In brief

More “teeth” for the Federal Cartel Office!

On 5 April 2023, the German Federal Ministry of Economics and Climate Protection published the government draft (“RegE“) of the 11th amendment to the Act against Restraints of Competition (“ARC“). Vice Chancellor Robert Habeck described the amendment as “one of the biggest reforms of competition law in recent decades”, which – in the words of Federal Minister of Justice Dr. Marco Buschmann – is intended to give the German Federal Cartel Office (“FCO“) more “teeth”

Key proposed changes:

Remedying disruptions of competition: Following sector inquiries, the FCO will be able to remedy disruptions to competition – without having to establish an antitrust infringement. The powers of intervention range from behavioral remedies to structural remedies.
Disgorgement of benefits: Statutory presumptions are intended to facilitate the disgorgement of economic benefits obtained in the event of an established cartel infringement.
Enforcement of the Digital Markets Act (“DMA”): New investigative powers are intended to allow the FCO to independently investigate violations of the DMA. Private enforcement of the DMA will also be facilitated.

Intervention powers following a sector inquiry

Section 32f ARC-RegE, which is already the subject of controversial debate, is causing the greatest stir. According to this proposal, the FCO will receive certain powers of intervention following the conclusion of a sector inquiry, if there are objectively verifiable indications that future mergers would significantly impede effective competition in the sector under investigation or that there is a significant and ongoing disruption of competition in at least one market or across markets. The blueprint for these proposed powers are the intervention powers of the Competition and Market Authority (United Kingdom). The aim is to have the ability to break up hardened competitive structures in order to restore effective competition. The new powers are likely to be applied in particular to the fuel market.

The proposed intervention tool builds on a sector inquiry and gives the FCO various powers without having to establish an antitrust infringement:

By means of an order, companies in one or more sectors of the economy may be subject to a notification obliga-tion for transactions with – compared to German merger control – lower thresholds. A notification obligation will exist if the acquirer has achieved sales in Germany of more than EUR 50 million and the target company has achieved sales in Germany of more than EUR 500,000. The order is generally intended for a period of three years. Repeated extensions of three years are possible.
If the FCO determines in the course of the sector inquiry that there is a “significant and continuing interference with competition”, the FCO can establish this interference with competition by means of an order and impose both behavioral and structural remedies on the companies. In particular, measures may include:
- Granting access to data, interfaces, networks or other facilities,
- Requirements on business relationships between companies in the markets investigated and at differ-ent market levels,
- Obligation to establish transparent, non-discriminatory and open norms and standards by companies,
- Requirements on certain forms of contracts or contractual arrangements, including contractual provi-sions on information disclosure,
- The prohibition of unilateral disclosure of information that favors parallel behavior by companies, or
- The organizational separation of company or business divisions.
As an ultima ratio, the FCO will be authorized to order structural remedies, i.e., the dissolution of companies. The dissolution will include the obligation of the company to sell shares in the company or assets and will be directed at dominant companies or companies with paramount significance for competition across markets. In contrast to the previous draft proposal, the latest government draft provides for a compensation obligation for affected companies, whereby the full loss in value will not be compensated.

The aforementioned orders are to be issued within 18 months of publication of the report on the sector inquiry. The planned powers of intervention meet with legal concerns at least to the extent that they are aimed at structural changes, i.e., the organizational separation of corporate and business units or dissolution.

Companies operating in sectors where a sector inquiry has taken place and where the report has been published in the last 12 months or in sectors where a sector inquiry is currently conducted should therefore closely monitor the development of the legislative process. If the latest proposals are adopted, particular caution is required in the event of a sector inquiry in the affected industries, as the sector inquiry “herald” intervention by the authorities. From a procedural point of view, it should be emphasized that the filing of an appeal against the order would lead to a suspensive effect, which is intended to improve the legal protection of the companies concerned.

Facilitated disgorgement of benefits

The government draft provides for a facilitated disgorgement of benefits in the event of a cartel infringement – an instrument that has so far not been used in practice. The simplification will be made possible with the help of two presumptions:

On the one hand, it will be presumed that a cartel violation has led to an economic advantage.
On the other hand, it will be possible to estimate the amount of the economic advantage, whereby a further presumption assumes an economic advantage amounting to at least one percent of the sales related to the offense. This presumption can only be rebutted if the company proves that it has not made a profit in the corresponding amount.

The presumption shall also be excluded if the obtaining of an advantage is ruled out due to the special nature of the cartel violation. The disgorgement of benefits is not tied to the imposition of a fine by the FCO. It can therefore also be applied where a cease-and-desist order is issued.

Enforcement of the DMA

Finally, the FCO will be given the authority to independently investigate violations of Articles 5, 6 and 7 of the DMA (so-called gatekeeper obligations) and to subsequently report its findings to the European Commission. The government draft, however, does not provide for sanctions by the FCO itself. In order to strengthen private enforcement of the DMA, the explanatory memorandum of the government draft refers to the provisions on facilitating private enforcement in antitrust cases, which are deemed applicable in the context of the DMA, where appropriate.

What’s next?

The current draft of the 11th amendment to the ARC is the government draft. It has already been approved by the German Federal Cabinet and will now be forwarded to the Bundestag and the Bundesrat in the legislative process for their initial statements. As the government draft was published before the Easter holidays, the first day of negotiations has not yet been fixed.

It is expected that the Bundestag and Bundesrat will approve the government draft with at most minor amendments. It is therefore recommended that in-house counsel already now monitor sector inquiries in markets in which the company is active or also in complemented markets (so-called “spillover effect”) in order to be prepared for possible remedial measures by the FCO.

In addition, the 12th amendment to the ARC is already planned for the current legislative period, which will primarily cover the topics of sustainability and consumer protection. The study presented by Heinrich Heine University Dusseldorf on 22 March 2023, which presents the German government various options for achieving sustainability goals in antitrust law, will serve as starting point.

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