On 18 October, the German Federal Parliament (Bundestag) adopted several changes to German competition law.  The new legislation still has to be passed by the second chamber of the German parliament (Bundesrat) but the changes are expected to come into force on 1 January 2013.  They concern, in particular

• The alignment of merger control rules with EU law
• The increase to 40 per cent of the threshold for statutory presumption of dominance
• Successor liability for antitrust fines
• The application of merger control rules in the health care sector
• The enforcement powers of the Federal Cartel Office (FCO).  

Merger Control

The reform will align German merger control rules with EU law.  In particular, the Significant Impediment of Effective Competition Test (SIEC) will replace the traditional “dominance” test.  The main objective of the SEIC test is to close the enforcement gap for mergers that do not lead to market dominance but nevertheless may impede effective competition, e.g., on oligopolistic markets.  In practice, dominance will remain the main example for significant impediment to competition and the FCO expects that recently published merger guidelines for the old system will still be applicable under the new substantive test.

Other German rules will also be brought in line with EU rules.  In the case of commitment decisions, the prohibition on behavioural remedies subjecting the company to continued control has been deleted.  In addition, in cases of public bids, the parties are, under certain conditions, no longer subject to the standstill obligation.  Finally, the splitting-up of a transaction into a series of smaller transactions may be caught by the merger control regime, even though each transaction would not itself meet the thresholds of merger control.

Concerning the question of notification requirements, the minor markets exemption will be transformed from an exemption from the notification requirement to an exemption from the prohibition of a merger, i.e. a merger will not be prohibited despite a significant impedident of effective competition if the impediment concerns a “minor market” with total sales of less than € 15 m and which exists for at least 5 years.

Finally, rules concerning merger control in the publishing sector will be less restrictive.  Under the current rules, the turnover of publishing houses is multiplied by 20 for the purposes of turnover thresholds.  This will be changed to a multiplier of eight, so many small and medium sized publishing mergers will no longer be caught by German merger control.

Presumption of Dominance

The threshold for the statutory presumption of single-firm dominance will be increased from one third to 40 per cent, bringing German law closer to EU precedents and economic theory.  It should be noted that in administrative proceedings, the FCO has to establish market dominance and can rely only on the presumption in the unlikely event that neither the existence nor the non-existence of dominance can be established by the authority.  In court proceedings, however, parties may rely on the statutory presumption if they can prove that the adverse party has a market share of more than 40 per cent.  The other party would then have to rebut the presumption of dominance.

The thresholds for the statutory presumption of collective dominance remain unchanged at 50 per cent for two or more undertakings, and two thirds for five or more undertakings.

Successor Liability

Up until now, a company could be held liable for fines imposed by the FCO for competition law infringements only if it could be seen as economically identical, or essentially identical, to the company on which the fine was imposed.  A loophole therefore existed that made it possible for companies to circumvent fines by ways of corporate restructuring within a group.  In the past, the FCO has struggled in numerous cases to determine how to enforce fines imposed on firms that were merged subsequently into other entities or otherwise re-organised without an “essentially identical” legal successor.

The relevant provision in the Act on Regulatory Offences will now be amended so the rules state clearly that in cases of (partial) universal succession through splitting up of assets after dissolution without liquidation (Section 123 German Transfer Act (Umwandlungsgesetz) the legal successor (Rechtsnachfolger) can be held fully liable for the infringements of its predecessor, even if it is not economically identical, up to the value of the acquired assets.

Health Care Sector

In the future, mergers and other concentrations of statutory health insurance funds will be caught by German merger control.  This goes further than EU rules because EU law (and, so far, EU courts) does not consider statutory health insurance funds as undertakings and therefore EU merger control does not apply.  In the future, mergers between statutory health insurance funds will face full FCO scrutiny.  Furthermore, the FCO is empowered to review the activities of health insurance funds with respect to healthcare providers, insured customers and between themselves.  However, this controversial piece of the reform may face substantial opposition in the Bundesrat.FCO Enforcement Powers

The general right under German law for companies to refuse to provide information in administrative proceedings that may lead to a fine will be limited.  This applies to information and documents about turnover figures, but not to incriminating information concerning the infringement itself.  The FCO will now be able to require companies to submit turnover information.  This is intended to enable the FCO to obtain more information (relevant for the calculation of the fine) without (additional) dawn raids, and should shorten the investigation period.

The reform also clarifies that the FCO is empowered to impose structural remedies in abuse of dominance cases to remedy the infringement.  Sectoral legislation may provide for more specific powers.

Overall, the changes are less far-reaching than many of the proposals discussed during the preparatory phase of the reform.  The changes outlined above, however, are significant and will have to be taken into account by companies doing business in Germany.