On 1 July 2016, the German Ministry for Economic Affairs published a draft bill for the 9th amendment of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB). The draft bill addresses numerous topics which have been subject to intensive discussions in German competition policy and will bring material changes to German antitrust law.
1. Expanded system of sanctions and fines
One of the main pillars of the 9th amendment of the GWB is the introduction of more comprehensive provisions than the present system on sanctions and penalties for antitrust violations to plug a number of legal loopholes exposed by recent cases. Under current German antitrust laws, companies may be able to avoid liability for fines by restructuring operations and corporate groups.
To prevent this happening again, the proposed new provisions empower the FCO to impose fines on companies’ legal successors, limiting the possibilities for corporate restructuring to try to limit liability.
Furthermore, under the new provisions, the FCO will be entitled to impose fines on a parent company, in situations where its subsidiary has been a member of a cartel, and the parent company and subsidiary form one economic entity. Not only will the parent company be subject to additional fines but, under the proposed measures, the fines will be calculated according to the revenue of the overall group. This in turn will mean significantly higher fines for antitrust violations.
2. Expanded merger control thresholds targeting digital market players
Another central issue of the 9th amendment of the GWB is to adapt German competition law to the latest developments in the area of digital economics. The new provisions aim to significantly widen the scope of merger control by implementing an additional merger control threshold, stating that a merger is also subject to notification when the consideration exceeds EUR 350m.
Under the current antitrust-rules, takeovers of small, but innovative and highly promising companies have not been subject to notification, when the smaller company did not reach the relevant turnover threshold of EUR 5m in turnover.
A famous example in this context is the takeover of WhatsApp by Facebook in 2014, when Facebook was willing to pay EUR 14bn for WhatsApp (which at that time did meet the turnover threshold of German merger control law). In the future, the new consideration-based threshold will empower the FCO to capture similar cases for merger control review.
This provision is accompanied by the new Sec. 18 (3a) GWB, which clarifies that a relevant market is also formed, even if the specific service (such as a smartphone app) is performed free of charge. Due to the diverging position of the FCO and the Higher Regional Court of Düsseldorf, there was legal uncertainty on this point to date.
3. Implementation of Directive 2014/104/EU on Actions for Damages
The third substantial part of the 9th amendment of the GWB implements the provisions of Directive 2014/104/EU on Actions for Damages into German law. Of particular note are the provisions which deal with the applicability and scope of the passing-on-defence, the limitation of civil liability of ‘crown witnesses’ and furthermore raises the limitation period dependent upon knowledge from currently 3 years to 5 years (maximum limitation period: now 30 years).
Of crucial importance for future antitrust trials is the introduction of a mandatory legal presumption of damage in cartels. Based on the new provisions, the occurrence of damage as well as the causal link between the respective cartel and the damage itself are now rebuttable presumptions. This measure is specifically designed to encourage more competition litigation.
Although the draft bill is only at the beginning of its legislative passage, there is a high likelihood that its provisions will reach the statute book relatively unchanged. As a consequence, the 9th amendment of the GWB is likely to have a deep impact on German competition law practice in the years ahead.