New competences conferred to the Federal Cartel Office (FCO) for consumer protection
Pursuant to the 9th Amendment to the Act against Restraints of Competition (GWB), which entered into force on 9 June 2017, the FCO has been conferred the competence to launch sector inquiries for the purpose of consumer protection. Thereby, consumer protection has been given a new impetus in the framework of competition law. Further the FCO is now entitled to intervene in court proceedings relating to infringements of consumer protection laws.
So far consumer protection had not been viewed as a direct subject-matter of German competition law. Indeed, prior to the 9th Amendment, German competition law did not entail any rules on consumer protection while the FCO had no respective competence to implement such rules.
Sector inquiries aiming at consumer protection
The FCO has been entitled to launch sector inquiries in order to obtain an insight of the prevailing competition conditions in the respective business sectors, where there were indications of dysfunctional competition. Pursuant to the new legal provisions from now on the FCO can conduct a sector inquiry where there is reasonable suspicion that consumer law provisions have been severely, constantly and/or repeatedly violated. Any alleged infringements of consumer law shall affect the interests of a significant number of consumers (Section 32 (5) GWB). Provisions on consumer protection are legal rules that provide for individual and collective protection such as – but not limited to – the Act against Unfair Competition (UWG) and consumer laws in the sense of Section 2 (2) of the Act Relating to Actions for Injunctions in the Case of Breaches of Consumer Protection and Other Laws (UKlaG). For example, an infringement of the UWG often lies in the implementation of invalid General Terms and Conditions (AGB) or the so-called ‘surreptitious advertising’ (Schleichwerbung); hence, since, by definition, surreptitious advertising affects a significant number of consumers and because AGB-rules are encountered in a large number of contracts (Section 305 (1) first sentence BGB), they are presumed to affect consumers in the sense displayed above.
With reference to the Resolution and the Report of the Committee for Economy and Energy (available here) the FCO is entitled to conduct sector inquiries only if public interest is put into jeopardy. A public interest of this kind is regarded to exist when a severe, constant and/or repeated violation of rules on consumer protection to the detriment of a large number of consumers is assumed.
By contrast, the FCO has no competence to conduct any sector inquiry when the implementation of the specific rules on consumer protection falls within the scope of the competences of another federal authority (Section 32 (5) second sentence GWB). For example, these are the cases of abusive advertising calls or unauthorised phone advertising which, under Section 67 of the German Telecommunications Act (TKG) and Section 20 UWG, fall within the scope of competences of the Federal Agency for Electricity, Gas, Telecommunications, Post and Railway. Thereby, it becomes evident that pursuant to the 9th Amendment new competences are being conferred to the FCO rather than competences of other federal agencies being transferred to the FCO.
As cited in the press release of the FCO on 12 June 2017 (available here) the latter will focus its activity under the new competences on ‘the digital economy [where] it only takes one illegal measure by a company to harm millions of consumers.’
The FCO as amicus curiae in court proceedings relating to infringements of consumer protection
Further, the FCO will be entitled to intervene as amicus curiae in court proceedings relating to alleged severe, constant and/or repeated infringements of consumer protection rules that affect the interests of a significant number of consumers (Section 90 (6) GWB). Therefore the FCO is entitled to request the delivery of copies of pleadings, protocols, rulings and judgments while it can also submit its own pleadings and participate in the oral proceedings before the court. In the field of antitrust damages actions the FCO already possesses such competences and has already made – at least before the Federal Supreme Court – frequent use of them.
In Germany, legal provisions on consumer protection have so far been primarily enforced by the assertion of claims raised by associations, competitors or public authorities before civil courts. In this context the FCO is expected to contribute its significant insight into the structure of markets and possible infringements as amicus curiae, as it is already the case today for antitrust-related litigation. Nonetheless, this competence is reserved only in case that the alleged infringement affects the interests of a large number of consumers and therefore, a public interest is put into peril. As stated in the official explanatory report (available here), this is the case when, for example, qualified entities such as the German Association of Tenants or the Consumer Association Berlin bring claims against an undertaking for unfair commercial practices under Section 8 to 10 UWG or under Section 1 or 2 UKlaG. By contrast, the FCO does not have any respective competence to intervene in the court proceedings concerning an individual complaints. Similarly to the pattern of subsidiary competences for sector inquiries conferred to the FCO the latter does not enjoy the right of intervention as an amicus curiae in cases which relate with the scope of provisions which call for another federal authority to step in (Section 90 (6) second sentence GWB).
The implementation of an extended competence of the competition authority for consumer protection is not without precedent on an international level. In the UK the Competition and Markets Authority (CMA) is also mandated to address consumer protection. The US Federal Trade Commission (FTC) and the Italian Autorità Garante della Concorrenza e del Mercato (AGCM) also have powers to apply measures of similar content in both fields of competition and consumer protection. In this context AGCM is entitled to investigate unfair commercial practices either following the submission of a complaint or ex officio; hence AGCM has the competence to impose fines and order an undertaking to bring the infringement to an end when enforcing rules on consumer protection. Further, the Polish competition authority, which is at the same time mandated to address both public enforcement of competition law and consumer protection, may ex officio launch administrative procedures against an undertaking to the support of collective interests of consumers. An infringement of collective consumers’ interests is usually encountered in the application of standard contract terms that have been entered in the Register of Prohibited Clauses as well as in the distribution of inaccurate, false or incomplete information and the use of unfair commercial practices. Further, in Denmark, Finland, Hungary, Ireland and the Netherlands public enforcement of both competition law and consumer protection is conferred to a single authority.
The European Union has also been putting effort in reinforcing competences in the field of consumer protection. On 30 June 2017 the European Commission launched a public consultation on the targeted revision of EU consumer law directives. Further, the Commission has also published the respective Impact Assessment report where specific measures aiming at the reinforcement of consumers’ rights at the EU level are proposed and analysed (available here).
The new decision division resumes work
Upon entering into force of the 9th Amendment a new decision division for consumer protection within the FCO has been launched. It is expected that the new competences will be employed in the near future; though, it remains still unclear to which extent the FCO will make use of the insights obtained in the course of sector inquiries as described above in competition cases as well as the impact of the aspects of consumer protection in cases of alleged abuse of dominant position and merger clearances. According to Andreas Mundt, President of the FCO, the extension of scope and the award of new competences are only ‘a first step.’
Important developments brought by the 9th Amendment
Important developments have been brought by the 9th Amendment. Please read the following reports:
Any questions? Please Contact: Georgios Malos or Eva Witzleb
Practice Group: Antitrust & Competition