Antitrust law and legislation in Germany during Covid-19

What significance does the coronavirus crisis have for antitrust law? We summarise the most important opportunities and risks.

Update of 3 June 2020

The Draft law to mitigate the consequences of the COVID 19 pandemic in competition law mentioned in the Update of 4 May 2020 below has entered into force on 29 May 2020.

End Update of 3 June 2020

Update of 4 May 2020 - Draft law to mitigate the consequences of the COVID 19 pandemic in competition law

With a law to be passed soon, the Federal Government intends to (i) extend the review periods in merger control and (ii) temporarily suspend the obligation to pay interest in cartel fine law.

•  For merger notifications received by the Bundeskartellamt during the acute phase of the corona pandemic (1 March to 31 May 2020) the examination periods for a Phase I clearance are to be extended from one to two months and for a Phase II clearance from four to six months.
• In addition, the obligation to pay interest on fines under cartel law (Section 81 (6) GWB) will be suspended until 30 June 2021 if payment facilities (e.g. deferral) have been granted.

The Act enters into force on the day following its promulgation. We expect promulgation for June 2020.

End Update of 4 May 2020

The coronavirus should not stop antitrust law, but German economic leaders are expressing interest in temporarily relaxing certain regulations in order to encourage companies to work closely together in response to the crisis.

Federal Economics Minister Peter Altmaier wants to discuss cooperation between the food industry and retail trade with cartel authorities, which Andreas Mundt, President of the Federal Cartel Office (Bundeskartellamt), has welcomed by saying that he "is of course available for any discussion with companies, associations and politics."

Germany is not alone in recognising that cooperation between businesses and industries are necessary. The British government has announced comparable flexibility. In Norway, too, a temporary exemption from the ban on cartels has been in force for days throughout the entire transport sector. For more information on cartel law and Germany's response to the crisis, follow this link to the main article.

Competition rules are sufficient to counter the crisis

In contrast, EU competition authorities, which are linked in the European Competition Network (ECN), do not consider changes in the law necessary at this time. European authorities have recognised the social and economic impact of the crisis and stress that competition rules are flexible enough to account for changing market realities such as the coronavirus crisis. According to EU authorities, companies in need of further guidance can turn to competition authorities for assistance.

Accordingly, in a notification dated 17 March 2020, the German Bundeskartellamt emphasised that it is able to cooperate with struggling companies.

Hence, companies affected by the crisis should take up the ball and examine what freedoms competition law leaves them to improve their services and reduce costs.

Possible exemptions from the ban on cartels during the pandemic

Even under current rules, restrictions on competition necessary to achieve cost reductions or an improvement in supply can be exempted from the ban on cartels. Each company can decide on this independently after obtaining legal advice or in coordination with the responsible antitrust authorities.

Bundeskartellamt President Mundt affirmed that his office is open to crisis-related cooperation. "Cartel law allows extensive cooperation between companies," he said, "if there are good reasons for this, as in the current situation."

This particularly applies where the direct concern is to supply consumers. As the Norwegian example shows, cooperation in the transport sector can be justified. A German example for cooperation in the transport sector concerns capacity reductions and capacity swaps in the ferry industry, which the Bundeskartellamt tolerated during the 2008 financial crises because of evident cost reductions and efficiency gains.

An exchange of information to reduce costs and improve supply can also be exempted from the ban on cartels.

Stronger supply relationships between competitors in order to avoid short-term supply bottlenecks are also conceivable (i.e. the so-called colleague supply).

What remains prohibited are classic restrictions of competition, such as price fixing, territorial and customer allocation and agreements on reducing supplies.

Abuse of market power still not permitted

In the case of dependence, a dominant supplier must supply affected customers on a non-discriminatory basis, but the supplier does not have to treat newcomers equally.

In the event of unjustified delivery stops, affected customers can defend themselves by means of an interim injunction, but the requirements for successful injunction application are high.

Excessive pricing, for example, concerning face masks, disinfectants or respirators could also be caught.

In the long run, this crisis may increase the market shares of the surviving companies, so that they fall within the scope of the prohibition of abuse.

Merger control: no changes in Germany so far

The Bundeskartellamt asks companies to examine whether the notification of a project is necessary at present or can wait. For the time being, notification obligations and the deadline regime of merger control in Germany remain unchanged.

In other countries such as Austria, there are already changes. For notifications filed in Austria, the examination period will not begin until 1 May 2020. For unproblematic cases, a waiver of examination is conceivable.

Changes in the deadline regime should be taken into account when planning transactions, including the relevant merger control clauses.

Restructuring mergers can be cleared under certain strict conditions, particularly if there is no alternative that is less harmful to competition and the market position of the acquired company would essentially fall to the acquiring company even without the merger.

The instrument of ministerial clearance would probably come too late since the Bundeskartellamt's examination, which takes at least four weeks, must first be awaited.