by Dávid Szász
Following the publication in the Federal Law Gazette, the 11th amendment[1] (“Amendment”) to the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, “GWB”) have entered into force on the 7th of November 2023. Regarded by some as the biggest reform of German competition law in the last 60 years the Amendment - which was triggered by price hikes during the 2022 energy crisis - centers around three main significant provisions:[2] the new powers of intervention following sector inquiries, the simplified disgorgement of benefits, and the investigation of violations of the Digital Markets Act (“DMA”).
I. New powers of intervention
First and foremost, as a result of the Amendment the Bundeskartellamt’s competences have been expanded to enable the authority to order certain remedies following a sector inquiry.[3] As a tool, sector inquiry has been in the toolkit of the Bundeskartellamt for some time, however these inquiries mostly culminated in final reports without consequences.[4] From now on, the Bundeskartellamt will be able to address cases of significant and continuing malfunctioning of competition discovered as a result of an inquiry without first having to demonstrate a violation of the law.[5] With this, a new fourth pillar of German competition law is on the rise complementing the three classics: the prohibition of cartels, the prevention of abuse of dominance and merger control.[6] The Bundeskartellamt will now be able to address the problems that originate from situations where harm to competition is not attributable to anti-competitive conduct but to imperfect market structures.
Important to note is, that sector inquiry must be conducted before remedies can be ordered. The whole inquiry must be completed within a period of 18 months and will result in a published final report. Only after the inquiry can the Bundeskartellamt determine, whether there is a “significant and persistent disruption of competition” or not.[7] This is crucial as only in the case of “significant and persistent disruption of competition” can the Bundeskartellamt intervene and order remedies. For the “significant and persistent disruption of competition” criteria to be fulfilled the malfunctioning of competition must be significant and continuing, which means it must have existed for three years and be expected to continue for at least two more years.[8] After it is established that “significant and persistent disruption of competition” occurs, in a third step the Bundeskartellamt can order the undertakings concerned to take remedial measures that are suitable to eliminate or reduce the malfunctioning.[9] Before the order can be issued it must also be established that the conventional antitrust and merger control powers would be insufficient to eliminate the malfunctioning effectively and permanently. The last criteria is that orders may only be addressed to undertakings which, by virtue of their market behavior and their importance to the market structure, contribute significantly to the disruption.[10]
Mentioned remedies can take various forms such as: obliging undertakings to grant access to data, interfaces, networks or other facilities or to separate the accountings of business divisions; prohibiting unilateral disclosure of information that encourages parallel behavior by companies. As a last resort the divestiture of assets is also possible. Originating from the last resort nature of the remedy the divestiture of assets can only be applied, if the undertaking is dominant or of “paramount significance for competition across markets” and the divestiture can be expected to eliminate or substantially reduce the disruption and there is no equally effective but less burdensome remedy.[11] It is also crucial that before imposing remedies a public hearing must be held, and that the appeals against remedies have suspensive effect. Last but not least, the Bundeskartellamt will also have the power to oblige companies - for a limited period of three years - in the respective sector to notify all concentrations where the acquiring undertaking has turnover of EUR 50 million in Germany and the target has turnover of EUR 1 million.[12] This will be applied only, if there are objectively verifiable indications that future mergers may significantly impede effective competition in Germany or in the sector under investigation.[13]
II. Disgorgement of benefits
The disgorgement of the economic benefit obtained by an undertaking as a result of the infringement has already been possible before the Amendment, however its use has not been frequent, namely because it required the demonstration of the benefits received and that the undertaking acted intentionally or negligently.[14] In order to facilitate the application of this instrument a double rebuttable presumption will now apply:
- it will be presumed that an infringing company that acted intentionally has obtained an economic benefit from its antitrust violation; and
- that the benefit obtained amounts to 1% of its domestic turnover with the relevant product or service.
The disgorgement is limited to illegal profits generated over the course of five years of the infringement and the maximum amount is capped at 10% of the undertakings’ worldwide turnover in the business year preceding the decision.[15]
III. Investigating the possible violation of the DMA
With the aim to strengthen the enforcement of the DMA the Bundeskartellamt has been granted power to investigate possible violations of Articles 5., 6. and 7. by companies that have been designated as gatekeepers. The European Commission (“EC”) still remains the sole authority empowered to enforce the DMA however it can be supported by national competition authorities with the restriction that only the EC can find that the DMA has been violated. Investigations will also be concluded in order to determine whether proceedings should be conducted under the DMA or under national and EU competition rules.[16]
The provisions presented herald a new age of stricter competition supervision in Germany, with a focus on imperfect market structures rather than just the violations of competition law.
[1] See in the Federal Law Gazette: https://www.recht.bund.de/bgbl/1/2023/294/VO.html (last accessed: 2023.12.18.).
[2] K & L Gates: 11th Amendment to the German Competition Act (GWB): New Powers of Intervention for the Bundeskartellamt Creating New Challenges for Companies, 2023. 11. 07., https://www.klgates.com/11th-Amendment-to-the-German-Competition-Act-GWB-New-Powers-of-Intervention-for-the-Bundeskartellamt-Creating-New-Challenges-for-Companies-11-7-2023 (last accessed: 2023.12.18.).
[3] Gleiss Lutz: 11th Amendment to the Act against Restraints of Competition Enters into Force; Consultations on 12th Amendment Begin, 2023. 11. 06., https://www.gleisslutz.com/en/news-events/know-how/11th-amendment-act-against-restraints-competition-enters-force-consultations-12th-amendment-begin (last accessed: 2023.12.18.).
[4] See: Ref. 3.
[5] Bundeskartellamt: Amendment to the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen – GWB; 11th amendment to the GWB), 2023. 11. 07., https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2023/07_11_2023_GWB_Novelle.html (last accessed: 2023.12.18.).
[6] Allen & Overy: 11th Amendment of German Competition Act enters into force, introducing significant reforms, 2023. 07. 18., https://www.allenovery.com/en-gb/global/news-and-insights/publications/11th-amendment-of-german-competition-act-enters-into-force-introducing-significant-reforms (last accessed: 2023.12.18.).
[7] See: Ref. 5.
[8] For example, malfunctioning can occur in the case of unilateral seller or buyer power; restrictions on entering or leaving a market or restrictions on company capacity or on switching to another seller or buyer; uniform or coordinated behavior; input or customer foreclosure through vertical relationships. See: Ref. 3.
[9] Poor market results such as higher or parallel prices, lower volumes, reduced choice, lower quality and market behavior, as well as countervailing efficiency gains can also be taken into account during the assessment. See: Ref. 6.
[10] See: Ref. 6.
[11] Wolters Kluwer: New Provisions in German Competition Law: New Competition Tool, Provisions Accompanying the DMA and a Presumption of Benefits, 2023. 11. 15., https://competitionlawblog.kluwercompetitionlaw.com/2023/11/15/new-provisions-in-german-competition-law-new-competition-tool-provisions-accompanying-the-dma-and-a-presumption-of-benefits/ (last accessed: 2023.12.18.).
[12] See: Ref. 3.
[13] See: Ref. 2.
[14] See: Ref. 11.
[15] See: Ref. 6.
[16] See: Ref. 5.
