Competition / Antitrust
Temporary amendments of the Act against Restraints of Competition (GWB) to mitigate
the consequences of the COVID-19 pandemic
On 14 May 2020, the Federal Parliament adopted an act to mitigate the consequences of the COVID-19 pandemic in competition law and with regard to self-administered organisations in the commercial business sector. The act entered into force on the day after its promulgation in the Federal Law Gazette (Federal Law Gazette I no. 24 of 28 May 2020, p. 1067), i.e. on 29 May 2020. Essentially, it has the following content:
- One-time extension of the decision periods for notifiable concentrations
- in the preliminary examination proceedings (Phase I) from 1 to 2 months,
- in the main examination proceedings (Phase II) from 4 to 6 months as of notification.
- Applicable for notifications submitted to the Federal Cartel Office between 1 March 2020 and 31 May 2020
- Not applicable for completed proceedings which have entered into effect.
- Suspension of interest on fines up to 30 June 2021 insofar as payment facilities (sections 18 and 93 Administrative Offences Act (OWiG)) have been or will be granted.
Extension of the decision periods in merger control
The examination periods in merger control are to be extended on a one-time and limited term basis. This extension applies solely to concentrations notified to the Federal Cartel Office between 1 March 2020 and 31 May 2020, for which the period will be extended in the preliminary examination proceedings from one month to two months and in the main examination proceedings from four to six months. These extended periods also apply in the event that the European Commission refers a concentration to the Federal Cartel Office in the aforementioned period. On the other hand, the applicable statutory periods will remain in effect if on the date of the entry into force of the act, (i) the one-month period in the preliminary examination proceedings has elapsed without the Federal Cartel Office having informed the notifying undertakings that it has initiated main examination proceedings, (ii) the period in the main examination proceedings has elapsed or (iii) the concentration was cleared by the Federal Cartel Office. Thus, the act will not have any retroactive effect on proceedings which have already been completed.
In the exceptional situation occasioned by the pandemic, the Federal Cartel Office is finding it difficult to obtain the information requested from market participants in market investigations in a timely manner. It is feared that concentrations which are competitively problematic will have to be cleared for lack of market information or that the examination periods will elapse before the harm to competition can be proven.
The regulation has the following practical implications:
- First of all, extended examination periods are not good news for undertakings. However, the envisioned extensions of the periods by one and two months, respectively, are manageable as a whole and will not change the planning capability of the parties involved in the concentration. The Federal Cartel Office and the undertakings concerned have found the ways and means to structure the examination periods in the past where that proved to be necessary in an individual case. However, a statutory regulation is generally preferable for reasons of planning and transparency.
- The experience of the past several weeks has shown that the Federal Cartel Office can carry out its official business involving merger control without serious restrictions. In particular, unproblematic cases apparently continue to be cleared relatively quickly. This is also expected to remain the case in the future. It is explicitly stated in the explanatory memorandum that the extension of the periods only applies to the maximum examination periods.
- In the case of larger transactions which have to be notified in multiple jurisdictions, the statutory amendment will scarcely have any influence on the transaction planning given the fact that the periods are longer in some other countries. The parties involved in the merger can profit to some extent from prolonged preliminary examination proceedings if they can thereby avoid extensive and protracted main examination proceedings.
- Even in the current situation, undertakings should make efforts to respond to decisions of the Federal Cartel Office requesting information completely and in a timely manner and to attempt to contact the Office if this is not possible due to special circumstances, as failing to provide correct, complete and timely information is an administrative offence which is subject to a fine of up to EUR 100,000.
- An additional extension of the deadline or lengthening of the period in which notifications are affected by the extension would require another statutory amendment. However, that will most likely not be necessary. It is to be assumed that in the weeks and months to come, the market participants will adapt increasingly well to their new situation and organise their business operation such that decisions by the Federal Cartel Office requesting information can be responded to in a timely manner.
- After all, situations can arise due to the crisis in which undertakings could be reliant on an especially quick clearance of concentrations or even an immediate (partial) implementation in order to survive. When exercising its discretion in deciding whether to exempt an undertaking from a prohibition on implementation, or on an informal level in an extraordinary situation, the Federal Cartel Office should also be open to pragmatic and creative solutions.
Suspension of the obligation to pay interest under the laws governing fines
Moreover, the obligation to pay interest on fines for which payment facilities have already been granted pursuant to section 18 or section 93 OWiG, or which are granted later, will be suspended up to 30 June 2021. This is supposed to mitigate the economic consequence of the COVID-19 pandemic somewhat for those undertakings which have proven to the antitrust authorities that the prerequisites for the granting of the payment facilities have been met. Payment facilities are to be granted pursuant to section 18 OWiG if, due to its economic situation, the affected entity cannot be reasonably expected to pay the fine all at once. The explanatory memorandum makes explicit reference to the fact that as a result of the economic consequences of the pandemic, the financial situation of undertakings can worsen in the short term to the extent that payment facilities pursuant to section 18 OWiG will be called for.
The suspension of the obligation to pay insurance is limited to the period of time for which the payment facilities are granted. No general suspension of the obligation to pay insurance is to take place. The regulation itself will only be in effect until 30 June 2021. It is meant to cover the anticipated duration of the pandemic and the phase of its economic aftereffects.
From the standpoint of the affected undertakings, the suspension of the obligation to pay interest is generally to be welcomed since it mitigates financial burdens. However, the overall effect will remain relatively slight and should merely affect a manageable number of undertakings. According to the explanatory memorandum, it is expected that the federal budget will suffer an interest shortfall of around EUR 120,000. However, since the number of payment facilities granted due to the pandemic can be expected to increase yet further, the interest shortfall could turn out to be even greater.
A more effective support would be an interest-free deferment of the payment of fines, as well as the postponement of certain tax payments, for example, in the current situation.
No one can say for certain right now whether the limitation in time until 30 June 2021 will actually cover the time period of the pandemic and its economic aftereffects.
The temporary amendments of the GWB contained in the act make a contribution to overcoming the crisis, even if their effects as a whole will most likely be relatively slight. The COVID-19 pandemic has the potential to make substantial structural changes in the world economy, as well as the corporate landscape in Germany. Since the crisis is presenting further challenges to antitrust law, which it might not always be able to meet effectively within the framework of the applicable law, the possibility of further statutory amendments in this area cannot be ruled out.