11th Amendment to the German Act against Restraints of Competition (“GWB”) is pending – New powers for the German Federal Cartel Office
At the beginning of April, the German government initiated the 11th GWB amendment, which significantly expands the German Federal Cartel Office’s powers to protect consumers.
The 11th GWB amendment, also referred to as the "Competition Enforcement Act", is intended to modernize German antitrust law and establishes new, far-reaching powers for the German Federal Cartel Office. We briefly present the draft law’s main new provisions.
The law’s three key points are:
the elimination of distortion of competition following a sector inquiry,
the facilitated skimming off of illegal gains in the event of antitrust violations, and
the enforcement of the Digital Markets Act (“DMA”).
Regulation of specific markets instead of mere sector inquiry
The core of the amendment is the new Art. 32 f GWB. Such Article is intended to establish new instruments of intervention for the Federal Cartel Office following a sector inquiry, even if a company cannot be proven to have violated antitrust law. Until now, such evidence has often been difficult to obtain.
The envisaged new regulation will significantly enhance the importance of sector inquiries. Two requirements must be met in order for the German Federal Cartel Office to take action on this basis:
First of all, an order subject to judicial review must establish a significant and ongoing disruption of competition in at least one nationwide market, several individual markets or across markets that cannot be remedied by conventional measures. The existence of such a “distortion of competition” is to be further specified by means of standard examples, as are the further factors to be taken into account by the Bonn authority.
In a second step, remedial measures can be imposed on all companies whose conduct or market position contributes significantly to the distortion of competition. The fact that it is not necessary for these companies to have violated antitrust law is a departure from the previous principle that law-abiding companies do not have to fear any sanctions.
In the future, behavioral or quasi-structural obligations will be possible, such as granting access to data, requirements regarding business relationships between companies, the obligation to establish transparent, non-discriminatory and open norms and standards, or the organizational separation of company or business units.
If a company is affected which has been identified as having an exceptional importance for competition across markets (“gatekeeper”), the German Federal Cartel Office can, as ultima ratio, even oblige such company to perform a demerger. This means that the authority can force the company to divest company shares or assets if this can be expected to eliminate or significantly reduce the material and ongoing distortion of competition and if the merger was performed less than ten years ago.
At least: The new legal regulations also enable companies to avert such remedial measures by submitting a binding commitment to the Federal Cartel Office, which is also binding for the authority.
Finally, the draft law provides for an option to oblige companies, following a sector inquiry, to notify planned mergers even if the company to be acquired has only very low sales of EUR 500,000 (which would per se not be subject to a notification obligation under merger control law). This regulation also breaks with the traditional system.
Adjustment of the skimming rules
The law would enable the Federal Cartel Office to skim off illegal gains for a period of five years under simplified conditions. For this purpose, presumption rules are to be introduced to the effect that a violation of central antitrust prohibitions has caused an economic advantage the amount of which can be estimated. This advantage is to be subject to a rebuttable presumption that it amounts to at least one percent of the related product or service’s domestic sales.
New regulations for the enforcement of the Digital Markets Act (“DMA”)
Finally, the 11th GWB amendment is intended to regulate the German Federal Cartel Office’s associated powers with regard to the DMA which came into force in December 2022. The DMA aims to ensure the contestability and fairness of markets in the digital sector and imposes certain obligations on gatekeepers with significant influence on the markets.
For example, the draft bill for the 11th GWB amendment provides that the German Federal Cartel Office can initiate investigations into whether a gatekeeper is complying with certain obligations under the DMA. To the extent necessary, the authority can make use of all conventional investigative powers and subsequently report to the European Commission on the investigation’s findings.
At the same time, the amendment also facilitates private enforcement: In line with German antitrust damages law, the same provisions of “private enforcement” are to be declared applicable under the DMA and thus private actions against DMA violations are to be integrated into the GWB as well.
Conclusion: 11th GWB amendment is a turning point in antitrust law
Another amendment to antitrust law is pending, and this one does indeed lead to the often-quoted “turning point” in some areas. In particular, the importance of sector inquiries will be significantly expanded, especially through the remedies provided.
Even though the legislative process is still in its early stages, companies should prepare themselves for changed and significantly more stringent antitrust requirements and increased risks in the future, from their usual business areas to transaction practice. In particular, a preventive consideration of antitrust risks will become even more important in the future.