On September 26, 2022, the Federal Ministry for Economic Affairs and Climate Action published a draft of the Competition Enforcement Act which will amend the German Act Against Restraints of Competition (“ARC”) for the 11th time (“Draft 11th Amendment”).[1]  The aim of the Draft 11th Amendment is to strengthen the Federal Cartel Office’s (“FCO”) enforcement powers beyond the existing enforcement of antitrust and abuse of dominance violations.  The ARC’s new provisions focus on empowering the FCO’s ability to intervene after a sector inquiry, enforce the Digital Markets Act (“DMA”) on the national level, and skim off any benefits derived from a violation of the competition rules.

Intervention After Sector Inquiries

The draft proposes to introduce new powers for the FCO to intervene after a sector inquiry when it identifies a “significant, persistent, or repeated distortions of competition”.[2]  The explanatory memorandum concluded that the sector inquiries under the existing regime have largely remained without consequences because of the length of the investigations which prevented a timely response to findings of a restrictions to competition.  If the new rules are adopted as proposed, the FCO will have a very effective tool kit at hand to intervene against competition concerns identified during sector inquiries.

The FCO will then be able to impose behavioral and structural measures to remedy the distortion of competition identified in the report of the sector inquiry.  The distortion of competition is not limited to infringements of existing competition rules, i.e., antitrust violations, abuse of dominance, or illegal conduct of undertakings with PCMS.[3]  According to the explanatory memorandum, there are loopholes with regard to conduct that distorts competition but does not fall under the existing competition rules because they are largely caused by structural market conditions.  Merger control is an adequate instrument to prevent the emergence of anti-competitive structures, but the current rules do not sufficiently address existing structural deficits of a market which prevent effective competition.  The proposed rules aim to close these loopholes and empower the FCO to remedy competition concerns that cannot be addressed with the existing instruments.

The behavioral and structural remedies that the FCO can impose include:

  • the granting of access to data or interfaces,
  • the ordering the supply to other undertakings,
  • the setting of common standards,
  • the predefining contractual provisions (e.g., disclosure of information) as well as
  • the separating the organizational structure and company divisions.

As a last resort (ultima ratio), the FCO may even order the divestment of shares or assets, unless those shares or assets have been acquired within five years prior to the investigation and cleared under German or EU merger control rules.[4]

Lastly, the FCO can order undertakings in the investigated sectors to notify practically all mergers (i.e., target’s turnover of > € 500,000 sufficient for mandatory filing).[5]

Enforcement Of The DMA

While the Commission remains the sole enforcement authority for the DMA, the new draft rules authorize the FCO to assist the European Commission (“EC”) by reviewing compliance with Articles 5-7 of the DMA.  The FCO may even publish its reports on undertakings’ compliance with the DMA.  The explanatory memorandum stresses that the FCO’s new investigative powers in relation to the compliance of the DMA does not conflict with the EC’s sole enforcement power of the DMA.[6]

The DMA is a regulation which is directly applicable and also enforceable before courts by private parties, provided that private individuals can derive rights and obligations from the DMA’s rules.  In order to facilitate the private enforcement of the DMA in Germany, the Draft 11th Amendment extends the provisions transposing the Damages Directive to the DMA where appropriate.[7]

Skimming Off Profits From Antitrust Violations

The existing rules of the ARC already empowered the FCO to skim off profits undertakings have gained from an infringement of competition rules.  However, the explanatory memorandum points out that the current rules come with many legal hurdles which have caused it to became a toothless instrument in practice.  In order to overcome such hurdles, the new rules introduce a presumption that an undertaking violating the competition rules has at least obtained a profit of 1% of its domestic turnover with the affected product over the entire duration of the infringement.  At the same time, the maximum profit that can be skimmed off is capped at 10% of the worldwide turnover of the undertaking.[8]  The undertaking can rebut the presumption of profits gained from the infringement, but it carries the burden of proof for the rebuttal.  The new rules extend the period for ordering the disgorgement of the profits from seven to ten years.

[1] Draft of the Federal Ministry of Economics and Climate Protection, Draft Act on the Improvement of Competition Structures and the Absorption of Advantages from Competition Violations (“Competition Enforcement Act”), Referentenentwurf des Bundesministeriums für Wirtschaft und Klimaschutz, Entwurf eines Gesetzes zur Verbesserung der Wettbewerbsstrukturen und zur Abschöpfung von Vorteilen aus Wettbewerbsverstößen (Wettbewerbsdurchsetzungsgesetz), as of September 15, 2022, available (in German only) here.

[2] Section 32f(3) Draft 11th Amendment.

[3] Section 19a ARC which was recently introduced under the 10th Amendment of the ARC in 2021.

[4] Section 32f(4) Draft 11th Amendment.

[5] Section 32f(2) Draft 11th Amendment.  According to section 187(11) Draft 11th Amendment, the new provision will have retroactive effect for sector inquiries which were completed (i.e., publication of the report) within a year before the entry into force of the new rules.

[6]  Article 38(7) DMA.

[7]  Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349/1.

[8]  Section 34(4) Draft 11th Amendment.