Since the group turnover is decisive for the fine, infringements of procedural obligations may cost big undertakings millions of Euro in fines.
  • Measures for preventing and detecting infractions, i.e. the compliance efforts of a company, both before – if “reasonable and effective” – and after the infraction of competition law are expressly mentioned as circumstances which may be considered when assessing a fine (§ 81d par. 1 No. 4 and 5).

    The reference to compliance measures taken before the infraction was added after the discussions in the Parliament Committee for Economy and Energy.  The Committee Report[3] explains that such efforts “before” may only qualify as mitigating circumstances if the compliance programme helped to detect and report the infringement to the authorities.  It is different if the infraction reveals weaknesses of the programme, or if members of the management are involved in the unlawful behaviour.

Liability of members of an association of undertakings for fines imposed on the association is provided in Art. 23 par. 4 Reg. 1/2003.  At an EU level, it has not been applied often.  Nevertheless, it is crucial for businesses to monitor carefully the activities of business associations and the representatives they entrust to participate in activities of such associations.  Measures for compliance in general and in this respect have become even more imperative.


[1] Federal Official Journal (“Bundesgesetzblatt”, BGBl.) I, page 2.

[2] German Federal Parliament Document (“Bundestagsdrucksache”, BT-Drs.) No. 19/23492 of 19 October 2020.

[3] BT-Drs. 19/25868 of 13 November 2020.

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