Schoenherr.eu

* v.weiss@schoenherr.eu** a.herzog@schoenherr.eu Competition Law - Suppl. 324 (August 2011) Competition Law - Suppl. 324 (August 2011) 1 Introduction and Sources of Austrian Competition Law .
1.2 Sources and Scope of the Austrian Competition Law .
1.2.3 Exemptions from the application of the KartG .
2 Institutions/Organs Responsible for Enforcement .
2.1 The Federal Competition Authority .
3 Anti-competitive Agreements, Decisions and Concerted Practices .
3.1 Section 1 of the KartG: The Prohibition of 3.1.2 Agreements, Concerted Practices, Decision 3.1.3 Prevention, Restriction or Distortion of Competition .
3.1.4 Group Privilege (‘Konzernprivileg’) . A.C-103.1.5 Unilateral Recommendations . A.C-11 3.2 Section 2 of the KartG: The Exception of the Cartel Prohibition . A.C-113.2.1 The Efficiency Exception of Section 2 3.2.2 De Minimis Cartels . A.C-123.2.3 Fixing Retail Prices for Books . A.C-123.2.4 Cooperative Societies . A.C-123.2.5 Members of a Group of Credit Institutions . A.C-133.2.6 Producers of Agricultural Products . A.C-13 3.3 Section 3 KartG: Block Exemption Regulation . A.C-13 4.1 Section 4 of the KartG: Legal Definition of Market Dominance . A.C-144.2 Abusive Behaviour . A.C-154.3 The Austrian Neighbourhood Supply Act . A.C-154.4 Prohibition of Retaliatory Measures . A.C-16 5.1 Introduction . A.C-165.2 Concentrations . A.C-175.3 Jurisdictional Thresholds . A.C-175.4 Domestic Effects Doctrine . A.C-185.5 Exception to the Notification Requirement . A.C-185.6 Substantive Assessment . A.C-195.7 Procedural Aspects . A.C-19 5.7.1 The Relevant Authorities . A.C-195.7.2 Mandatory Notification Requirement . A.C-19 Competition Law - Suppl. 324 (August 2011) 5.7.3 Suspension Requirement . A.C-205.7.4 Timing . A.C-205.7.5 Format of Notification . A.C-205.7.6 Decisions in Merger Control Proceedings . A.C-215.7.7 Remedies . A.C-21 6 Enforcement and Judicial Review . A.C-21 6.1.1 Finding and Termination of Infringements . A.C-226.1.2 Interim Measures . A.C-226.1.3 Commitment Decisions . A.C-226.1.4 Declaratory Judgments . A.C-22 6.2 Sanctions . A.C-236.3 Periodic Penalty Payments . A.C-246.4 Criminal Sanctions . A.C-246.5 Civil Law Consequences . A.C-25 6.5.1 Nullity . A.C-256.5.2 Claims for Damages . A.C-25 7.1 Introduction . A.C-267.2 Requirements for Immunity or Reduction of Fines under 8.1 Unfair Competition Act . A.C-288.2 Sector-specific Regulations . A.C-28 Competition Law - Suppl. 324 (August 2011) The origins of an autonomous national competition legislation in Austria can be tracedback to the Cartel Act of 1951 (KartG 1951)1 that introduced the duty for undertakings toregister cartels combined with a kind of abuse control. Influenced by the economicaldifficulties after the Second World War, the Austrian legislator considered cooperationsand coordinations between independent undertakings not per se harmful; in fact, cartelswere widely perceived – from an economic-political perspective – to form a legitimatetool to stabilize and regulate the economy.
The further development of the Austrian competition law has been driven by the developments on European level. The KartG 19722 – heavily influenced by the Free-Trade Agreement between Austria and the European Union (EU) – brought the registra-tion systems of cartels more in line with the former system of Articles 85 and 86 of the ECTreaty (now Articles 101 and 102 of the Treaty on the Functioning of the European Union(TFEU)). However, it was not until the KartG 19883 that the Austrian approach towardscartels, market dominance and mergers changed considerably.
The modernization of the Austrian competition law gained momentum through the accession of Austria to the EU in 1995, which set off a continuous process to align theAustrian competition law to the premises prompted by European competition law.
The Austrian competition law regime received its current ‘shape’ through the adoptionof the 2005 reform package. The reform package included a new cartel act (i.e., theAustrian Cartel Act of 2005 (Kartellgesetz, ‘KartG’)), which embedded the Austriancompetition law regime into the competition law system of the EU and notably intothe legal framework of Regulation No. 1/2003.4 To this end, one of the main changes brought about by the new act in 2005 was to streamline the substantial rules of Austrian competition law to those on EU-level. Thus,the KartG mirrors – with the exception of some national peculiarities – the substantiveprovisions of EU competition law on restrictive agreements as well as abuse of domi-nance. In addition, the new act continues – by taking over the merger control provisions ofits predecessor – to foresee a mandatory merger control regime.
On institutional level the initial step to modernize the Austrian system were taken with the 2002 amendment of the previous KartG.5 The most significant element of this amend-ment concerned the establishment of the Federal Competition Authority (Bundeswettbe-werbsbeho¨rde, ‘FCA’) and the Federal Cartel Prosecutor (Bundeskartellanwalt, ‘FCP’),which were foreseen to take the role as the primary competition watchdogs in Austria.
1. Federal Law Gazette 1951/173.
2. Federal Law Gazette 1972/460.
3. Federal Law Gazette 1988/600.
4. Council Regulation (EC) No. 1/2003 on the implementation of the rules on competition laid down in Arts81 and 82 of the Treaty, OJ 2003 L 1/1.
5. Federal Law Gazette 162/2002.
Competition Law - Suppl. 324 (August 2011) The rules governing the FCA were included – to the most part – in a new act, theCompetition Act (Wettbewerbsgesetz, ‘WettbG’), which became next to the KartG theprimary source of Austrian competition law. The 2002 amendment replaced the formersystem in which the task of preserving competition was mainly attributed to the so-calledsocial partners (such as the chamber of commerce, chamber of labour, chamber of agri-culture, etc.), which was widely perceived to be outdated due to the developments on EU-level. The reform process on institutional level was completed through the reformpackage in 2005 which essentially aligned the national enforcement rules to the oneon EU-level by mirroring Articles 7–9 of Regulation No. 1/2003 and introducing aleniency programme.
However, opposed to the inquisitorial (administrative) institutional system on EU- level, in which the competition authority both investigates and decides on substance,the Austrian institutional system continues to be characterized by an adversarial (judicial)system, where investigating authorities (i.e., FCA and FPC) are different from the bodydeciding on the merits. The latter task is attributed in the Austrian institutional system tothe Cartel Court (Kartellgericht), which is a court specialized in competition law matters.
The prime legal source of the Austrian competition law is the KartG, which contains thesubstantive and procedural rules and sets up the general institutional framework. The set-up of the FCA and its tasks are dealt with in the WettbG.6 Similar to EU competition law the KartG deals with three substantial parts: (i) a general prohibition of restrictive agreements between undertakings in Section 1 KartG pairedwith an efficiency exemption in Section 2 KartG, (ii), the prohibition of abusive behaviourby a dominant undertaking pursuant to Section 5 KartG and a comprehensive mergercontrol system in Section 7ff KartG.
Like under EU law the addressees of the provisions of the KartG are undertakings;7 thus,the KartG catches only anti-competitive agreements or mergers between undertakingsand abusive behaviour by an undertaking.
However, the KartG does not provide for a legal definition of this term. The Austrian case-law – in accordance with EU principles – pursues a very broad and functionalapproach when defining the term undertaking.8 Thus, the concept of an undertakingencompasses every ‘entity’ engaged in an economic activity regardless of the legal statusof the entity, the way in which it is financed or the duration of the economic activity.9In the recent jurisprudence the Austrian courts took a quite broad stance what can con-stitute an undertaking.
For instance, the Cartel Court considered an ‘empty’ holding company to constitute an undertaking in the meaning of the KartG. In this case the fact that the holding companywas anticipated to hold a non-controlling minority stake in an undertaking was deemed 6. The institutions responsible for the enforcement of the Austrian competition law are described in s. 6 of thischapter.
7. The behaviour of consumers does not fall within the KartG. Cf Whish, Competition Law6 (2009), 89f for amore comprehensive overview.
8. Austrian Supreme Court as Higher Cartel Court, 26 Jun. 2006 – 16 Ok 51/05 ¼ RdW 2007/27; AustrianSupreme Court as Higher Cartel Court, 14 Jun. 2004 – 16 Ok 5/04 ¼ wbl 2004/259; Austrian Supreme Court asHigher Cartel Court, 15 Dec. 2003 – 16 Ok 12/03 ¼ NetV 2004, 21.
9. Leading case of the ECJ, Case 41/90, Ho¨fner and Elser, [1991] ECR-I-1979.
Competition Law - Suppl. 324 (August 2011) sufficient to constitute an economic activity.10 Furthermore, the assets of a liquidatedcompany (e.g., as the result of insolvency) may form an undertaking, if the resources /assets can be readily re-activated to engage in economic activities again.11 However, thepossibility to re-engage into economic activity must go beyond a mere abstract possibil-ity: the Cartel Court found that a former taxi driver, who put his taxi concession quiescent,made no efforts to re-register its car as taxi and did not indicate to reopen his taxi businessin the near future, cannot be considered to be an undertaking.12 The KartG applies to the extent that an anti-competitive behaviour or a merger has aneffect within Austria, irrespectively where the anti-competitive behaviour or the merger iscarried out.13 This so-called effects doctrine is foreseen in Section 24 paragraph 2 KartGand gained particular importance in the context of merger control due to the broadjurisdictional turnover thresholds provided for in the KartG. For more details pleasesee section 5.4 of this chapter.
1.2.3 Exemptions from the application of the KartG The KartG exempts certain specific business activities from the scope of the KartG(Section 24 paragraph 3 KartG). The practical relevance of this exemption is limited.14Section 24 paragraph 3 No. 1 KartG foresees an exemption for credit institutions andprivate insurance companies insofar as they are already regulated by the Austrian Finan-cial Market Authority (‘FMA’) and for transport companies insofar as they are under thesupervision of the Federal Minister of Transport. In fact, Section 24 paragraph 3 No.
1 KartG is supposed to avoid parallel intervention by the Austrian Competitions Author-ities and the (mentioned) sector-specific regulators. However, since the tasks of thesector-specific authorities do virtually not overlap with those of the Competition Author-ities the exemption has gained – for all practical purposes – no relevance. Furthermore,pursuant to Section 24 paragraph 3 No. 2 KartG, the act does not apply to state-ownedmonopolies, as far as the monopoly undertaking exercise its legally conveyed monopolyrights. Also this exemption has virtually no practical relevance any more.
The reform of the Austrian competition law regime in 2002 and 2005 brought aboutsignificant changes on institutional and procedural level. The essential goal of thesereform packages were to achieve an institutional and procedural legal framework thatsecures workable and efficient competition law enforcement while adhering to the adver-sarial (judicial) system that has traditionally been in place in Austria.
10. See, in detail, Weiss/Mayer, KOG: s. 7 para. 1 No. 3 KartG: ‘Beherrschung’, nicht ‘Durchrechnung’entscheidend, OZK 2009, 72.
11. Austrian Supreme Court as Higher Cartel Court, 4 Oct. 2010 – 6 Ok 6/10 <www.ris.bka.gv.at>.
12. OLG Vienna as Higher Cartel Court, 20 Dec.1999, 16 Ok 9/99 ¼ ecolex 2000, 215/99.
13. Austrian Supreme Court as Higher Cartel Court, 27 Feb. 2006 – 16 Ok 49/05 ¼ RdW 2006/467.
14. Austrian Supreme Court as Higher Cartel Court, 27 Feb. 2006 – 16 Ok 1/06, O Supreme Court as Higher Cartel Court, 17 Nov. 2003 – 16 Ok 14/03, O Higher Cartel Court, 11 Oct. 2004 – 16 Ok 9/04, O Competition Law - Suppl. 324 (August 2011) This adversarial system is characterized by a separation of investigation authorities (FCA and FCP) and the authority, which decides on substance (Cartel Court). Thus,competition law enforcement occurs in an adversarial process in which the investigatingauthorities that are bestowed with competition law enforcement are an adverse party inproceedings before a court specialized on competition law matters that issues decisions(e.g., fine decisions, decision to block or impose conditions on a transaction).
The authorities and their competences may be described as follows: The FCA has been set-up in 2002 and is pursuant to Section 40 KartG a party in all cartelproceedings irrespective whether or not it initiated the proceedings.15 The FCA isinstalled at the Ministry of Economic Affairs and is granted by constitutional law theposition of an independent and instruction-free authority. Its head, the ‘Director Generalof Competition’ (Generaldirektor fu¨r Wettbewerb), who decides monocratically, is notbound by instructions of whichever kind from other authorities (Section 9 paragraph 3WettbG). At the same time, the officials of the FCA are only bound by instructions of theDirector General.
The ‘manpower’ of the FCA is rather low compared to the resources of Competition Authorities in other European Member States. Per 30 June 2010 – additional to theDirector General and the Deputy Director General – fifteen lawyers, seven economists,two other professionals and six persons as support staff, that is, all together thirty-twopersons, were working at the FCA.16 The tasks of the FCA are listed in Section 2 paragraph 1 WettbG. First and foremost, theFCA is assigned the role of the ‘competition watchdog’ in Austria: this means that theFCA has the task to investigate restrictions and distortions of competition and, if needed,bring them before the Cartel Court (Section 40 KartG). Moreover, the FCA may not onlycommence proceedings at the Cartel Court (Section 36 KartG); it may also participate inall other proceedings before the Cartel Court, for example, in proceedings that wereinitiated by an undertaking on its own motion (see section 6.4).
Furthermore, it is entitled to conduct general investigations into industry sectors in case of presumed distortions of competition (i.e., sector enquiries) and to issue general state-ments on competition policy (so-called ‘competition advocacy’).
Finally, the FCA acts as the ‘interface’ to the European Commission and the national competition authorities of other Member States within the framework of the EuropeanCompetition network (Section 2 paragraph 1 No. 2 and Section 3 paragraph 1 WettbG); The FCA is equipped – similar as the European Commission under Council RegulationNo. 1/2003 on the implementation of the rules on competition laid down in Articles101 and 102 TFEU17 – with comprehensive investigatory means in order to fulfil its 15. Austrian Supreme Court as Higher Cartel Court, 20 Dec. 2004 – 16 Ok 6/04 ¼ O Supreme Court as Higher Cartel Court, 11 Oct. 2004 – 16 Ok 14/04 ¼ O 16. Annual Report on competition policy developments in Austria 2009–2010, <www.bwb.gv.at/BWB/English/oecd_report_2009_2010.htm>.
17. Council Regulation (EC) No. 1/2003 of 16 Dec. 2002 on the implementation of the rules on competition laiddown in Arts 81 and 82 of the Treaty, OJ 2003 L 1/1.
Competition Law - Suppl. 324 (August 2011) functions.18 The investigatory powers conferred upon the FCA include, most importantly,the right to obtain information from undertakings and – in severe cases – to conductinvestigation of premises. However, differently from the European Commission theFCA has no decision making power. Thus, in order to enact legally enforceable inves-tigatory measures it has to apply to the Cartel Court.
For instance, in order to issue a legally enforceable information request the FCA has to apply to the Cartel Court, which then decides in adversarial proceedings on the request.
Once the Cartel Court has ordered the production of information, fines amounting to1% of the turnover of the preceding business year can be imposed on the addressees of therequest if the information is not provided. Recently the Cartel Court imposed, followingan application of the FCA, a fine of EUR 120,000 upon an undertaking in the food retailindustry, which refused to produce information ordered by the Cartel Court. The decisionwas perceived to significantly contribute to the standing of the FCA vis-a`-vis the businesscommunity.19 In case of a concrete suspicion of a severe violation of the KartG the FCA may also enter business premises, in order to examine and copy business documents (so-calleddawn raids). However, a dawn raid requires a search order issued by the Cartel Court.
The officials of the FCA may in the course of the dawn-raid enter all premises, land andmeans of transport covered by the search order that is issued by the Cartel Court. This mayalso include the inspection of private homes and private means of transport. During theinvestigation the officials of the FCA may ask for information on the depository of thebooks and other records that are searched. However, the FCA has no power of forcibleentering the premises of an undertaking. However, the FCA may resort to the assistance ofthe police in order to gain access to premises.
In a dawn raid the FCA may examine the books and other records related to the business, irrespective of the medium on which they are stored or have such books andother records examined by experts. The officials may take copies and extracts but mustnot seize originals. However, the officials are not allowed to investigate purely privatecorrespondence or documents that do not relate to the subject matter and the purpose ofthe investigation as set out in the search order issued by the Cartel Court. But, the officialsmust be enabled to ascertain themselves of the relevance of a document. If it is uncertainwhether a document is private or outside the scope of the investigation, an undertaking isadvised to produce the document in a closed envelope to the Cartel Court that then decideson the permissibility of its examination.
Differently than under EU Law the existence of an ‘attorney/client privilege’ is dis- puted in Austria. Neither the KartG nor theWettbG explicitly foresee the privilege.
According to the FCA the legal privilege applies only if the FCA acts upon request ofthe European Commission; conversely, it does not apply if the FCA acts on its ownaccord. So far the existence of attorney/client privilege has not been tested before theCartel Court.
The second investigation authority in the Austrian institutional system is the FCP;The authority consists of two persons, the Federal Cartel Prosecutor and its deputy,which are supported by the registry of the Cartel Court in administrative matters.
The FCP has been installed at the Ministry of Justice. As the second public party, the 18. Austrian Supreme Court as Higher Cartel Court, 30 May 2005 – 16 Ok 10/05 ¼ O Supreme Court as Higher Cartel Court, 11 Oct. 2006 – 16 Ok 7,8/06 ¼ O Court as Higher Cartel Court, 14 Jun. 2004 – 16 Ok 5/04 ¼ wbl 2004/259.
19. Austrian Supreme Court as Higher Cartel Court, 21 Jan. 2008 – 16 Ok 8/07 <www.ris.bka.gv.at>.
Competition Law - Suppl. 324 (August 2011) FCP is supposed to supplement the functions of the FCA with which the FCP shouldcooperate closely. The FCP is designated to act in cases of public interest.
Opposed to the Director General of the FCA / the FCA, the FCP is not established as an independent agency. Thus, the FCP is bound by instructions of the Minister of Justice.
The FCP may – like the FCA – file motions with the Cartel Court. In addition, the FCPmay request that the FCA inquires possible breaches of competition law (Section75 KartG). While the FCP itself has no investigatory powers, it may resort to the assis-tance of the FCA (Section 81 paragraph 3 KartG).
While the FCA and FCP are meant to be complementary authorities in fulfilling their duties, there is no sharp distinction between the competences of both agencies. Indeed theestablishment of the two authorities – with overlapping activities – is widely perceivedto go back to a political compromise at the time the authorities were installed. None-theless, in practice the parallel competences have often proven useful. The four-eye-principle is especially important in merger control cases where the FCA and FCPhave an application monopoly in order to initiate an in-depth investigation (see section5.7 of this chapter).
In the Austrian institutional system the competence to decide upon cases is exclusivelyvested with the Cartel Court and the Higher Cartel Court as an appellate body to theCartel Court. The Cartel Court may release cease and desist orders, impose fines orissue declaratory orders. The Cartel Court has no competence to start infringement pro-ceedings ex officio. The Cartel Court will only be able to commence proceedings upon amotion by the FCA, FCP or upon an individual application by an undertaking (see belowsection 2.5).
The Cartel Court is organized and decides in panels (Senate) each being composed of two professional judges and two lay judges. In total there are currently five panels.
The Cartel Court employs at present seven professional judges who are partly involvedin other matters and are supported by fifteen lay judges. Additionally, the Cartel Courtrelies on advisory opinions of independent economic experts of its own choice.
The Higher Cartel Court comprises one panel being composed of three professionaljudges and two lay judges.20 In the case of parity of votes (which may occur in the panelsof the Cartel Court) the opinion of the chairman, which is a professional judge, prevails.
Pursuant to Section 38 KartG all procedures in cartel matters before the Cartel Court and Higher Cartel Court follows the provisions of the Austrian Non-Contentious Pro-ceedings Act (Außerstreitgesetz). This means, first and foremost, that the Cartel Court –due to the inquisitorial principle which the Außerstreitgesetz foresees – has to conduct itsown procedure of taking evidence and may request evidence ex officio, including hearingthe parties and witnesses and obtain advice by economic expert.21 The court fees in procedures before the Cartel Court may – depending of the kind of procedure – amount up to EUR 30,000. For proceedings with respect to the termination ofinfringements, declaratory judgments, the imposition of fines and periodic penalty pay-ments Section 41 KartG contains an obligation of reimbursement of costs by the losingparty. This obligation however applies only in cases where the prosecution by the partywas mischievous.22 The case-law was so far reluctant to impose an obligation of reim-bursement of costs on the losing party.23 A mischievous proceedings will only be 20. Annual Report on competition policy developments in Austria 2009–2010, <www.bwb.gv.at/BWB/English/oecd_report_2009_2010.htm>.
21. Austrian Supreme Court as Higher Cartel Court, 16 Dec. 2002 – 16 Ok 8/02 <www.ris.bka.gv.at>.
22. Austrian Supreme Court as Higher Cartel Court, 16 Dec. 2002 – 16 Ok 8/02 <www.ris.bka.gv.at>.
23. Austrian Supreme Court as Higher Cartel Court, 11 Oct. 2006 – 16 Ok 10, 11/06 ¼ O Austrian Supreme Court as Higher Cartel Court, 14 Jun. 2004 – 16 Ok 18/04 ¼ O Competition Law - Suppl. 324 (August 2011) assumed in cases where the party is aware of its false claim or if it proceeds for a notjustified goal (e.g., hostility or publicity effects).24 Decisions of the Cartel Court may be appealed against before the Higher Cartel Court (which is a special senate installed at the Austrian Supreme Court). The appeal canessentially only be based on legal grounds, but not on factual grounds. The remedymust be filed within four weeks after the decision is delivered. The appeal has usuallyno suspensive effect (Section 49 paragraph 2 KartG).
The Competition Commission (Wettbewerbskommission) is an independent organizationof experts which has primarily an advisory function (Section 16 WettbG). To this end, theCommission shall provide to the FCA economical expert opinions if so asked by theFCA or the Federal Ministry. In addition, it may request the FCA to launch an in-depthinvestigation of a concentration at the Cartel Court. If the FCA fails to request then an in-depth investigation thereby ignoring a statement to the contrary by the CompetitionCommission, it has to publish the reasons for this on its webpage (Section 17 WettbG).
The KartG foresees the possibility for undertakings to file a motion to the Cartel Court.
For instance, an undertaking can file a motion at the Cartel Court that anti-competitivebehavior which is directed against it should be prohibited. The right to request fines at theCartel Court is however exclusively vested with the FCA and the FCP.
In practice, undertakings frequently use their right to file such applications. This has to be seen against the background that the Cartel Court must decide on such an application(meaning that it cannot refuse to take the proceedings forward because of other prioritiesin its cartel policy). Moreover, opposed to the proceedings before the Commercial Courtsthe production of evidence – due to the inquisitorial principle – rests not only with theclaiming undertaking, but is rather with the Cartel Court. Lastly the cost risk is minor,because of the limited risk of the losing party to reimburse the costs of the winning party(see section 2.3).
The Austrian rules on restrictive agreements mirror in essence Article 101 TFEU and arealigned to fit into the system set in place by Regulation No. 1/2003 on the implementationof the rules on competition.25 Section 1 KartG provides a general prohibition for all kinds of agreements, decisions by associations of undertakings and concerted practices that prevent, restrict or distort 24. Austrian Supreme Court as Higher Cartel Court, 11 Oct. 2006 – 16 Ok 10, 11/06; Austrian Supreme Court asHigher Cartel Court, 22 Dec. 2003 – 16 Ok 23/03 <www.ris.bka.gv.at>.
25. Council Regulation (EC) No. 1/2003 of 16 Dec. 2002 on the implementation of the rules on competition laiddown in Arts 81 and 82 of the Treaty, OJ 2003 L 1/1.
Competition Law - Suppl. 324 (August 2011) competition. The provision applies – like Article 101 TFEU – to horizontal and verticalrestrictions. Section 2 KartG foresees an efficiency exception by exempting collusivebehaviour from the prohibition of Section 1 KartG which (i) contributes to improving theproduction or distribution of goods or to promoting technical or economic progress, while(ii) allowing consumers a fair share of the resulting benefit, and which (iii) does notimpose on the undertakings concerned restrictions which are not indispensable to theattainment of these objectives and (iv) afford such undertakings the possibility of elim-inating competition in respect of a substantial part of the products in questions. In general,the Austrian case-law interprets and defines the scope of the prohibition of restrictiveagreements and the exemption of Section 2 KartG in accordance with the jurisprudence ofthe European courts.26 3.1 Section 1 of the KartG: The Prohibition Section 1 KartG foresees a general prohibition (cf Section 1 paragraph 1 KartG) and setsout examples (cf Section 1 paragraph 2 KartG) of anti-competitive conduct, including(i) directly or indirectly fixing purchase or selling prices or any other trading conditions,(ii) limiting or controlling production, markets, technical development, or investment,(iii) sharing markets or sources of supply and (iv) applying dissimilar conditions toequivalent transactions with other trading parties, thereby placing them at a competitivedisadvantage or (v) making the conclusion of contracts subject to the acceptance by otherparties of supplementary obligations which, by their nature or according to commercialusage, have no connection with the subject of such contracts.
3.1.2 Agreements, Concerted Practices, Decision by Associations In accordance with Article 101 TFEU the Austrian cartel prohibition defines three typesof collusive behaviour; namely all kinds of agreements, concerted practices and decisionsby associations of undertakings no matter if they are ‘horizontally’ or ‘vertically’restrictive.
The definition of these terms follows European case-law. Hence, a general principle underlying Section 1 KartG is that each economic operator must determine independentlythe policy, which it intends to adopt on the market.27 To this end the terms are frequentlydefined by reference to merely unilateral conduct, in which an undertaking pursues anautonomous behaviour on the market.28 Thus, the type of coordination of behaviour or collusion between undertakings falling within the scope of Section 1 KartG can take any form that reduces the parties’ decisionmaking independence, either due to obligations contained in the agreement which reg-ulate the market conduct of at least one of the parties, or by influencing the marketconduct of at least one of the parties by causing a change in its incentives.29 This includes 26. Austrian Supreme Court as Higher Cartel Court, 26 Jun. 2006 – 16 Ok 51/05 ¼ RdW 2007/27 (also withregard to ss 4ff KartG see below).
27. See, e.g., Case C-49/92 P, Anic Partecipazioni, [1999] ECR I-4125, para. 116; and Joined Cases 40/73 to48/73 and others, Suiker Unie, [1975] ECR page 1663, para. 173.
28. For the leading European opinion that also applies in Austria please see GC, Case T-41/96, Adalat, [2000]ECR-II-3383.
29. Cf para. 27 of the Guidelines on the applicability of Art 101 of the Treaty on the Functioning of the EuropeanUnion to horizontal cooperation agreements, OJ 2011 C 11/1.
Competition Law - Suppl. 324 (August 2011) also any ‘exchange’ between undertakings which reduces or eliminates the uncertainty asto their conduct on the market.30 The coordination needs not to be in the interest of all theundertakings concerned.31 An agreement within the meaning of Section 1 KartG does not need to be legally binding or enforceable, also so-called ‘Gentleman’s agreements’ and a mere commonunderstanding can amount to a coordination in the meaning of Section 1 KartG.32 In fact,the coordination must not necessarily be expressed. It can also be tacit. For an agreementto be capable of being regarded as having been concluded by tacit acceptance there mustbe an invitation from an undertaking to another undertaking, whether expressed orimplied, to fulfil a goal jointly and some form of acceptance by the addressee of theinvitation. In certain circumstances an agreement may be inferred from an ongoingcommercial relationship between the parties. However, the mere fact that a measureadopted by an undertaking falls within the context of ongoing business relations is notsufficient.33 3.1.3 Prevention, Restriction or Distortion of Competition The prevention, restriction or distortion of competition may relate to every aspect ofeconomic behaviour; in general, Austrian case-law considers every influence on a param-eter of competition on the market as being capable of restricting competition.34 Thus,agreements or concerted practices between undertakings are caught by the prohibition ofSection 1 KartG if they are likely to have an appreciable adverse impact on the parametersof competition on the market, such as price, output, product quality, product variety andinnovation.35 When assessing whether an agreement has a restrictive effect on competition, the effects of the agreement have to be benchmarked against the situation that would prevailin the absence of the agreement (i.e., counterfactual). In other words: The assessment ofwhether an agreement is restrictive on competition must be made within the actual con-text in which competition would occur in the absence of the agreement with its allegedrestrictions.36 For example, horizontal cooperation agreements between competitors that would not be able to independently carry out the project or activity covered by the cooperation (e.g.,a joint production), will normally not give rise to restrictive effects on competition withinthe meaning of Section 1 KartG, unless the parties could have carried out the project oractivity with less stringent restrictions. In the Austrian practice, this counterfactualassessment has received particular attention in the context of assessing constructionconsortia (so-called Arbeitsgemeinschaften).
Section 1 KartG distinguishes (like Article 101 TFEU) between those agreements that have a restriction of competition as their object and those agreements that have a restric-tion of competition as their effect. In accordance with European case-law the terms are tobe read disjunctively. Hence, once it has been established that an agreement has as its 30. See Joined Cases T-25/95 and others, Cimenteries CBR, [2000] ECR II-491, paras 1849 and 1852; and JoinedCases T-202/98 and others, British Sugar, [2001] ECR II-2035, paras 58–60.
31. See to that effect Case C-453/99, Courage v. Crehan, [2001] ECR I-6297, and para. 3444 of the judgment inCimenteries CBR [2000] ECR II-491.
32. Austrian Supreme Court as Higher Cartel Court, 8 Oct. 2008 – 16 Ok 5/08 <www.ris.bka.gv.at>.
33. Cf para. 15 of the Commission notice – Guidelines on the application of Art 81(3) of the Treaty; OJ 2004 C101/97.
34. Austrian Supreme Court as Higher Cartel Court, 29 Mar. 1993 – Okt 2/93 ¼ O 35. Cf para. 27 of the Guidelines on the applicability of Art 101 of the Treaty on the Functioning of the EuropeanUnion to horizontal cooperation agreements, OJ 2011 C 11/1.
36. Cf para. 29 of the Guidelines on the applicability of Art 101 of the Treaty on the Functioning of the EuropeanUnion to horizontal cooperation agreements, OJ 2011 C 11/1.
Competition Law - Suppl. 324 (August 2011) object the restriction of competition, there is no need to take account of its effects,meaning that for the purpose of applying Section 1 KartG no actual anti-competitiveeffects need to be demonstrated where the agreement has a restriction of competition as itsobject.37 Restrictions of competition by object are those that by their very nature have the potential of restricting competition. These are restrictions which in light of the objectivespursued by the competition rules have – based on the serious nature of the restriction –such a high potential of negative effects on competition that it is unnecessary to dem-onstrate any actual effects on the market. Restrictions by object include, in the case ofhorizontal agreements, price fixing, output limitation and sharing of markets and custo-mers. As regards vertical agreements, the category of restrictions by object includes,notably, fixed and minimum resale price maintenance and restrictions providing absoluteterritorial protection, including restrictions on passive sales.
If an agreement is not restrictive of competition by object it must be examined whether it has restrictive effects on competition. For this account needs to be taken of the actualand potential effects. For an agreement to have restrictive effects on competition withinthe meaning of Section 1 KartG it must have, or be likely to have, an appreciable adverseimpact on at least one of the parameters of competition on the market, such as price,output, product quality, product variety or innovation.
An example for such an assessment is the Asphalt case, in which the Austrian Supreme Court was called upon to rule whether a joint production company for asphalt, which wasset-up by the three largest Austrian road construction companies, restricted competitionby object or effect. By applying the European Commission’s guidelines on horizontalcooperation agreements38 the court stated that, in principle, a joint production agreementdoes not have as its object a restriction of competition, so that it was necessary to evaluatewhether negative effects materialized from the agreement. To this end the court held that,as the jointly manufactured input covered only a limited percentage of the shareholders’total requirements of asphalt in the relevant geographic region and accounted only for alimited percentage of total costs of the final product, there was no sufficient influence onthe prices charged on the downstream road construction market. However, the courtconcluded that in the circumstances at hand the joint production prima facie contributedto price rigidity in the market and would therefore fall within the scope of the cartelprohibition.39 3.1.4 Group Privilege (‘Konzernprivileg’) Like under EU law only collusive behaviour between independent undertakings thatprevents, restricts or distorts competition is prohibited. Thus, Section 1 KartG will notapply in relation to companies that form part of a single economic entity and, therefore,belong to the same undertaking / group. A single economic entity will exist if a companycan exercise decisive influence over another company, or for companies over which thesame entity exercises ultimately decisive influence. Thus, for instance, sister companies,over which decisive influence is exercised by the same parent company, form a singleeconomic entity.40 37. See ECJ, Case 8/08, T-Mobile Netherlands et al, [2009] ECR-I-4529.
38. Guidelines on the applicability of Art 101 of the Treaty on the Functioning of the European Union tohorizontal cooperation agreements, OJ 2011 C 11/1.
39. Austrian Supreme Court as Higher Cartel Court, 26 Jun. 2006 – 16 Ok 51/05 <www.ris.bka.gv.at>.
40. See, e.g., Case C-73/95, Viho, [1996] ECR I-5457, para. 51; Case 107/82, AEG, [1983] ECR-3151, para. 50;Case C-286/98 P, Stora, [2000] ECR-I 9925, para. 29; or Case C-97/08 P, Akzo, [2009] ECR I-8237, paras 60et seq.
Competition Law - Suppl. 324 (August 2011) The Austrian cartel prohibition extends to a specific form of unilateral conduct.41 Recom-mendations to obey specific prices, minimum prices, calculation guidelines, trading mar-gins or rebate schemes are treated equivalent to an anti-competitive agreement, unlessthe recommendation states explicitly to be non-binding and no economical or socialpressure42 is exercised in order to implement the price recommendation (Section 1paragraph 4 KartG).Therefore, opposed to EU law, where some form of agreement orconcerted practice needs to be established, a purely unilateral recommendation can becaught by the KartG. Austrian case-law interprets – in accordance with EU jurisprudenceon recommended retail prices – the term ‘non-binding’ very broadly; for example, a moralobligation of the distributor/retailer to observe the recommendation may be sufficient totrigger a cartel violation.43 3.2 Section 2 of the KartG: The Exception 3.2.1 The Efficiency Exception of Section 2 Paragraph 1 KartG Similar to Article 101(3) TFEU the KartG provides in Section 2 paragraph 1 KartG for anexception of certain restrictive practices prohibited by Sec1 KartG. The exception appliesto restrictive practices that produce pro-competitive benefits which outweigh therestrictive effects on competition. The balancing of restrictive and pro-competitiveeffects is conducted within the framework laid down by Section 2 paragraph 1 KartG.
If the pro-competitive effects do not outweigh a restriction of competition, the agreementis void. Section 2 paragraph 1 KartG foresees two positive and two negative requirementsthat need to be fulfilled in order to qualify for an exception: (a) The agreement must contribute to improving the production or distribution of goods or contribute to promoting technical or economic progress.
(b) Consumers must receive a fair share of the resulting benefits.
(c) The restrictions must be indispensable to the attainment of these objectives, and (d) the agreement must not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.
Undertakings have to assess for themselves whether the requirements for an exemptionare fulfilled or not. The burden of proof under Section 2 KartG rests on theundertaking(s) invoking the benefit of the exception rule; the undertakings are obligedto demonstrate that all four conditions pursuant to Section 2 KartG are satisfied. Theexception is interpreted in the Austrian practice in accordance with the European case-law and the various notices provided by the European Commission on Article 101(3)TFEU, for example, the guidelines on the application of Article 101(3) TFEU,44 theguidelines on vertical restraints45 or horizontal cooperation agreements.46 41. Austrian Supreme Court as Higher Cartel Court, 5 Sep. 2001 – 16 Ok 5/01 ¼ wbl 2001, 320.
42. Austrian Supreme Court as Higher Cartel Court, 4 Dec. 1997, 12 Os 93/73 <www.ris.bka.gv.at>; Classicalexamples for an illegal economic pressure to implement price recommendations are refusals to supply; AustrianSupreme Court as Higher Cartel Court, 21 Jan. 1964, 10 Os 160/63 <www.ris.bka.gv.at>.
43. Austrian Supreme Court as Higher Cartel Court, 29 Mar. 1967, 9 Os 66/66 <www.ris.bka.gv.at>.
44. Commission notice – Guidelines on the application of Art 81(3) of the Treaty; OJ 2004 C 101/97.
45. Commission notice – Guidelines on vertical restraints, OJ 2010 C 130/1.
46. Commission notice – Guidelines on the applicability of Art 101 of the Treaty on the Functioning of theEuropean Union to horizontal cooperative agreements <http://ec.europa.eu/competition/antitrust/legislation/horizontal.html>.
Competition Law - Suppl. 324 (August 2011) Section 2 paragraph 2 No. 1 KartG provides an exception for de minimis cartels (Baga-tellkartelle). The de minimis test reflects the economic approach underlying the KartGmeaning that the prohibition should apply only when the identified anti-competitiveeffects have some kind of macroeconomic significance.
The exception applies to collusive behaviour of undertakings which have a combined market share in Austria not higher than 5% and in case of a narrower regional market inAustria not higher than 25%. The kind of collusion is not relevant; thus – and opposed tothe approach of the de minimis notice of the European Commission47 – also hard-corerestrictions are exempted. However, the exception applies only as long as the under-takings are below the market share thresholds; unlike the EU rules there is no toleranceperiod if the thresholds are only exceeded temporarily.48 The application of the exception pre-supposes a definition of the relevant market(s) affected by the agreement. The relevant product market for applying theexemption does not only refer to the market directly concerned by the agreement inquestion but also to all other related markets that may indirectly be affected by theagreement (e.g., downstream or upstream market). In addition, in line with the Europeanpractice – but deviating from the predecessor rule under the KartG 2002 – the marketshare of the undertakings taking part in the agreement and not only the share of theproducts that are affected by the agreement needs to be taken into account. Thus, themarket share of the undertakings with the relevant products in- and outside the agree-ments must be considered.49 Section 2 paragraph 2 No. 2 KartG exempts from the general cartel ban agreementsbetween publishers / traders of books, art prints, music, journals and newspapers andretailers which fix the retail prices. The exception ‘correlates’ with the Federal Law on theobligation to sell books at a fixed price (‘BPrBG’),50 a so-called lex specialis whichapplies to the publication and importation of, and trade, except for cross-border electronictrade, in German language books and music. The BPrBG provides for a fixed minimumretail pricing system for imported German language books and music at a level set by thepublisher or importer.
Section 2 paragraph 2 No. 3 KartG exempts certain restrictions of competition amongmembers of cooperative societies (Genossenschaften) as well as between cooperativesocieties and their members, as long as the restriction is justified by the societies’ mandateto support its members (Fo¨rderauftrag) (Section 1 GenG). The intention of the exemptionis to warrant that the functionality of the cooperative society is not hampered by theapplication of the KartG. The exception is widely perceived as emanating from theancillary restraint concept (or so-called Immanence Theory) meaning that ancillaryrestrictions of competitions are admissible insofar as they are indispensable to allowthe participants to an agreement to achieve the main legitimate objective of the agree-ment. In the context of cooperative societies the applicability of the exemption was, for 47. Commission Notice on agreements of minor importance which do not appreciably restrict competition underArt 81(1) of the Treaty, OJ 2001 C 368/13.
48. Under the European de minimis notice the market share thresholds may temporarily be exceeded in twoconsecutive years for not more than 2%.
49. Austrian Supreme Court as Higher Cartel Court, 26 Jun. 2006 – 16 Ok 51/05 <www.ris.bka.gv.at>.
50. Bundesgesetz u¨ber die Preisbindung bei Bu¨chern, Federal Law Gazette I, 45/2000.
Competition Law - Suppl. 324 (August 2011) instance, discussed for the obligations imposed on the members of the society not toengage in business activities competing with the cooperative society or becoming mem-bers in competing cooperative societies (non-compete obligations).
3.2.5 Members of a Group of Credit Institutions Pursuant to Section 2 paragraph 2 No. 4 KartG restrictions of competition among creditinstitutions which form pursuant to Section 30 paragraph 2a of the Austrian Banking Act(Bankwesengesetz) a cross guarantee system (Haftungsverbund) are exempted from thecartel prohibition.51 While the relations between the members of the Haftungsverbund areexempted from the prohibition of restrictive agreements, the forming of a Haftungsver-bund is considered to amount to a concentration under merger control (see below undersection 5.2. of this chapter). In practice, the provision played a role in assessing theSparkassen-Haftungsverbund.52 The Austrian Supreme Court held in one of its decisionsto the Sparkassen-Haftungsverbund that this exception does however not prevent theapplicability of EU competition law, even if the agreement would be covered by theexception under the KartG.53 Section 2 paragraph 2 No. 5 KartG exempts agreements, decisions and concerted prac-tices among the members of agricultural producer associations as long as they do notcontain retail price maintenance and eliminate competition on the relevant market.
Hence, the KartG provides a similar exemption as Article 42 TFEU in connectionwith Council Regulation No. 1184/2006 applying certain rules of competition to theprotection of, and trade in, agricultural products.54 3.3 Section 3 KartG: Block Exemption Regulation Section 3 paragraph 1 KartG enables the Federal Minister of Justice to enact in accordancewith the Federal Minister of Economic Affairs block exemption regulations. Up to now, nonational block exemption regulation has been adopted, which leaves a legal gap for agree-ments that do not affect inter-state trade. The practice usually applies the EU block exemp-tions in analogy to restrictive agreements which are not in the scope of Article 101 TFEU.
While Section 1 KartG deals with agreements, decisions and concerted practices amongstundertakings (e.g., collusive behaviour), Section 5 KartG addresses unilateral conduct of 51. To quality as a Haftungsverbund in the meaning of s. 30 para. 2a BWG the credit institutions forming part ofthe arrangement have to enter into a contractual agreement (1) to set up an early warning system for adverseeconomic developments, (2) to support one another by way of financial or other measures in the case of economicdistress, (3) to harmonize their business and market policies and (4) to exercise the right to end the arrangementgranted to the individual member institutions only after a notice period of at least two years.
52. OLG Vienna as Cartel Court, 13 Jun. 2006, 27 Kt 83/04 <www.ris.bka.gv.at>; Austrian Supreme Court asHigher Cartel Court, 26 Mar. 2007, 16 Ok 12/06 ¼ O 53. Austrian Supreme Court as Higher Cartel Court, 20 Dec. 2005 – 16 Ok 6/05 <www.ris.bka.gv.at>.
54. Council Regulation (EC) No. 1184/2006 of 24 Jul. 2006 applying certain rules of competition to the pro-duction of, and trade in, agricultural products, OJ 2006 L 214/7.
Competition Law - Suppl. 324 (August 2011) dominant firms. The provision is shaped along Article 102 TFEU and prohibits any abuseby a dominant undertaking. As enumerated in Section 5 paragraph 1 KartG, such an abusemay consist of (i) directly or indirectly imposing unfair purchase or selling prices orunfair trading conditions, (ii) limiting production, markets or technical development tothe prejudice of consumers, (iii) applying dissimilar conditions to equivalent transactionswith other trading parties, (iv) making the conclusion of contracts subject to acceptanceby the other parties of supplementary obligations which, by their nature or according tocommercial usage, have no connection with the subject of such contracts and(v) unjustified sales of goods below the cost price.
4.1 Section 4 of the KartG: Legal Definition Section 5 KartG applies only where an undertaking has a dominant position. Though notexplicitly stated in the provision, also collective dominance is encompassed by the pro-hibition.55 A finding of dominance involves a two-stage procedure. The first is to deter-mine the relevant product and geographical markets, whereby the method for this is thesame as under European law. Having defined the market, it is necessary to determinewhether the undertaking has dominant position on this market.
Dominance has been defined under Union law as a position of economic strength enjoyed by an undertaking, which enables it to prevent effective competition beingmaintained on a relevant market, by affording it the power to behave to an appreciableextent independently of its competitors, its customers and ultimately of consumers.56 Section 4 paragraph 1 KartG provides a legal definition of the term dominant position by essentially mirroring the European case-law stating that an undertaking is dominant ifit can act on the market largely independently of other market participants. Thus, underSection 4 paragraph 1 KartG an undertaking is dominant if it is exposed to no or onlyinsignificant competition, or has, in relation to the other competitors, a superior positionin the market, taking particularly into consideration the financial strength, relations toother undertakings, access to the procurement and sales markets, as well as the circum-stances limiting market access for other undertakings.
In addition, Section 4 paragraph 2 KartG contains a set of very broad (refutable) presumptions of market dominance if certain market share thresholds are met. Pursuantto Section 4 paragraph 2 KartG an undertaking is deemed to be dominant, if (i) its marketshare exceeds 30%, or (ii) its market share exceeds 5% and if it is exposed to competitionof no more than two competitors on the market; or (iii) its market share exceeds 5% and ifit is one of the four largest undertakings on the relevant market, which together accountfor a market share exceeding 80%.
Furthermore, an undertaking is considered dominant pursuant to Section 4 paragraph 3 KartG if it has in relation to its customers or suppliers a superior market position. Thiswill be assumed if the customers and suppliers – in order to avoid severe economicaldisadvantages – depend on the business relationship with the (dominant) undertaking.
Austrian case-law identified this kind of market dominance in vertical relationshipsbetween car distributors and manufactures/general importers57 or between cinemasand film distributors.58 55. For more details see Vartian in Petsche/Urlesberger/Vartian (editors) KartG 2005, s. 4 para. 46 (2007).
56. Leading case of the ECJ, Case 27/76, United Brands v. Commission, [1978] ECR-207.
57. Austrian Supreme Court as Higher Cartel Court, 14 Dec. 1993 – Okt 7/93 ¼ O 58. Austrian Supreme Court, 9 Dec. 1997 – 4 Ob 214/97t ¼ O Competition Law - Suppl. 324 (August 2011) Similar to EU law it is not in itself illegal for an undertaking to be in a dominant positionand such a dominant undertaking is entitled to compete on the merits. However, anundertaking, once being dominant, is considered to have special responsibility not toallow its conduct to impair genuine undistorted competition, so that certain behaviour(i.e., abusive behaviour) set by the dominant undertaking can be challenged.
The scope of abusive behaviour prohibited by Section 5 KartG follows essentially Article 102 TFEU. Therefore, similar to the EU practice the Austrian jurisprudencedistinguishes two different forms of abuse, that is, exploitative and exclusionary abuses.
Exploitative abuse consists of a conduct which is directly exploitative of customers(e.g., charging of excessive prices). The objection against this type of conducts emanatesfrom the dominant undertaking being in a position to reduce output and/or increase theprices of its products above the competitive level, thereby exploiting customers. Of agreater practical significance are exclusionary practices. Exclusionary abuses consists ofbehaviour that is designed to impair effective competition by foreclosing competitors of adominant firm in an anti-competitive way; classical forms of exclusionary conductsinclude amongst others various forms of exclusive dealings, predatory pricing, refusalto supply, margin squeeze, etc.
The foreclosure might occur upstream or downstream in the market and on the same market level of the dominant firm. Examples of conduct with an impact on the marketlevel of the dominant firm are single branding agreements,59 rebates and predatory pric-ing. On the other hand, for example, refusals to supply or margin squeezing, are predom-inantly considered to harm competition in the downstream market (vertical foreclosureeffect). In the past, the Austrian Cartel Court has imposed on dominant undertakings thathave been found to have conducted an anti-competitive refusal to deal an obligation tocontract.60 Compared to Article 102 TFEU the KartG contains in Section 5 paragraph 1 No. 5 an Austrian peculiarity; namely the prohibition not to sale products beyond the acquisitionprice unless there exists a reasonable justification for it. While in substance the provisionis perceived to correspond largely to predatory pricing under Article 102 TFEU, Section 5paragraph 2 KartG shifts effectively the burden of proof to the dominant undertaking;thus, the dominant undertaking has to demonstrate that its sale price is not predatory.
4.3 The Austrian Neighbourhood Supply Act In addition to the provisions on dominance in the KartG, the Austrian NeighbourhoodSupply Act (Nahversorgungsgesetz) imposes an obligation of orderly market conduct onwholesalers and retailers which applies regardless of their market position. The act wasaimed to warrant the supply of consumers on local level (i.e., the neighbourhood) withproducts of daily-life (notably food) by protecting smaller retailers (e.g., groceries)against improper market conduct such as excessive and ruinous practices of undertakingswith stronger market power. Examples for improper behaviour are discriminatingcommercial terms or imposing unjustified prices or terms of trade.
59. Austrian Supreme Court as Higher Cartel Court, 9 Dec. 1996 – 16 Ok 12/96 ¼ O Supreme Court as Higher Cartel Court, 12 Sep. 2007 – 16Ok 4/07 ¼ O 60. Austrian Supreme Court as Higher Cartel Court, 9 Sep. 1997 – 4 Ob 214/97t, O Supreme Court as Higher Cartel Court, 17 Dec. 1997 – 16 Ok 20/97; O Court as Higher Cartel Court, 17 Dec. 1997 – 16 Ok 22/97, O ¨ Bl 1998,309; Austrian Supreme Court as Higher Cartel Court, 9 Dec. 1996 – 16 Ok 20/04, O Competition Law - Suppl. 324 (August 2011) The Austrian Higher Cartel Court has recently decided that the Austrian Neighbour- hood Supply Act is a complementary legislation to the antitrust rules and is to be appliedalso to foreign acts if they significantly affect the Austrian market (see effects doctrine insection 5.4. of this chapter).61 More importantly, the Court allowed the application ofSection 2 of the Neighbourhood Supply Act, which generally prohibits undertakings fromoffering discriminating sales conditions to commercial resellers, beyond its teleologicalcore, the food retail industry, and offered a very broad interpretation of ‘commercialresellers’, including effectively all undertakings with the exception of end-users. Thisdecision was widely understood (and criticized) as a general prohibition to discriminate inbusiness-to-business relationships.62 According to Section 6 KartG proceedings pursuant to Section 5 KartG may not be takenas an opportunity by the market-dominating undertaking to cease to supply to or purchasefrom the undertaking against which the abuse is directed. Hence, Section 6 KartG pro-hibits a market dominant undertaking to set retaliatory measures against a trading partnerwho initiated a cartel proceeding or filed a complaint to the FCA.
However, Section 6 KartG is hardly of practical relevance because an anti-competitive refusal to supply or any other forms of discrimination on unjustified terms is usuallyprohibited by Section 5 KartG.
The KartG contains in part I Chapter 3 (Sections 7–19 KartG) a number of provisionsdealing with merger control. In addition to the KartG the WettbG foresees some relevantprocedural provisions. The KartG establishes a mandatory prior approval system requir-ing relevant mergers to obtain prior approval before the merger may be implemented.
Transactions that are notifiable to the European Commission under the EU Merger Control Regulation (Council Regulation (EC) No. 139/2004 on the control of concentra-tions between undertakings ‘ECMR’63) are excluded from the scope of the Austrianmerger control (one-stop-shop principle). However, the KartG contains specific ruleson media mergers (see below). In accordance with the exemption from the ‘one-stop-shop principle’ pursuant to Article 21(4) ECMR, media mergers may require a filing tothe FCA despite the need to obtain approval from the European Commission.
61. Austrian Supreme Court as Higher Cartel Court, 16 Jul. 2008 – 16 Ok 3/08 <www.ris.bka.gv.at>.
62. Austrian Supreme Court as Higher Cartel Court, 9 Jun. 2010 – 16 Ok 1/10 <www.ris.bka.gv.at>; for moredetails see Reidlinger, Diskriminierungsverbot im Nahversorgungsgesetz: Einheitspreise gibt es (doch) nicht,OZK 2010, 210.
63. Council Regulation No. 139/2004 of 20 Jan. 2004 on the control of concentrations between undertakings, OJ2004 L 24/1.
Competition Law - Suppl. 324 (August 2011) Section 7 KartG defines the following types of transactions as relevant events (concen-tration) under Austrian merger control: – the acquisition of an undertaking or part thereof, including by merger (Verschmel- zung) or transformation (Umwandlung) (Section 7 paragraph 1 No. 1 KartG); – the acquisition of the rights by an undertaking to operate another undertaking by way of management or lease agreement (Section 7 paragraph 1 No. 2 KartG); – the (direct or indirect) acquisition by an undertaking of shares, whereby a share- holding of 25% or 50% is attained or exceeded in another undertaking (Section 7paragraph 1 No. 3 KartG); – the establishment of interlocking directorships whereby at least half of the manage- ment or members of the supervisory boards of two or more undertakings becomeidentical (Section 7 paragraph 1 No. 4 KartG); – any acquisition whereby a controlling influence over another undertaking may be exercised (Section 7 paragraph 1 No. 5 KartG); and – the formation of a full-function joint venture (Section 7 paragraph 2 KartG).
Furthermore the conclusion of certain agreements between banks (as defined in theBanking Act) also constitutes a concentration pursuant to the KartG (cf above).
The concentration tests foreseen in the KartG correspond largely to the concept of concentration under the ECMR. Notably, the concept of control (as established by thecase-law of the Austrian courts) mirrors essentially the notion of control under EU mergerrules. The main exception is Section 7 paragraph 1 No. 3 KartG which foresees that alsothe acquisition of a shareholding of 25% or more in another undertaking, regardless ofwhether or not control is conferred by the transaction, qualifies as a concentration.
Like under the ECMR, intra-group transactions are not caught by the KartG.
A concentration has to be notified to the FCA if the following thresholds are fulfilled(based on the revenues of the last financial year): (1) the combined worldwide turnover of all undertakings concerned exceeds EUR (2) the combined Austrian turnover of all undertakings concerned exceeds EUR (3) the individual worldwide turnover of each of at least two of the undertakings However, even if the above thresholds are satisfied, no obligation to notify exists if: (1) the Austrian turnover of only one of the undertakings concerned exceeds EUR (2) the combined worldwide turnover of all other undertakings concerned does not For calculating the relevant turnover the revenues of all entities that are linked with anundertaking concerned as defined in Section 7 KartG must be attributed, that is, also theturnover of a 25% subsidiary must be attributed fully. Revenues of the seller can bedisregarded (unless the seller remains linked with the target undertaking as defined inSection 7 KartG).
Specific provisions for the calculation of turnover apply for mergers in the banking, insurance and media sectors. As regards ‘media mergers’ (i.e., mergers involving twoundertakings that are – or hold a share of at least 25% in – either a media undertaking, amedia service, or a media support undertaking), the KartG stipulates that, with regard to Competition Law - Suppl. 324 (August 2011) the first and second and fifth turnover thresholds mentioned above (i.e., all thresholdsexcept the EUR 5 million-threshold), the turnover of media undertakings and mediaservice undertakings has to be multiplied by 200, whereas the revenues of media supportundertakings have to be multiplied by 20.
The KartG only applies to agreements and practices that may impact the Austrian market.
Thus, a concentration, despite meeting the turnover thresholds, does not require notifi-cation if it has no domestic effect.
According to this test, Austrian competition law only applies if the concentration has a direct and foreseeable impact on the Austrian market. The now established practice,which is reflected in the notice of the FCA sets very low standards for actual or potentialeffects on the competitive situation in Austria.64 Jurisdiction is assumed if a foreignconcentration is – ‘due to concrete facts according to general economic experience –capable of having an impact on Austrian assets or legally protected rights in Austria’. Thisincludes (besides actual horizontal overlaps or vertical relations which relate to marketsthat pertain to Austria) cases where the target, through the transaction, gains access to theacquirer’s resources (such as financial means, patents or know-how), which might affectthe acquirers’ business activities in Austria. The jurisdictional effect-test is an objectivetest. Therefore, any potential nexus to Austria is sufficient to bring the transaction into thejurisdiction of the FCA, regardless whether or not the effects on Austria are – from acompetition law perspective – harmful. The question whether the transaction brings aboutnegative effects on competition (i.e., the actual substantive assessment) is supposed to betested in the course of the regular merger review process, but not in the course of thejurisdictional assessment.
So far, the Cartel Court has been rather hesitant to decline a notification obligation for lack of domestic effects. However, with regard to the acquisition of a Czech and aSlovakian bank with purely local businesses by the Austrian Erste Bank, the HigherCartel Court overturned the decision of the Cartel Court by ruling that a strengtheningof resources, such as an increase of financial power of Erste Bank in Austria, would byitself not suffice in order to establish an effect on the Austrian market.65 5.5 Exception to the Notification Requirement The KartG excludes certain transactions from the applicability of the merger controlprovisions irrespective of whether the turnover thresholds are met. This exception appliesif an interest in an undertaking is acquired: – by a bank for the sole purpose of reselling the interest acquired;– by a bank for the sole purpose of restructuring the undertaking in which the interest is acquired or serving as a guarantee for a claim against the respective undertaking; or – for the sole purpose of managing and commercializing the interest acquired (investment fund or financing of capital business).
The exception pre-supposes that the acquirer is restricted in the use of his voting rights.
Moreover, in the first two cases the acquirer has to resell the interest acquired within oneyear or after the restructuring has been accomplished or after the purpose of the guaranteehas ceased to exist respectively.
64. Accessible under <www.bwb.gv.at>.
65. Austrian Supreme Court as Higher Cartel Court, 27 Feb. 2006 – 16 Ok 49/05.
Competition Law - Suppl. 324 (August 2011) The KartG foresees a dominance test, that is, a concentration has to be prohibited if it isexpected to lead to the creation or strengthening of a (single or collective) dominantmarket position. Different than under the ECMR the KartG does not foresee a distinct testfor negative spill-over effects in the case of JVs (cf Article 2(4) ECMR). Thus, negativespill-over effects are only tested under the dominance test.
An undertaking is dominant in the meaning of the KartG if it can act on the market largely independently of other market participants. The KartG contains various refutablepresumptions of market dominance if certain market share thresholds are met (see above).
Even if the concentration creates or strengthens a dominant market position, it might be approved if (i) it generates efficiencies which outweigh its detrimental effects, or (ii) themerger is necessary to maintain or improve the international competitiveness of theundertakings concerned.
In the case of a media merger (see also section 5.1. of this chapter) the concentration needs to be assessed not only against its compatibility with competition rules but alsoagainst the likelihood of the concentration adversely affecting media diversity in Austria.
The relevant merger authorities in Austria are the FCA, the FPC (together the statutoryparties) and the Cartel Court (see section 2. of this chapter for more details).
In the Austrian institutional system the statutory parties assess notifications in phase I proceedings. Should a notification raise competition concerns, either statutory party canrequire the Cartel Court to open an in-depth investigation (phase II proceedings). In thatcase (i.e., opening of an in-depth investigation) the Cartel Court takes the lead in theinvestigation and decides on the merits of the cases. Decisions of the Cartel Court may beappealed before the Higher Cartel Court.
Further, the Competition Commission may give (non-binding) recommendations to the FCA whether or not to apply for an in-depth investigation of a notified merger. Moreover,the KartG foresees that the regulatory authorities in the energy (E-Control) and telecom-munication (Telekom-Regulator) sectors may submit (ex officio or upon request by theCartel Court) advisory opinions on notified transactions that affect the respective sector.
In transactions affecting air transport, the Federal Minister for Transport, Innovation andTechnology may submit statements. Finally, also the Chamber of Commerce, theChamber of Labour and the presidential conference of the Federal Chambers of Agri-culture may submit statements, if the transaction affects the relevant sector.
Concentrations that meet the turnover thresholds must be notified to the FCA (unlessthe transaction has Union dimension pursuant to Article 1 ECMR). There is no formalfiling deadline; however, a transaction must not be implemented prior to obtainingclearance.
A notification may be filed as soon as the undertakings concerned can demonstrate their intention to enter into the ultimate transaction agreements and close the transaction in theforeseeable future (e.g., by means of a Memorandum of Understanding or a Letter ofIntent).
Competition Law - Suppl. 324 (August 2011) Transactions which are notifiable may not be implemented prior to obtaining clearance.
Infringements of the suspension clause may lead to fines of up to 10% of the worldwideturnover of the infringing undertaking and nullity of the implementing measures.
However, the meaning of ‘implementation’ has not yet been clarified by the CartelCourt. Older jurisprudence suggests that the mere acquisition of shares and/or votingrights without the acquirer exercising the voting rights in a way affecting the marketbehaviour of the target does not amount to an unlawful implementation of the transaction.
Like under the ECMR Austrian merger control foresees tight deadlines for the agencies todecide upon cases.
The statutory parties have four weeks upon submission of a notification (provided that the filing fee has been paid in due form) to assess the transaction and decide whether toopen a phase II proceedings before the Cartel Court (by applying for an in-depth inves-tigation).
A transaction is cleared in phase I if the statutory four-week period expires and neither of the statutory parties has lodged an appeal for phase II proceedings (the statutory partieshave to issue a declarative clearance notice to confirm that no application has beenlodged). In addition, the statutory parties may waive their right to apply for an in-depth investigation, which enables clearance before the end of the four-week-period.
However, the statutory parties will be prepared to grant ‘early clearance’ only in caseswhere the clearance is needed ahead of the statutory review period (e.g., if the target is atrisk to go bankrupt).
According to a notice of the FCA,66 it will – generally – only waive its right after two weeks following publication of the transaction on the FCA’s website (which will usuallyoccur on the day of submission or the next working day), and only if it safeguarded thatthe transaction does not raise competition concerns.
Phase II proceedings must be completed within five months after the statutory parties have requested an in-depth investigation at the Cartel Court. A transaction is cleared inphase II if either the statutory party(ies) withdraw(s) the application for phase II proceed-ings or the Cartel Court clears the transaction (with or without conditions).
Neither merger authority can expand the timeframe. However, there is a procedure foreseen in the case of incomplete notifications that do not enable the assessment of atransaction. In that case the Cartel Court may require the applicant to supplement thenotification, once an in-depth investigation has been launched. The time-period grantedfor supplementation of the notification cannot be longer than one month. In this case thefive-month period only starts, once the notification is complete.
The KartG only requires that, in the notification, accurate and complete information mustbe provided with regard to all facts by which a dominant market position may be estab-lished or enhanced; these facts are in particular the structure of ownership, the turnover onthe relevant markets and the respective market shares of each undertaking concerned aswell as information regarding the general structure of the market. The FCA has publisheda notification form which undertakings are well advised to adhere to. Should the statutoryparties find that the submitted information does not suffice to assess the transaction, they 66. Accessible under <www.bwb.gv.at>.
Competition Law - Suppl. 324 (August 2011) usually apply for an in-depth investigation to gain time for the assessment, since infor-mation requests do not prolong the statutory four-week period.
The notification form requires the notifying party(ies) to provide substantial informa- tion, notably if the transaction gives rise to an affected markets in the meaning of thenotification form.
An ‘affected market’ is a market where:– the transaction leads to or enhances a dominant market position (notably if the presumptions of market dominance are met, cf. above); – the activities of the parties involved overlap and the parties account for a combined – the undertakings involved are active on markets up- or downstream of each other and The notification form is attached to this chapter.
5.7.6 Decisions in Merger Control Proceedings Phase I proceedings may end by (i) time lapse, if neither statutory party has applied for anin-depth investigation or (ii) issuance of a waiver by the statutory parties.
Phase II proceedings before the Cartel Court end by (i) the statutory parties withdraw- ing the application for an in-depth investigation, (ii) the Cartel Court rejecting the appli-cation of the statutory parties, as the merger was not notifiable, (iii) the Cartel Courtdeclaring the merger not compatible with merger control rules, or (iv) the Cartel Courtclearing the notified transaction (subject to conditions or unconditionally). Decisions ofthe Cartel Court may be appealed before the Higher Cartel Court (but only on legalgrounds).
The KartG expressly foresees the possibility of the undertakings concerned agreeing withthe Statutory Parties on acceptable remedies, in both phase I and II proceedings. Also theCartel Court may clear a transaction subject to restrictions or conditions.
Remedies can be suggested at any stage during the merger control proceedings. There are no formal deadlines for their submission.
The enforcement powers foreseen in the Austrian competition law regime are – to themost part – aligned to the enforcement rules provided for by Council Regulation No. 1/2003 on the implementation of the rules on competition laid down in Articles 101 and102 TFEU.67 This chapter will deal with the main features of the public enforcementsystem (the sanction system is described in section 6.2).
The powers of the Austrian Cartel Courts encompasses the finding and termination of an infringement (Section 26 KartG), commitment decisions (Section 27 KartG) and 67. Council Regulation (EC) No. 1/2003 of 16 Dec 2002 on the implementation of the rules on competition laiddown in Arts 81 and 82 of the Treaty, OJ 2003 L 1/1.
Competition Law - Suppl. 324 (August 2011) declaratory judgments (Section 28 KartG). In addition, interim measures can be orderedpursuant to Section 48 paragraph 1 KartG.
6.1.1 Finding and Termination of Infringements Where the Cartel Court finds that there is an infringement of Section 1 or Section 5 KartG,it may by decision require the undertakings concerned to bring such infringement to anend (cease and desists orders). For this purpose, it may impose on them any behavioural orstructural remedies which are proportionate to the infringement committed and necessaryto bring the infringement effectively to an end (Section 26 KartG).
Structural remedies may only be imposed either where there is no equally effective behavioural remedy or where any equally effective behavioural remedy would be moreburdensome for the undertaking concerned than the structural remedy.68 In urgent cases the Cartel Court may – if requested – order on the basis of a prima faciefinding of an infringement an interim measure (Section 48 paragraph 1 KartG). Comparedto European competition law (Article 8 of Regulation No. 1/2003 requires the risk ofserious and irreparable damages to competition) Austrian case-law is less restrictive: onlythe anti-competitive behaviour must be acknowledged but not an irreparable risk.69 Section 48 paragraph 2 KartG provides for the defendant against an interim relief the right to be heard. A legal remedy against the decision to grant interim relief has nosuspensive effect. However, the Cartel Court may on request of the applicant approvea suspensive effect if this is justified by the interest concerned.
Section 27 KartG provides – similar to Article 9 of Regulation No. 1/2003 – for theadoption of decisions by the Cartel Court whereby undertakings under investigation makelegally binding commitments with respect to their future behaviour. The procedure itselfentails a formal initiation of the proceedings by an application of the FCA, the FCP or anyindividual concerned (see above) at the Cartel Court. In Austria, there exists no legal dutyto publish – at least – a concise summary of the case and the main content of thecommitments. In practice, the FCA publishes the respective information usually on itswebsite. For individuals who do not participate in the cartel proceedings, the informationon the FCA’s website is the only possible way to be informed about commitment pro-ceedings and their outcome.
Section 27 paragraph 2 KartG provides for the possibility to reopen the proceedings if (i) there has been a material change in any of the facts on which the decision was based, or(ii) the undertakings concerned act contrary to their commitments, or (iii) the decisionwas based on incomplete, incorrect or misleading information provided by the parties.
Section 28 paragraph 1 KartG foresees that the Cartel Court can – upon a legitimateinterest – adopt a decision declaring that an infringement was committed in the past.
68. Austrian Supreme Court as Higher Cartel Court, 16 Jul. 2008 – 16 Ok 6/08 ¼ wbl 2008/262; AustrianSupreme Court as Higher Cartel Court, 4 Apr. 2005 – 16 Ok 20/04 ¼ O 69. Austrian Supreme Court as Higher Cartel Court, 1 Mar. 1999 – 16 Ok 1/99 ¼ O Supreme Court as Higher Cartel Court, 16 Jul. 2008 – 16 Ok 6/08 ¼ wbl 2008/262; Austrian Supreme Court asHigher Cartel Court, 17 Jun. 1991 – Okt 46/90 ¼ O Competition Law - Suppl. 324 (August 2011) What constitutes a ‘legitimate interest’ depends on the applying party. If the statutoryparties (e.g., FCA and FCP) ask for a declaratory judgment the request will usually bejustified by the statutory task conferred upon them to preserve competition in the publicinterests. For private parties a legitimate interest may include, for instance, the clarifi-cation of an important and new point of law or the risk of a recurrent infringement.
However, the Cartel Court dismisses a legitimate interest if the claimant just tries tofacilitate a follow-up action for damages.70 Section 28 paragraph 2 KartG provides the possibility for a general declaratory judg- ment that allows an upfront decision whether and to what extent a specific situation issubject to the KartG. The provision is similar to Article 10 of Regulation No. 1/2003 (find-ing of inapplicability). Section 28 paragraph 2 KartG allows undertakings to ‘test’whether a specific constellation is in the scope of the KartG. For instance, undertakingscan request the Cartel Court whether a transaction amounts to a concentration in the termsof merger control. However, Section 28 paragraph 2 KartG is not applicable to merehypothetical cases.
Furthermore, Section 28 paragraph 2 KartG only refers to violations of the KartG, but is perceived by the Cartel Court not to provide a basis for a declaratory judgment of apossible infringement of EU competition law. Indeed, the Cartel Court has persistentlyrefused in the past to provide declaratory judgments for constellations to which alsoArticle 101 TFEU applies.
The KartG provides for EU-type sanctions for infringements of competition law. Thus,compliance with the KartG and the fulfilment of obligations imposed on undertakings canbe sanctioned / enforced by means of fines and periodic penalty payments.
Pursuant to Section 29 KartG the Cartel Court may impose fines on undertakings where, either intentionally or negligently, they (amongst others): – infringe the prohibition of restrictive agreements (Section 1 KartG);– infringe the prohibition to abuse a dominant position (Section 5 KartG);– infringe the prohibition of retaliatory measures (Section 6 KartG);– infringe the prohibition of implementing a merger that has not been cleared by the – fail to comply with a commitment made binding by a decision pursuant to Section – infringe Article 101 or Article 102 TFEU.
For each undertaking participating in the infringement, the fine shall not exceed 10% ofthe total annual group turnover in the preceeding business year.
In addition the Cartel Court may impose fines on an undertaking not exceeding 1% of the total turnover in the preceding business year where, intentionally or negligently, theundertaking (amongst others) (i) gives incorrect or misleading information in a mergercontrol notification, (ii) does not comply with an order by the Cartel Court to produceinformation, (iii) obstructs the investigation of the FCA at the premises, or iv) givesin response to an information request incorrect, misleading or incomplete answers(Section 29 paragraph 2 KartG).
Only the FCA and the FCP are vested with the right to request fines at the Cartel Court (Section 36 paragraph 2 KartG). The Cartel Court cannot impose a higher fine thanapplied for by the FCA or the FCP. It may, however, impose fines lower than requestedby the FCA or the FCP. Thus, the Cartel Court may desist from a fine even if applied forby the FCA or the FCP. In practice, the FCA has calculated the initial and requested 70. Austrian Supreme Court as Higher Cartel Court, 8 Oct. 2010 – 16 Ok 8/08 <www.ris.bka.gv.at>.
Competition Law - Suppl. 324 (August 2011) fine-amount based on the practice on EU-level (and therefore on the Commission noticeson fines), given that no comparable piece of legislation exists on national level.71The Austrian Supreme Court clarified, however, recently that the Austrian system ofcartel fines is – though similar – not identical to the EU-system.72 The basis for calcu-lation of the fine shall be the total revenue of the relevant undertaking and not only theturnover relating to the infringement. Furthermore, the court is not bound by the finingmethod used by the FCA. Rather, the authority’s application only serves as a cap for thecourt’s own findings.
Hence, in exercising its power to set the fine-amount the Cartel Court enjoys discretion within the limits of Section 29 KartG (the maximum cap of 10%) and Section 36paragraph 2 KartG (the maximum amount of fine is limited to the request of theFCA or FCP). The Cartel Court especially needs to take into account the gravity andthe duration of the relevant infringement. Furthermore, it will usually refer to the value ofthe sales of goods or services to which the infringement relates for setting the fine.
The fine also shall reflect the relative weight of each undertaking taking part in theinfringement. In addition, the Cartel Court will have to pay regard to the circumstancesthat may result in an increase or decrease of the fine. Aggravating factors are, for example,that the undertaking continued or repeated the same or a similar infringement, or that theundertaking refused to cooperate or obstructed the investigation. On the other side, mit-igating circumstances usually are considered where the undertaking provides evidencethat it terminated the infringement as soon as the public party intervened or for example,where the undertaking shows that its involvement in the infringement was limited.
The FCA may only request for fines at the Cartel Court within five years after termi- nation of the violation. The infringement lasts according to the case-law as long as theanti-competitive conduct is up-held.73 The Cartel Court may also impose periodic penalties (amounting to up to 5% of theaverage daily turnover in the preceding business year) to enforce court orders (Section35 KartG). Period penalties are not considered as fines for a violation, but as a meremeasure to force the undertaking to comply with an issued order.74 Although the KartG itself does not contain criminal law provisions, Section 168b of theAustrian Criminal Code (Strafgesetzbuch) qualifies the participation in a bidding cartel(‘bid-rigging’) as a criminal offence.75 The provision is directed against natural persons(i.e., not against undertakings).
In addition, competition law infringements may also trigger criminal liability of indi- viduals if all elements of the criminal offence fraud as provided for in Section 146f in theCriminal Code are fulfilled.
As of 1 January 2011, the Austrian Code of Criminal Procedure was supplemented by an immunity scheme for competition law infringements (Section 209b of the Code ofCriminal Procedure – Strafprozessordnung). Under the new rules, individuals who fully 71. For more details see Guidelines on the method of setting fines imposed pursuant to Art 23(2)(a) of RegulationNo. 1/2003, OJ 2006 C 210/2.
72. Austrian Supreme Court as Higher Cartel Court, 25 Mar. 2009 – 16 Ok 4/09.
73. Austrian Supreme Court as Higher Cartel Court, 12 Sep. 2007 – 16 Ok 4/07 <www.ris.bka.gv.at>.
74. Austrian Supreme Court as Higher Cartel Court, 30 Mar. 2007 – 16 Ok 3/07 <www.ris.bka.gv.at>.
75. Austrian Supreme Court as Higher Cartel Court, 12 Sep. 2007 – 16 Ok 4/07 ¼ O Competition Law - Suppl. 324 (August 2011) disclose all facts of a cartel in the course of a leniency application with the FCA(see section 7 of this chapter) or the European Commission may be relieved from personalcriminal prosecution.
Section 1 paragraph 3 KartG states that an agreement, decision, or concerted practiceprohibited by Section 1 paragraph 1 KartG is automatically null and void. Thus, the anti-competitive agreement or practice is not binding or enforceable. The nullity does notdepend upon a prior decision to that effect.
Likewise a conduct that violates Section 5 KartG cannot be enforced before a court.
While not expressly foreseen in the KartG, the nullity sanction is deduced from thepurpose of the abuse control. In literature it is disputed whether all kinds of abusivebehaviour necessarily need to be null and void in order to meet the objective of theprohibition.76 This is mainly argued in cases where the market dominant undertakingis responsible for an anti-competitive tie-up of its trading partners with attractive con-ditions or prices for these customers. However, the Austrian civil courts have in the recentpast shown a tendency to apply the nullity sanction very broadly. To this end the HigherCartel Court stated in the so-called KombiPaket-case that even if the alleged infringementitself was terminated, still valid long-term contracts with customers which were con-cluded only under the impression of the abusive conduct could produce ongoing anti-competitive effects and thus might be null and void.77 In Austria, each party to an agreement or practice is allowed to allege the nullity of an anti-competitive clause. Thus, also a party that – in full awareness of the illegality of aclause – enters into an agreement may later successfully claim the voidness of it.78However, in Austria the nullity sanction only encompasses the anti-competitive partsof an agreement. According to Section 878 paragraph 2 General Civil Code (AllgemeinesBu¨rgerliches Gesetzbuch) the remainder of the agreement is usually still valid.
The agreement as a whole is only void, if the prohibited clause cannot be severedfrom the remaining terms of the agreement.79 Competition law infringements may trigger civil liability. The undertakings concerned(but also the individuals) involved in an infringement, may be subject to private damagesclaims. Such damages claims have to be pursued before the regular civil courts.
Decisions of the Cartel Court finding an infringement of the Austrian or the European competition law are only to a limited extent binding for the Civil Court in follow-upclaims. First they may only be binding if the defendant was also a party in the cartelproceeding. Second – according to Austrian literature – only the ‘award’ itself has abinding effect. Thus, the Civil Court is only bound to the fact that an infringementoccurred however not to the reasoning and additional facts of the decision.80 Claims for damages from competition law are generally time-barred after three years (Section 1489 of the General Civil Code). The limitation period hinges on the knowledgeof the damages and the wrongdoer.
76. See Eilmansberger in Streinz, EUV/AEUV-Vertrag2 (2011), Art 102 AEUV, para. 126 (to be in print).
77. Austrian Supreme Court as Higher Cartel Court, 8 Oct. 2008 – 16 Ok 8/08 <www.ris.bka.gv.at>.
78. Based on the ECJ, Case C-453/99, Courage and Crehan, [2001] I-6297, para. 24.
79. Austrian Supreme Court as Higher Cartel Court, 25 Oct. 2000 – 3 Ob 296/99x ¼ RdW 2001/88, O AustrianSupreme Court as Higher Cartel Court, 22 Jan. 2001 – 6 Ob 322/00x ¼ wbl 2001/265.
80. Sole´, Das Verfahren vor dem Kartellgericht (2006) para. 242f.
Competition Law - Suppl. 324 (August 2011) According to case-law it must be assessed on a case-by-case basis at which point of time an individual claimant has sufficient information to be able to lodge a proper claim(or at least an action for a declaratory judgment). However, the beginning of the timeperiod is not halted until the claimant has all evidence in order to reduce the risk oflitigation to a minimum. Furthermore as soon as the claimant has reasonable suspicion ofpossible damages and the liable person he is obliged to gather actively sufficient infor-mation for bringing a claim. Knowledge of the concrete amount of loss is not relevant fortriggering the limitation period. Thus, the beginning of the limitation period is not directlylinked to a decision of the Cartel Court or a first instance decision of the EuropeanCommission. However, the limitation period will usually be triggered, once the ‘Carteldecision’ has been issued. The claimant will then usually have sufficient information ofthe damages and the liable entity.
The general cost rules applicable in civil procedures apply for follow-up claims in cartel cases. Therefore, the losing party has to bear the costs of the entire proceedings.
This is a significant difference from the proceedings before the Cartel Court (which havehowever no competence to award damages).
The 2005 amendment of the Austrian competition law regime introduced a leniencyprogramme. The statutory basis for the leniency programme is Section 11 paragraph 3WettbG. The leniency programme has played a significant role in the cartel investigationactivities of the FCA. In fact, most of the cartel case output of the Austrian competitionauthorities is due to leniency applications, while ex office investigations are more seldom.
So far the FCA has received some twenty leniency applications (per June 2010), with anoutput of six cases (lift/elevators, industrial chemicals, printing chemicals, plumbing(pending), freight forwarding (pending) and sugar (pending)).
7.2 Requirements for Immunity or Reduction of Fines Pursuant to Section 11 paragraph 3 WettbG the FCA may refrain from applying to imposea fine on undertakings or associations of undertakings which (1) have stopped their participation in an infringement of Section 1 KartG or (2) inform the FCA about this infringement before the authority has learned about the (3) consequently cooperate with the FCA promptly and without restrictions in order to (4) have not coerced any other undertakings or associations of undertakings to partic- If the FCA is already in possession of evidence an application for a reduction of fines maybe submitted, provided that the other requirements are met (Section 11 paragraph 3Sentence 2 WettbG).
As foreseen in Section 11 paragraph 4 WettbG, the FCA has issued a handbook which sets out in detail the requirements for being entitled to receive leniency. The handbook ispublished on the website of the FCA.
Competition Law - Suppl. 324 (August 2011) According to the handbook, the following requirements must be met in order to qualify for leniency according to Section 11 paragraph 3 WettbG: (1) The applicant has conducted an infringement of Section 1 KartG or Article 101(1) TFEU. This includes in particular a participation in forbidden, horizontal or verticalagreements or concerted practices in the meaning of Article 101(1) TFEU and/orSection 1 KartG (e.g., price fixing, market sharing). Different than under EU law,the Austrian leniency programme does not make a distinction between horizontal andvertical agreements. Thus also the participant to a vertical cartel is eligible to leniency.
(2) The undertaking has stopped its participation in the allegedly illegal act. Pursuant to the handbook the applicant should do so only in accordance with the FCA,which – taking into account the progress of the investigations – determineswhen and in what way the participation should be ceased.
(3) During the investigations of the FCA the undertaking cooperates genuinely, fully and on a continuous basis with the FCA and submits to the authority all evidence onthe alleged infringement in the undertaking’s possession or otherwise available. Itremains at the authority’s disposal to reply promptly, truthfully and completely toany requests that may contribute to the full clarification of facts. The undertakingdoes not disclose the fact of its cooperation to other participants in the allegedinfringement.
(4) The undertaking has not coerced any other undertakings to participate in the In order to be eligible to full immunity the leniency applicant has to inform the FCA aboutan alleged infringement before the authority has found out about the facts of the case fromother sources. Different than under the EU-system, in the Austrian leniency programme itis sufficient that the authority is informed about a cartel, whilst it is not required to provideinformation and evidence that enables the authority to carry out a targeted inspection inconnection with the alleged cartel.
If the FCA is already aware of the cartel, the applicant is only eligible to a reduction of fine. The level of reduction depends on the time of disclosure of the additional informa-tion and its added value relative to the evidence already in the authority’s possession. TheFCA will reduce the fines to the following extent (if the other requirements for leniencyare met): – for the first undertaking between 30% and 50%;– for the second undertaking between 20% and 30%;– for any subsequent undertaking up to 20%.
In order to determine the level of reduction of fines within the above mentioned ranges,the FCA will consider the time at which the information has been submitted as well as theadded value of the information or evidence, that is, the extent to which the submittedinformation or evidence due to its quality and/or comprehensiveness may help the FCA toprove the facts of the respective case in a more conclusive or more complete way than itwould otherwise have been possible.
When determining the value of the submitted evidence the FCA will generally consider information submitted in writing or evidence referring to the time of the facts to be provenas containing a higher added value than information referring to a later time.
Furthermore, evidence immediately proving the facts in questions will be considered as representing a higher added value than evidence which just represents an indirectreference to the case.
An undertaking that wishes to benefit from leniency will have to apply for leniency at theFCA by using a special application form (which is annexed to the leniency handbook).
Competition Law - Suppl. 324 (August 2011) The form can be submitted by fax or e-mail. Upon the applicant’s request the under- taking may also submit its application orally at the FCA, where the application will berecorded by completing the application form.
The date of receipt of the duly and fully completed form determines whether an application for immunity or a reduction of fines may be considered and to which extentthe fine may be reduced.
After assessment of the submitted information or evidence (and if necessary after further contacts with the undertaking in question), the FCA will notify the applicant ina non-binding way – provided that the other leniency requirements are met (notably fullcooperation with the FCA in the investigation of the case) – if the authority intends torefrain from requesting a fine or intends to grant a reduction of fines. In the latter case theAuthority will inform the applicant of the prospective level of reduction.
On the undertaking’s request the FCA will notify the undertaking without the above reservations after completing its investigations.
The FCA notifies the FCP of its intention to proceed in compliance with Section 11 paragraph 3 WettbG. As a result the latter is no longer authorized to request a fine for theinfringement in question (Section 36 paragraph 3 KartG). This prevents that the FCP mayrequest fines for the leniency applicant. In addition, the Cartel Court may not impose ahigher fine than requested by the FCA (Section 36 paragraph 2 KartG).
Besides the already mentioned Neighbourhood Supply Act (see section 4.3. of this chap-ter), the Austrian legal system contains also other forms of competitions rules.
Competition law infringements may also trigger a violation of Section 1 of the UnfairCompetition Act (Gesetz gegen unlauteren Wettbewerb) which may be pursued in privatelitigation. In regard to this provision agreements or practices that breach the law (includ-ing the KartG) may form an act of unfair competition.81 The commercial courts arecompetent for hearing cases in the scope of the Unfair Competition Act. The courtswill usually take the decision without any prior decision of the Cartel Court, so that apossible claimant may take concurrent legal actions before the Cartel Court and theCommercial Court.
In the course of market liberalization in some industries (e.g., telecommunication, energyor post services) specific regulations to deal mainly with market access problems and theabuse of a dominant position were set forth by sector-specific laws. The application of thislaw is attributed to sector-specific regulators. In the prevailing opinion the rules of theKartG and sector-specific regulations may be applied simultaneously.82 In general, thesector-specific regulators are organized as administrative authorities with an independentdecision-making body.

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