Federal Court of Justice rules on substance prohibitions under the RoHS Directive and German Electronic Materials Ordinance
In its decision of 21 September 2016, only recently published (case no. I ZR 234/15), the German Federal Court of Justice stated its position for the first time in competition law proceedings on the substance prohibitions under section 5(1) sentence 1 of the superseded version of the German Electrical and Electronic Equipment Act or section 4(1) in connection with section 3(1)(1) of the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment.
In 2012, the environmental association Deutsche Umwelthilfe e.V. examined compact fluorescent lamps from two different series in the range of one producer with regard to their compliance with substance-related requirements and found mercury content of 13 mg and 7.8 mg. The association then applied for an injunction against the producer, as in their view the lamps contained more mercury than legally permitted under section 5(1)(1) of the now superseded version of the German Electrical and Electronic Equipment Act or section 4(1) in conjunction with section 3(1)(1) of the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment.
The Federal Court of Justice confirmed the application for an injunction in the last instance. It said the producer had breached the requirements of section 5 of the now superseded version of the Electrical and Electronic Equipment Act applicable at that time, by selling low-energy bulbs with a mercury content of 7.8 mg or 13 mg. The sale of the lamps in question now also breached section 4(1) in conjunction with section 3(1) and (3) of the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment and was thus still anticompetitive at the time of the appellate decision, the court added.
1. Substance prohibitions are market conduct rules
The Federal Court of Justice emphasises that both under section 5(1) sentence 1 and (2) of the Electrical and Electronic Equipment Act in its superseded version and under section 4(1) and section 3(1) and (3) of the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment, the mercury content of compact fluorescent lamps must not exceed 5 mg. The previous instance assumed that upon exceeding this absolute threshold, which follows from an exception rule in Annex II to Directive 2011/65/EU (“RoHS”), once again the relative threshold of 0.1 per cent by weight per homogeneous material was to be used as the basis. But the Federal Court of Justice did not follow this approach. In the view of the Federal Court of Justice, no such recourse to the relative threshold in the area of application of an exception according to the rules of the underlying Directive comes into question.
The Federal Court of Justice specifically confirmed that the substance prohibitions contained in section 4(1) in conjunction with section 3(1)(1) of the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment represent market conduct rules within the meaning of section 3a of the German Act Against Unfair Competition. The Federal Court of Justice supported this finding mainly because the substance restrictions serve to protect health and consumers whatever the case. The court justified the classification of the substance prohibitions as a market conduct rule with a specific risk assessment, as higher mercury content can lead to higher health risks, especially when bulbs break.
We cannot conclude from the decision that classification of a substance prohibition under the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment as a market conduct rule always depends on at least an abstract product- and substance-specific risk situation with regard to the user or consumer. As a result, depending on the specifically contaminated homogeneous material and the use of the product, the question of competition law relevance of the substance prohibition would vary greatly. However, electrical and electronic equipment is generally not marketable if there is a breach of the substance prohibitions of section 3(1) Electronic Materials Ordinance; therefore a risk assessment is not relevant. Also, compliance with the substance prohibitions under Electronic Materials Ordinance or RoHS must be declared by affixing a CE mark. The competition law relevance therefore follows already from correspondingly incorrect labelling of products which do not comply with the applicable substance prohibitions but still bear a CE mark.
2. Strict requirements for merely “trivial breaches”
The Federal Court of Justice did not consider in detail the issue of whether and in what circumstances the products objected to could have been viewed merely as outliers. The producer sued did not provide a sufficiently substantiated submission on this point, in the court’s view. But it would have been the job of the producer, which bears the burden of presentation and proof, to prove that only “outliers” were involved, e.g. by presenting suitable technical documents and test reports. However, the Federal Court of Justice specifically emphasised that there are “strict requirements” for asserting that a breach is simply a trivial one. Especially given that the substance prohibitions also protect human health and are therefore normally capable of tangibly impairing consumers’ interests.
This decision by the Federal Court of Justice now clarifies the competition law dimension of the substance prohibitions under the German Ordinance on Hazardous Substances in Electrical and Electronic Equipment and/or RoHS. Beyond the actions of competent market surveillance authorities, producers of electrical and electronic equipment will therefore still face attacks under competition law if the substance prohibitions are not complied with. In addition, we can draw the conclusion from this judgment by the Federal Court of Justice that substance prohibitions in other regulatory areas are to be considered market conduct rules if they at least also serve to protect human health and consumers. This could be assumed for restrictions according to Annex XVII to Regulation (EC) No 1907/2006 (“REACH”) which were implemented according to Article 68(1) or (2) REACH in view of an identified “unacceptable risk to human health” – although the companies concerned in these cases should also not ignore the criminal law risk under section 5 German Chemical Penalties Ordinance.
See also Zeitschrift für Stoffrecht, issue 1/2017 for a detailed commentary on the decision.
Any questions? Please contact Martin Ahlhaus and Dr. Simon Menz
Practice Groups: Regulatory & Governmental Affairs; Intellectual Property & Media