The German Federal Ministry of Economics and Climate Protection released the government draft of the 11th amendment to the Act against Restraints on Competition (“ARC”) on April 5, 2023. According to this proposal, a new section 32f ARC would provide the FCO with certain intervention powers following the conclusion of a sector inquiry if i) there are objectively verifiable indications that future mergers would significantly impede effective competition in the sector under investigation or ii) there is a significant and ongoing disruption of competition in at least one market or across markets. The model for these proposed powers are the intervention powers of the Competition and Markets Authority of the United Kingdom (CMA). The objective is to be capable of dismantling rigid competitive structures to restore effective competition according to the German Government.

Therefore, following a sector inquiry, the FCO may, without having to establish a competition violation, initially order undertakings in one or more sectors of the economy to notify transactions to the FCO, even if regular German merger control thresholds have not been met: Thus, a notification obligation will exist if an acquirer has generated more than EUR 50 million in sales in Germany and if the target company has generated more than EUR 500’000 in sales in Germany. This order will typically be in effect for three years. However, repeated three-year extensions are possible.

Furthermore, if the FCO determines during the sector inquiry that there is “significant and continuing interference with competition”, it may be able to establish this interference through an order and impose both behavioral and structural remedies on the undertakings. In addition, the FCO will be authorized to order structural remedies, i.e. the dissolution of undertakings, as a last resort. The dissolution will include the obligation of the undertaking to sell its shares or assets, and it will target dominant undertakings or undertakings with a significant impact on competition across markets. In contrast to the previous proposal draft, the most recent government proposal draft stipulates a compensation obligation for affected undertakings, with the loss in value not being fully compensated.

Moreover, the government draft provides for a facilitated disgorgement of benefits in the event of a cartel violation – a mechanism that has not been utilized in practice to date. With the aid of two assumptions, a simplification will be possible: On the one hand, it will be assumed that a violation of a cartel has resulted in a financial advantage. On the other hand, it will be possible to estimate the economic advantage, with a further presumption assuming an economic advantage of at least 1% of the offense-related sales. This presumption may only be refuted if the undertaking can demonstrate that it has not earned the corresponding amount of profit. The presumption is also rebutted if obtaining an advantage is ruled out due to the unique nature of the cartel violation. In addition, the FCO may not link the forfeiture of benefits to the imposition of a fine. Therefore, it is also applicable when a cease-and-desist order is issued.

Finally, the FCO will be given the authority to independently investigate violations of Art. 5, 6 & 7 of the DMA (so-called gatekeeper obligations) and to subsequently report its findings to the European Commission. The latter may then begin its own investigation. However, the government draft does not include sanctions by the FCO itself. This would then be handled solely by the European Commission.

The planed 11th amendment to the ARC is a government proposal that requires legislative approval in Germany. The Bundestag and Bundesrat are expected to approve the government draft with minimal amendments. To be prepared for potential corrective measures by the FCO, it is recommended that in-house counsel monitor sector inquiries in markets where the company is active or in complemented markets (so-called “spillover effect”).

In addition, the 12th amendment to the ARC, which will focus primarily on sustainability and consumer protection, is already scheduled to take effect by the end of 2025. German competition researchers Justus Haucap, Ruprecht Podzun, Rüdiger Hahn and Charlotte Kreuter-Kirchhof of the Heinrich Heine University Düsseldorf presented in March 2023 a study that will serve as the legislative process’s foundation. On nearly 300 pages, the study presents a variety of strategies for achieving sustainability objectives in competition law.