June 19, 2017

June 19, 2017

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June 16, 2017

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Reform of German Competition Law

A number of amendments to the German competition law (Amendment) entered into force on 9 June 2017. The key changes are:

  • Merger control: Introduction of a new “size of transaction”-threshold
  • Sanctions for antitrust law infringements: Rules of liability aligned to EU concept, in particular with respect to “parental liability”
  • Private enforcement: Implementation of EU Cartel Damage Claims Directive.

Merger control: New “size of transaction” threshold

While the existing merger control “turnover”-thresholds remain unchanged and will continue to apply, the Amendment introduces an alternative “size of transaction”-threshold. The new threshold is the result of a perceived lack of control over transactions involving companies with significant market potential, but–for the time being–limited actual revenues in Germany, like tech start-ups with immense predictable growth. Under the new threshold, transactions will have to be notified in Germany if (i) the parties’ combined worldwide turnover exceeds € 500 million, and (ii) one party has a turnover of more than € 25 million in Germany, and (iii) the “value of the compensation” exceeds € 400 million, and (iv) the target company has “significant business activities” in Germany.

The Amendment specifies that the “compensation” includes the purchase price and all other assets and non-cash benefits, as well as liabilities assumed by the purchaser. In practice the calculation of the compensation will in all likelihood raise numerous questions (e.g. relevant point of time for determining all elements of the compensation; scope of liabilities to be taken into account). Similarly, the meaning of “significant business activities” remains largely unclear. One should assume that “significant business activities” may exist even if the target has annual turnover of less than € 5 million in Germany. Due to these uncertainties, the applicability of German merger control is likely to become more difficult to assess, and less predictable.

Sanctions for antitrust law infringements: Parental liability

So far, German antitrust law essentially only allowed for imposing fines on the legal entity which, through its employees, was directly involved in an antitrust law infringement. In practice, companies were often able to escape liability by adopting certain restructuring measures (essentially consisting of making the infringing company disappear while moving assets to other group companies). The Amendment closes the loophole (in Germany largely referred to as “Wurstlücke”, “sausage gap”, named after a case involving a sausage producer which managed to escape liability by restructuring).

In essence, the Amendment aligns German law to European Union law by extending liability to all companies constituting a “single economic entity”. The idea is that a parent company will be jointly and severally liable for subsidiaries involved in antitrust law infringements if, at the time of the infringement, the parent company exercised controlling influence over its subsidiary. While the “sausage gap” will cease to exist, the new rules on liability are complex and are likely to lead to numerous follow-on questions (and possibly new loopholes).

Private enforcement

The Amendment implements the EU Cartel Damage Claims Directive and further facilitates bringing damage claims for antitrust law infringements under German law. In particular, the Amendment introduces:

  • a limitation period which is extended from three to five years,
  • a rebuttable presumption that antitrust infringements cause damages (the presumption does not apply to the level of damages caused),
  • some rules on the effects of settlements between the claimant and individual defendants to improve the willingness to settle,
  • extensive disclosure rights with respect to information held by the defendant and / or third parties (and also, for reasons of “equality of arms” regarding information held by the claimant), and
  • certain privileges for immunity applicants (e.g. a liability which is limited to damages caused to the immunity applicant’s direct customers).
© 2017 McDermott Will & Emery

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About this Author

Christian Krohs, McDermott Will, Dusseldorf, antitrust litigation attorney, compliance matters lawyer
Partner

Christian Krohs is a Capital Partner in the law firm of McDermott Will & Emery, based in its Düsseldorf office. His practice covers antitrust and competition law, including antitrust litigation, as well as compliance matters.

Christian has extensive experience in all areas of EU and German antitrust and competition law, particularly in relation to cartel investigations, cartel damages claims, abuse of dominance proceedings and both national and international merger control projects. He has also advised numerous clients regarding antitrust...

49 211 30211 220
Partner

Daniel von Brevern focuses his practice on competition / antitrust law, with particular emphasis on merger control, cartel proceedings and European state aid. Daniel has represented a number of clients before both the German Federal Cartel Office and the European Commission. He has a wealth of experience across a number of industries, including financial services, energy, pharmaceutical/health care and automotive.

+49 211 30211 144