draft new act restraints competition

13 February 2004

Dr. Felix Hauck

Far-reaching amendments are planned to the German Act against Restraints of Competition (“ARC”) to further harmonise it with EC competition law, in particular EC Regulation 1/2003. The new ARC was originally due to come into force on 1 May 2004. Most legal experts assume, however, that Autumn 2004 is a more realistic date.

An official draft for the new ARC was published on 17 December 2003 by the Federal Ministry of Economics. This contains some major changes:

  • As in Article 81 EC, the new ARC contains a general prohibition of agreements restricting competition. The ARC currently in force distinguishes between horizontal and vertical agreements. Horizontal agreements restricting competition (sec. 1 pp. ARC) are generally prohibited and void. Vertical agreements, on the other hand, are currently only prohibited by law under specific circumstances (e.g. price-fixing). The new ARC will therefore lead to a stricter assessment of vertical agreements under competition rules.
  • Following the approach in EC Regulation 1/2003 the new ARC replaces the system of applying for an individual exemption from the Federal Cartel office by a general codified exemption which is identical with Article 81(3) EC. This leads to a certain degree of legal uncertainty as undertakings that conclude an agreement have to assess themselves whether their agreement restricts competition and, given the case, whether it falls within the exemption provisions. The German legislator appears to have seen this problem: Sec. 32c of the new ARC confers the right upon the Federal Cartel Office to decide that there is no reason to take action against an agreement. Such a decision is comparable to a comfort letter of the European Commission and is, however, not binding upon the courts. The agreement can therefore be declared void in civil litigation if a judge assumes an infringement of competition rules. It is thus quite likely that the invalidity of such an agreement on grounds of an infringement of competition law would be invoked by one or the other party more often - in court and out of court.
  • In addition, the new ARC provides that the German courts and the Federal Cartel Office also have to apply the EC block exemptions if an agreement is not capable of affecting trade between Member States.

The latest additions to the draft include new rules regarding mergers in the press sector. Provided that the editorial departments of the individual newspapers remain independent, the law concerning the acquisition of newspapers and magazines will become considerably more relaxed. The independence of the editorial departments will be preserved by stipulating that the original owner of the medium retains more than 25% of the voting rights in the undertaking to be sold.

In conclusion, the new ARC leads in general to a uniform application of Article 81 EC regardless of the existence of cross-border effects.

The German rules with regard to abuse of a dominant position have, however, not been adapted to Article 82 EC. This applies, in particular, to the market share threshold of sec. 19 ARC, i.e. one third, that indicates a dominant market position. Thus, it may still be easier to establish a dominant market position in civil litigation under German competition rules.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.