The Four Pillars of Antitrust Law in Germany

Antitrust and fair-trading law together form competition law, whose most important function is to protect the economy. Therefore, the primary regulatory focus is the market conduct of businesses, which aims to prevent competitive distortion. Therefore, its primary focus lies on businesses as market participants. Breaches of the applicable legislation can be addressed through cease-and-desist orders and compensation claims in both competition and fair-trading law.

Legal enforcement for antitrust and fair-trading law is carried out at a private or public level.  The competition authorities, especially the German Federal Cartel Office and the European Commission, which together are called the “European Competition Network” (ECN), are responsible for the monitoring, enforcement and sanctioning. Both authorities are governed by their own procedural law. Due to their international nature, both legal fields are fully harmonised within the European Union, meaning that national legislation is coherent and consistent with EU legislation.  Therefore, the same rules apply to all member states.

A “Cartel” is an arrangement or a coordinated practice between market participants with the intention or effect of limiting influence or preventing competition.

There are two forms of cartels: horizontal and vertical. Horizontal cartels, also known as hardcore cartels, are the classic case of cartels between equal market participants. Vertical cartels relate to competition restrictions in a supplier-distributor relationship.

Antitrust law aims to protect competition by preventing and regulating anti-competitive private restraints. It is regulated in the GWB (Gesetz gegen Wettbewerbsbeschränkung) and at the EU level in articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).

Antitrust law aims to ensure a functioning, unhindered, and diverse competition that benefits society. This is achieved through the prohibition and control of:

• Formation of cartels,
• Abuse of monopolies/ market-dominant positions,
• Mergers and acquisitions, and potential restrictions on competition, such as market concentration, or
• Vertical restrictions, such as price fixing or exclusive distribution agreements.

Cartels appear in different forms:

• Price cartels are agreements on pricing,
• Quota cartels are arrangements regarding production quantities,
• Market-sharing cartels are arrangements based on geographical territories, and
• Bid-rigging cartels are arrangements in public tenders.

The fundamental prohibition of cartels is governed by Article 101 TFEU and Section 1 GWB. This fundamental prohibition applies to hardcore cartels. This means these cartels are prohibited in principle without an economic analysis of their actual effects. This is also referred to as a “per se” prohibition, since these are almost always harmful to competition, furthermore, offer no significant economic benefits that could outweigh their disadvantages, and undermine the core of the competitive principle.

If it is not a hardcore cartel, the exemption possibility under Article 101(3) TFEU or Section 2 GWB may apply. The exemption possibility exists when agreements, despite having competition-restricting elements, also provide efficiency benefits. In contrast to the above, this is the case when significant economic advantages are offered.

The exploitation of market dominance is defined as the abuse of a market-dominant position to the disadvantage of competitors or buyers. Market dominance is determined when the market share reaches a certain percentage. When reaching this point, it is legally assumed to be market dominant. In Germany, this point is reached with market shares over 40 % (§ 18 GWB). The European threshold lies at 40 – 50 % according to EU legislation, whereby a market share that exceeds 50 % already establishes a strong ground for a market dominant position. However, the national competition laws may define their own threshold value. In Austria, the threshold is 30 %; in France, there are no fixed thresholds, but in legal practice, it is similar to the EU-level. The same applies to Italy, for example.

In international comparison, the threshold value in the EU is relatively low. While there are no fixed thresholds in the USA for a legal assumption of market dominance, historically, market dominance is typically not indicated until a market share of 70 %. A market share of under 50% typically is not enough to assume market dominance. First, there will be a thorough market analysis of the individual situation. Next to the market share, more factors must be considered, like market-access barriers, countervailing buyer power and innovation dynamics.

The misuse presents itself in

• Excessive pricing or unfair business conditions (exploitative abuse),
• Exclusionary strategies against competitors (exclusionary conduct),
• Different treatment of similar customers (discriminatory conduct),
• In the linking of independent products (tying arrangements)

Merger control means the preventive control of business combinations. The examination procedure consists of the registration obligation, insofar as certain turnover thresholds are exceeded. On the other hand, it consists of a two-phase examination, in which there is first a pre-examination followed by a main examination procedure.

The evaluation criteria are:

• The SIEC test (the criterion of “significant impediment to effective competition”),
• Market concentration and its effects,
• Countervailing market power (or countervailing buyer power),
• Efficiency gains and balancing (or efficiency benefits and trade-off analysis).

Vertical Limits are competition-limiting agreements between businesses on different economic levels.

Different forms of vertical restraints are:

• Resale price maintenance: Setting minimum of fixed resale prices
• Exclusive distribution systems: Exclusivity for specific territories or customer groups
• Selective distribution: Selection of dealers based on specific criteria, and
• Non-compete clauses: Prohibition of cooperation with competitors.

These are generally forbidden after Art. 101 Section 1 TFEU and § 1 GWB. Potential exemption possibilities are available under Article 101 (3) TFEU and § 2 GWB, respectively. Furthermore, there are block exemption regulations for vertical agreements (EU Regulation No. 2022/720), which exempt certain types of agreements between companies at different levels of the supply chain from the cartel prohibition, provided that the companies involved do not exceed certain market share thresholds (generally 30%) and do not contain hardcore restrictions (such as resale price maintenance or absolute territorial protection clauses). The block exemption regulation thus creates a “safe harbour” for many typical distribution agreements and significantly reduces the legal compliance burden for companies.

Unfair competition law is also referred to as “competition law in the narrow sense.” It regulates the conduct of individual market participants in existing markets. It can thus also be understood as “market conduct law”. It is governed by the Act against Unfair Competition (UWG).

Other laws that contain market conduct regulations are the General Data Protection Regulation (GDPR), the Telemedia Act (TMG), and the Federal Data Protection Act (BDSG).

In contrast to competition law, unfair competition law focuses its regulatory approach on unfair business practices and competitive conduct, with competitors, customers, and the general public as its primary objects of protection. It thus establishes “rules of the game” for conduct in existing markets. Therefore, unlike competition law, it regulates individual market behaviour, such as misleading advertising, while competition law focuses more on collective market behaviour. In unfair competition law, sanctions are primarily achieved through civil law enforcement. Market power plays a relatively minor role here, while it is decisive in competition law. The legal avenue in unfair competition law is predominantly civil litigation, whereas competition law also involves administrative proceedings before competition authorities.

Given the complex interplay between competition and unfair competition laws, comprehensive legal advice covering both areas is recommended. Schlun & Elseven Rechtsanwälte has many years of expertise in all facets of competition law. Our lawyers provide preventive support in the legally compliant implementation of merger projects and defend your interests in competition law proceedings. From registering mergers to defending against unfair competitive practices, we develop tailored solutions that align your business goals with legal requirements. Our comprehensive advice protects you from costly legal violations and sustainably secures your business success in the competitive environment.