GWB amendment: These interventions threaten after sector inquiries

On April 5, 2023, the German government passed the 11th amendment to the Act against Restraints of Competition (GWB), the so-called Competition Enforcement Act. The draft law is a turning point in antitrust law: serious antitrust measures can also be taken against law-abiding companies. The planned Section 32 f GWB-E provides for a new intervention instrument which, following a sector inquiry, gives the Federal Cartel Office new and significantly more far-reaching powers to put an end to identified competition problems. As an “ultima ratio,” this should even include an unbundling order, i.e., the breakup of a company.

Up to now, sector inquiries have primarily served the Bundeskartellamt to gain in-depth knowledge of markets and resulted in final reports. It can use these findings in procedures. So far, however, it has only been able to take measures if companies violate specific legal requirements or prohibitions. The sector inquiries into rolled asphalt and cement and ready-mix concrete subsequently led to extensive divestments of joint ventures, which were, however, justified on the grounds of violations of the ban on cartels (Section 1 GWB).

Draft amendment to GWB allows direct intervention following sector investigations for the first time, even against law-abiding companies

Section 32 f GWB-E is now intended to give the Federal Cartel Office the power to intervene and draw direct consequences if a sector inquiry reveals that competition has been disrupted. The paradigm shift is that an intervention under Section 32 f GWB-E is not dependent on proof of concrete violations of antitrust law. This means that action can also be taken against companies that are in themselves law-abiding, insofar as in the view of the Office there is a “significant, persistent or repeated disruption of competition in at least one market or across markets.” For the purpose of concretization, Section 32 f ARC provides for factors listed by way of example, some of which are based on the criteria of Section 18 (1) ARC. 3 GWB, but additionally include in particular market results and practices that are detrimental to competition.

While both German and European antitrust law have hitherto been based on the principle that law-abiding companies do not have to fear sanctions, the draft amendment to the ARC leads to a departure from this proven principle. The German government used Great Britain as a model. The reason given for this is that, unlike the UK Competition and Markets Authority (CMA), German antitrust authorities have so far not been able to intervene effectively in cases where competition is disrupted primarily as a result of market structure.

The GWB amendment provides for these remedies

Remedies typically include primarily behavioral or quasi-structural commitments. These include in particular:

• granting access to data, interfaces, networks or other facilities,
• Specifications on business relationships between companies in the markets studied and at different market levels,
• Commitment to establish transparent, non-discriminatory and open norms and standards by companies,

• Requirements for certain forms of contracts or contractual arrangements, including contractual arrangements for the disclosure of information,
• the prohibition of unilateral disclosure of information that favors parallel behavior by companies,
• the organizational separation of corporate or business units.

However, if such measures are not promising, the Federal Cartel Office can order the unbundling of companies as a last resort. Affected companies can be market-dominant companies or those with overriding cross-market significance for competition (“gatekeepers”). In the event of prior clearance under merger control law, however, there is to be a basic ten-year period of protection of legitimate expectations.

To avert these measures, provision is made for affected companies to reach agreement with the Federal Cartel Office on an undertaking. The commitment to be declared binding by the Federal Cartel Office shall, in return, bind the Federal Cartel Office not to make use of the aforementioned measures.

Increased merger control as a further measure following the sector inquiry

Furthermore, as an additional measure following a sector inquiry, the Federal Cartel Office is to be able to require companies to notify relevant mergers for merger control even if the companies involved have only very low sales. This is intended to prevent corporate concentration. It is true that Section 39 a ARC also allows for an obligation to notify a merger below the notification thresholds of Section 39 ARC under the current legal situation. However, the regulation provided for in Section 32 f GWB-E is tightened. In particular, the sales thresholds will be lowered even further.

Conclusion

If the law is passed in this way, sector inquiries will in future be seen as a sign of potential antitrust intervention measures. Companies affected by sector investigations are therefore strongly advised to seek qualified antitrust advice in a timely manner.