The German Ministry for Economic Affairs and Energy has published the draft bill on the 10th amendment to the German Act against Restraints of Competition, which includes a proposal for the revision of abuse control in Germany. Such revision would be of high relevance for undertakings in the digital sector. The draft also proposes significant changes to the German merger control regime and extended investigative powers of the German competition authority in cartel proceedings.
The German Federal Ministry for Economic Affairs and Energy has recently published its draft bill on the 10th amendment to the German Act against Restraints of Competition (Draft Bill). The Draft Bill proposes major changes including the implementation of Directive (EU) 2019/1 (ECN+ Directive), the establishment of a “digital regulatory framework” to regulate the market power of digital platforms, revisions to the German merger control regime, changes to the antitrust enforcement proceedings, as well as clarifications to the damages claims provisions. Final adoption of the Draft Bill subject to possible changes should be summer 2020 at the earliest.
The Draft Bill focuses on a modernization of the provisions on abuse control with particular respect to undertakings active in digital markets. It proposes to implement new, far-reaching powers of intervention to the German Federal Cartel Office (FCO):
The Draft Bill proposes two major changes to the German merger control rules intended to allow the FCO to focus its resources on competitively complex cases. The first major change relates to raising the second domestic revenue threshold from 5 million euros to 10 million euros. (approximately $5.52 million to $11.04 million.) The new revenue thresholds leading to the obligation to notify a concentration would thus be (i) a combined worldwide revenue of the undertakings to the concentration of more than 500 million euros (about $551.8 million), (ii) a domestic revenue of at least one undertaking exceeding 25 million euros (about $27.6 million), and (iii) a domestic revenue of another undertaking exceeding 10 million euros (about $11.04 million). The relevant domestic revenue threshold in the recently introduced transaction value test would be amended accordingly.
The second major change concerns the introduction of an instrument giving the FCO the right to extend the German merger control regime in certain economic sectors where it has indications that further concentrations may have a negative impact on competition. In such case, the FCO shall be entitled to require individual undertakings with worldwide revenues of more than 250 million euros (about $276 million) by individual order to notify any planned acquisition in the given economic sector where the target has sales of more than 2 million euros (about $2.21 million) of which at least two-thirds were generated in Germany. The FCO’s respective individual orders shall be valid for three years but may be appealed by the undertaking addressed.
The Draft Bill proposes several amendments to implement the ECN+ Directive into German law, including rules on the exchange of information between the FCO and competition authorities of other EU member states as well as on mutual assistance, for example, in cartel investigations, as well as the enforcement of decisions by the antitrust authorities from other EU member states.
As regards antitrust investigations, the Draft Bill proposes to implement the FCO’s right to issue requests for information to undertakings and also to individual representatives of undertakings under investigation. With respect to dawn raids, the Draft Bill foresees an extensive cooperation obligation for all representatives and employees of the undertaking concerned with failure to do so being subject to administrative fines. When cooperating in the context of an issued request for information or a dawn raid, natural persons shall be obliged to incriminate themselves if there is no other adequate way for the FCO to obtain the relevant information. The information obtained can be used in the proceeding against the undertaking under investigation but not in separate criminal or administrative proceedings against this natural person.
Finally, the Draft Bill provides for a claim on access to files in antitrust administrative proceedings, as well as standardized rights for third parties in this regard (i.e., demonstration of a legitimate interest).
The Draft Bill proposes to specify the criteria for the calculation of fines in an attempt to harmonize the FCO’s and the German cartel courts’ approach to the calculation of fines. In this respect, the Draft Bill provides a non-exhaustive list of criteria to be considered when setting a fine including the infringement-related revenues as well as the undertaking’s behavior after the infringement. Against this background, active cooperation with the FCO during the investigation process and the implementation of (or the respective improvement of an already existing) compliance system could now be considered as a mitigating factor.
Additionally, the Draft Bill proposes to codify rules on the leniency program, which currently are included in guidelines of the FCO. Corresponding to the FCO’s present practice, a leniency applicant, in order to gain full immunity, would have to provide conclusive evidence that enables the FCO to prove a certain antitrust infringement. Further, full cooperation in the investigation is a prerequisite for any immunity.
The Draft Bill provides for minor, clarifying amendments following the codification of the EU Antitrust Damages Directive in 2017 into German law. In particular, the Draft Bill proposes a rebuttable presumption for claimants to be affected from a cartel. This shall be the case if they fall within the cartel's material, geographical, and temporal scope. In antitrust damage litigation to date, claimants regularly face challenges to demonstrate that they have been affected by an alleged cartel, which is, however, a prerequisite for claiming damages under the currently applicable provisions.
The Draft Bill’s proposals are of especially high relevance for undertakings in the digital sector. The legislator thereby significantly increases the FCO's enforcement powers in the digital economy so that continuous active enforcement can be expected going forward, in particular with regard to aggregation and handling of data across networks and platforms. The proposed extension of the FCO’s investigative powers in cartel proceedings and, in particular, the cooperation obligations of natural persons could result in a substantial reduction of an undertaking’s defense rights. The proposed right of the FCO to enforce the German merger control regime in specific economic sectors by orders addressed to individual undertakings reflects the FCO’s previous inability to assess transactions in concentrated markets in which mainly undertakings are active with moderate revenues below the general merger control revenue thresholds (e.g., the waste disposal markets in Germany). While the Draft Bill expects that the FCO will issue respective orders to only one to three undertakings per year, it ultimately remains to be seen how the FCO interprets the provision in practice. In any case, the Draft Bill should be understood as an initial draft that is subject to further input by shareholders and parliamentary consultation. We will closely monitor any further developments.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Frankfurt
Michael Masling
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Christina Renner