Entry into Force of 11th Amendment to the German Competition Act
The 11th Amendment to the German Competition Act (the “Act”) came into force on 7 November 2023. After a sometimes controversial debate, one of the most comprehensive reforms of the Act since the 1960s has now been finalised. Essentially, it leads to three changes which extend the powers of the German Federal Cartel Office (“FCO”). In particular, there is now a provision allowing the FCO to intervene following the completion of a sector inquiry. In addition, the requirements for disgorgement under competition law have been facilitated. Finally, the FCO now has investigative powers in connection with the Digital Markets Act (Regulation (EU) 2022/1925 – the “DMA”), which came into force at the end of last year and has applied since the middle of this year.
It remains to be seen how the FCO will utilise its newly granted powers in practice. The requirements for this are high, which is hardly surprising given the broad scope of the powers of intervention. Accordingly, only time will tell whether the Amendment to the Act really leads to more competition in highly concentrated markets, as hoped for by the Federal Ministry for Economic Affairs and Climate Action, which was responsible for proposing the legislative changes.
Response options in the wake of sector inquiries (section 32f of the Act)
The Amendment has revised the possible consequences of a sector inquiry pursuant to section 32e(1) of the Act by adding a new fourth competition-law element to the Act that gives the FCO far-reaching intervention powers.
Whereas previously a sector inquiry was concluded with the FCO publishing a final report and specific remedial measures were only available if a breach of the prohibition on cartels or rules on abuse was established, the FCO's powers have now been significantly expanded so as to allow it to take specific remedial measures under less stringent conditions. A competition infringement is no longer required. Instead, the FCO may intervene if it simply finds a significant and continuing disruption of competition in the sector under investigation and that the addressee substantially contributed to the disruption (section 32f(3), sentence 3 of the Act). This means that the FCO will in the future also be able to react to market structures that are generally deficient in terms of competition (such as highly concentrated oligopolies).
If these conditions are met, the FCO may in principle order any remedial measure of a behavioural or structural nature that is necessary to eliminate or reduce the disruption of competition (section 32f(3), sentence 6 of the Act). Under certain circumstances, it may, as a last resort, even order the unbundling of specific dominant companies and require them to sell company shares or assets if there are no milder, equally effective measures available (section 32f(4) of the Act).
Furthermore, in response to sector inquiries, the FCO may order temporary extensions of the notification obligations for mergers as defined in section 37 of the Act more broadly compared to the previous status quo (section 32f(2) of the Act).
Facilitations for disgorgement
Due to the strict requirements for determining the exact amount of the benefit, the FCO has not made any use of its power, pursuant to section 34 of the FCO, to disgorge pecuniary benefits derived from a competition infringement. In the future, two new presumptions will therefore provide relief in this respect. First, from now on, it will be presumed that an infringement has actually led to an economic benefit. Second, it will be presumed that the benefit amounts to at least 1% of the turnover generated in Germany with the products or services related to the infringement (section 34(4), sentences 1 and 4 of the Act). It will only be possible to rebut this presumption by proving that a benefit in the corresponding amount was not in fact generated during the disgorgement period (section 34(4), sentence 7 of the Act). Furthermore, the benefits to be disgorged can now be estimated in accordance with section 287 of the German Code of Civil Procedure at an amount that is more likely than not to be the correct amount (section 34(4), sentence 3 of the Act).
Investigative powers and private enforcement options with regard to the DMA
Finally, the 11th Amendment to the Act confers investigative powers on the FCO in connection with infringements of Articles 5 to 7 of the DMA. The new section 32g of the Act sets out search and seizure powers as well as a right to information in relation to gatekeepers under the DMA. However, the European Commission remains exclusively responsible for the actual enforcement of the DMA; the FCO will only provide assistance in this respect.
At the same time, the possibilities for privately enforcing DMA obligations have also been strengthened. The Act now largely extends the mechanisms and instruments set out in sections 33 et seq. to breaches of the DMA. However, the presumption of damages pursuant to section 33a(2), sentence 1 of the Act has not been extended; it still only applies in its previous area of application, i.e. classic cartels.