Insights

Antitrust Alert: German Government Proposes New Cartel Act

The German government has published a draft bill that will amend the German Act on Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB). According to the draft, the government believes that current version of the GWB has proved itself effective in practice and only minor modifications are required. In fact, however, the changes proposed in the draft bill are significant and will affect all businesses active in Germany.

Perhaps the most striking change relates to the standard for prohibiting mergers. Currently, German merger control uses a dominance test. The Federal Cartel Office (Bundeskartellamt, BKartA) must prohibit transactions that are likely to create or strengthen a dominant position.  Under the draft bill, the BKartA would prohibit transactions that "significantly impede effective competition" (SIEC).  The dominance test will survive only as an example of SIEC.

The new standard would mirror the SIEC test that has been in place under the EU merger regulation since 2004. When the EU itself changed from "dominance" to SIEC, the German government fiercely opposed the change. One of its arguments at the time was that the SIEC test is too difficult to apply in practice, particularly where it requires complex economic analysis.  In this draft bill, the government now claims that the BKartA has acquired sufficient economic expertise over the past few years to be able to work with the SIEC test efficiently. The change is also said to be necessary in order for the BKartA to be able to prohibit certain situations which it is not able to prohibit under the current law (such as unilateral effects of oligopolies).  As to this alleged "enforcement gap," it remains doubtful whether there are really enough of these relevant transactions to prompt a change in the law.

Additionally, the draft bill takes the position that the change from the dominance to the SIEC test is required to bring German law into line with EU law. While this is plainly wrong (EU law does not make it mandatory for member states to harmonize their merger control systems), it is quite clear that the German "dominance" test has become an oddity in the area of international merger control. Not only the EU, but also a number of member states use SIEC or similar criteria as a test for prohibition. It was only a matter of time until the German Government would feel the need to close that particular gap.

Should the SIEC test become part of German merger control, only the future will tell if the BKartA will use the new test to step up its enforcement level even in situations unrelated to SIEC or whether it will follow the EU’s more cautious approach.

Important as it is, the change of the standard for prohibition should not distract from the many other changes the German government is proposing, relating to merger thresholds, enforcement and investigative powers, and private litigation.  Most of these changes will make the German law more aggressive.

A high-level summary of the proposed legislation is available here

Lawyer Contacts
For more information, please contact your principal Jones Day representative or either of the lawyers listed below. 

Thomas Jestaedt
Frankfurt / Brussels
+49.69.9726.3612 / +32.2.645.14.14
tjestaedt@jonesday.com

Johannes Zöttl
Frankfurt
+49.69.9726.3939
jzoettl@jonesday.com

Carsten T. Gromotke
Frankfurt
+49.69.9726.3942
cgromotke@jonesday.com

Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter.  Please visit our Publication Request form to add your name to our distribution list.

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