Out-Law Analysis 4 min. read

German Federal Cartel Office gains stronger powers of intervention with amended competition law

The 11th amendment to the GWB (Act against Restraints of Competition) (‘the amendment’)  marks the entry into force of a further comprehensive reform of national competition law in Germany.

The amendment, also known as the Act to Strengthen Competition, is intended to further strengthen competition and modernise German antitrust law. The most important reforms include new powers that enable the Federal Cartel Office (FCO) to intervene in highly concentrated markets. In addition, there are new powers to investigate infringements of the Digital Markets Act, as well as changes to the sanctioning of infringements including benefit skimming – the FCO’s power to deprive cartel members of the economic advantage obtained by the arrangement – and merger control.

The most significant change is that the amendment gives the FCO new rights to intervene in markets in which competition is "significantly disturbed". The definition of disruption used in the law is essentially linked to a high level of market concentration. The threshold for what is “significant” is relatively low, and only requires that the disruption has "not only minor negative effects on competition".

Where the FCO’s powers are triggered, it can order market remedies, which can have the following effects:

  • The granting of access to data, interfaces, networks, or other facilities,
  • guidelines on business relationships between companies in the markets examined and at different market levels,
  • obligation for companies to establish transparent, non-discriminatory, and open norms and standards,
  • requirements for certain types of contracts or contractual arrangements, including contractual provisions on the disclosure of information,
  • the prohibition of unilateral disclosure of information that favours parallel behaviour by companies and
  • the accounting or organisational separation of company or business divisions.

This is a fundamental change to German competition law. "Previously, remedies such as the obligation to enter into business relationships were only possible if the company could be proven to have abused market dominance," said Dr. Michael Reich, antitrust partner at Pinsent Masons.  According to him, this will have a significant impact. "The draft bill spoke of two proceedings per year and the investigations will result in very high costs for the companies concerned," he added.

In addition, the amendment is also accompanied by minor changes in the area of merger control: As has been the case for several years, the FCO can oblige companies to notify it of mergers in the relevant economic sectors following a sector inquiry - irrespective of whether the usual thresholds under Section 35 GWB are reached.

What is new is that the turnover thresholds above which this special notification obligation applies have been drastically lowered. It is now sufficient for the acquirer to generate sales of more than €50 million in Germany and for the target to generate sales of more than €1m in Germany. "Even if this 'special merger control' has no relevance for the majority of M&A transactions, the changes may result in those affected having to notify almost every transaction - which in turn may lead to delays in the transaction process and intervention by the authorities. For strategic investors in particular, this can be a disadvantage that must be kept in mind when planning transactions - especially in bidding procedures," said Arkadius M. Strohoff, specialist in antitrust and merger control proceedings at Pinsent Masons.

The recently amended notification thresholds for normal transactions have not been affected by the 11th amendment to the ARC. These remain the same.

Another key aspect of the amendment is the new provisions on benefit skimming. Although the antitrust authorities have had this instrument in their toolbox for a long time, they have hardly ever made use of this power. This could be due to the fact that determining the economic advantage required considerable effort in practice or was not even possible in the first place.

Following the amendment, it is now legally presumed that:

  1. an infringement of antitrust law generally leads to an economic advantage; and
  2. that this economic advantage amounts to at least 1% of German sales of the products or services associated with the infringement.

Cartel offenders can try to rebut this presumption. In practice, however, this can develop into an insoluble, or at least a complex and therefore very expensive challenge. In particular, under section 34 of the GWB, it is expressly not possible to argue that no economic advantage at all or an advantage of only a small amount was gained.

As a cap only comes into effect at 10% of the total turnover of the previous financial year and the cartel authorities can also skim off advantages of up to five years, considerable sums can quickly add up.

"The new amendments have at least given the previously rather toothless tiger of benefit skimming some respectable fangs," said Dr. Mathias Greupner, antitrust compliance expert at Pinsent Masons.

Experts expect that benefit skimming will become particularly important in the area of abuse of a dominant market position. To date, when acting against this type of infringement, the FCO has mostly done so by means of regulatory orders, which only require the dominant company to cease its abusive behavior. "Companies with high market shares in particular should therefore critically review their existing antitrust compliance measures and readjust them if necessary. This is because the amendment could significantly increase the financial risks of an abuse of market power," said Greupner.

Alongside the amendment, the Federal Ministry of Economics and Climate Protection (BMWK) has initiated a public consultation on the further modernisation of competition law. The aim is to obtain a comprehensive opinion that will be incorporated into the future implementation of competition policy. We can therefore expect that legislative activity in antitrust law will remain high. 

Co-authored by: Arkadius M. Strohoff

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.