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Europe > Austria > Competition Antitrust > Cartel > Overview

Overview: Competition/Antitrust, Cartel

                                                                  Austrian Cartel Law

1.1.1. General Procedure

The main sources of the Austrian cartel law are the Cartel Act (Kartellgesetz) and the Competition Act (Wettbewerbsgesetz). In 2006, the Cartel Act and the Competition Act underwent their last modernization and are currently revised again: amendments to the Cartel Act and the Competition Act are planned to come into force in 2013. Whereas the 2006 reform was intended to harmonize the Austrian substantive law on cartels with the competition rules of the European Union, the current reform does not fundamentally restructure Austrian cartel law but aims in particular at extending the scope of its applicability (by reducing exemptions), stipulating specific provisions for claims for damages because of cartel law infringements and strengthening the powers of the Federal Competition Authority (FCA (Bundeswettbewerbsbehörde)).

The Cartel Act contains special antitrust regulations (on cartels, merger control and abuse of a dominant market position). The Competition Act contains provisions on the establishment and the powers of the FCA. Proceedings in cartel (antitrust) matters take place before a special panel of judges of the Higher Regional Court Vienna, the Cartel Court (Kartellgericht), and before the FCA (e.g. first phase of the merger control procedure). Since the Cartel Court is not permitted to initiate cartel proceedings ex officio, they may be initiated, in particular, by
• the so-called official parties (Amtsparteien), which are the FCA and the Federal Cartel Prosecutor (Bundeskartellanwalt),
• every enterprise and association of undertakings that have a legal or economic interest in the decision and
• the Austrian Economic Chamber (Wirtschaftskammer Österreich), the Federal Employees Chamber (Bundesarbeitskammer) and the Standing Committee of the Presidents of the Austrian Chambers of Agriculture (Präsidentenkonferenz der Landwirtschaftskammern Österreichs).

The Federal Cartel Prosecutor represents the public interest in competition matters and is accountable to the justice minister.

The FCA is established at the economic affairs ministry and is headed by a director general, who is independent and therefore may not be given instructions by the minister. One of the FCA’s tasks is to prepare cartel proceedings. In this process it can consult the competition commission, which is established at the FCA. Among other things, the FCA is empowered to examine potential restraints on competition on a case-by-case basis and entire business sectors if it suspects that competition is being threatened. In the course of its investigations, the FCA may also call on and question companies or individuals and examine relevant business documents. The Cartel Court has to allow the FCA to carry out house raids in case of a substantiated suspicion of an abuse of a dominant position or the implementation of a prohibited cartel or merger. Furthermore, the FCA is empowered to apply EC competition rules.

Violations of cartel regulations can result in fines – demanded by the FCA and imposed by the Cartel Court – upon enterprises of up to 10 % of the previous year’s global revenue. All criminal sanctions against individuals under the cartel law have been abolished, with the exception of certain agreements restricting competition in connection with (public) procurement procedures now included in the Criminal Code (Strafgesetzbuch).

In order to effectively implement the cartel law, Austria has introduced a leniency program, in line with the European model. Under this rule, the FCA may refrain from demanding the imposition of a fine against enterprises which have stopped their participation in an infringement of the cartel ban, informed the FCA of the infringement before the FCA gained knowledge of it, cooperate with the FCA in order to fully clarify the facts of the case and have not forced any other undertaking to participate in the infringement. If the facts of the case are already known to the FCA, it may demand a reduced fine, provided that the other requirements have been met.

Agreements and decisions violating the ban on cartels as well as unapproved mergers (if such approval is necessary) are null and void and consequently cannot be enforced among the members or parties. Violations of antitrust regulations may also give rise to cease and desist orders or claims for damages.

1.1.2. Cartels

Agreements between enterprises, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition (i.e. cartels - Kartelle) are prohibited unless expressly exempted under law. Previously, companies could (and had to) obtain an approval from the Cartel Court for arrangements that might fall under the cartel ban, and thus gained legal certainty. Since 2006, however, the legal exception principle has applied in Austria. Enterprises must assess whether any competition restraints they envisage are exempted from the cartel ban. Exemptions are essentially designed to ensure that consumers adequately benefit from improvements in product manufacturing and the promotion of technological and economic progress. It is only when such economic justification can be furnished that competition restraints are permitted. The enterprises’ self-assessment is facilitated by a legal tool available to the justice minister in conjunction with the economic minister, who can issue a regulation exempting certain groups of cartels from the ban (block exemption regulation). These regulations specify the general criteria set out in the Cartel Act. Now that Austrian antitrust legislation has been harmonized with European cartel law, it is possible to apply the numerous decisions rendered by the European Commission and the European courts assessing competition restraints. Nevertheless, compared to the past, legal uncertainty has grown since undertakings or their lawyers must now assess the legal situation without the aid of the Cartel Court. Furthermore, the Cartel Act contains a de-minimis exemption for cartels without noticeable effect on competition.

1.1.3. Merger Control

Mergers include acquisition of the whole or substantial parts of one undertaking by another, acquisition (directly or indirectly) of certain portions of shares, measures creating dominant influence over decisionmaking bodies and certain joint ventures.

Mergers must be notified to the FCA if the undertakings involved in the financial year prior to the merger achieved

• a combined worldwide turnover of more than EUR 300 million (for the purpose of calculating that threshold the turnover of a media undertaking or media service has to be multiplied by 200; the turnover of a credit institution is replaced by the value of the interest earnings and other earnings figures; the turnover of insurance undertakings is replaced by the value of gross premiums) and
• a combined domestic turnover of more than EUR 30 million (turnover is generated in Austria if the recipient of goods or services is domiciled in Austria) and
• at least two undertakings involved achieved a turnover of EUR 5 million each worldwide.

Even where these thresholds are met, mergers are exempt from the notification obligation if the Austrian turnover of only one of the undertakings concerned exceeded EUR 5 million but the combined worldwide turnover of the other undertaking(s) concerned did not exceed EUR 30 million.

Although competitors do not have the right to request an investigation by the Cartel Court (this is a privilege of the Amtsparteien), the Cartel Act gives competitors affected by the merger the right to file comments with the FCA or the Federal Cartel Prosecutor within 14 days of publication of the merger on the FCA’s website. If the FCA or the Federal Cartel Prosecutor demands an investigation of the merger, they have to file a request for examination. That initiates a second phase in which the notification of the merger is submitted to the Cartel Court. The Cartel Court must prohibit the merger if it expects the merger to create or intensify a dominant position. The non-prohibition of a merger can be made contingent upon restrictions and the imposition of certain duties. Mergers may be reversed if approval was based on false information provided by the parties or the conditions for approval were infringed.

1.1.4. Dominant Market Position

The abuse of a dominant market position is prohibited. The Cartel Court may order the undertaking to cease abusing its position. Consequently, such orders might entail the sale of parts of the undertaking or its reorganization.

1.2. European Competition Law

Competition law plays a key role in the European Union. European Union competition rules are intended to support the realization of the Internal Market (Binnenmarkt) and its four freedoms and have, to a large extent, direct effect in national law. Article 101 TFEU (Treaty on the Functioning of the European Union) prohibits agreements and concerted practices that have the object or effect of preventing, restricting or distorting competition. Article 102 TFEU prohibits exclusionary and exploitative conduct by holders of a dominant market position. Additionally, the EC Merger Control Regulation is directly applicable in Austria.

According to these provisions all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the European Market are prohibited and void, unless the de-minimis principle (minimum standard for a noticeable effect on competition) applies. However, individual exemptions or Block Exemption Regulations may apply. In 2004 the system of exemptions was significantly modified. Undertakings relying on an exemption must now evaluate whether certain agreements or practices are justified, although they may have a negative competitive effect. This places a considerable burden on undertakings. For vertical restraints the European Commission has enacted a Block Exemption Regulation on Categories of Vertical Agreements and Concerted Practices, exempting certain exclusive distribution, exclusive purchasing and other potentially restrictive agreements from the applicability of Article 101 TFEU. Various other block exemption regulations for specific industry sectors (e.g. car distribution) also exist.

Intentional or negligent infringement of Article 101 TFEU may lead to the European Commission imposing fines of up to 10 % of the previous year’s worldwide turnover. Furthermore, the abuse of a dominant position within the European Market or a substantial part of it is prohibited insofar as it may affect trade between member states, and may also result in fines in the same amount.

Certain concentrations (such as mergers, acquisitions and joint ventures) between undertakings with a combined worldwide turnover of more than EUR 5 billion, in which at least two of the undertakings concerned have a combined European-wide turnover of more than EUR 250 million each, require approval by the European Commission. Additionally, a merger must be notified to the European Commission if a combined worldwide turnover of more than EUR 2.5 billion is concerned and the combined turnover exceeds EUR 100 million in at least three member states whereby in each of those three member states the revenues of at least two of the merging parties exceed EUR 25 million and the community-wide turnover of at least two of the undertakings concerned is more than EUR 100 million. In both cases, the merger does not have a community-wide dimension and, thus, does not require approval of the European Commission if each of the undertakings concerned achieves more than two-thirds of its aggregate European-wide turnover within one and the same member state. A merger which does not exceed these thresholds but would have to be notified in at least three member states may be referred to the European Commission upon request of the applicant if no member state objects. Likewise, the Commission may refer a merger to the authorities of a member state under certain conditions and the authorities of the member states may do so vice versa to the Commission.

The European Union law competition rules are not only enforced by the European Commission and the European courts (European Court of Justice, General Court), but also by national authorities. Furthermore, European Union law is applicable before national courts, e.g. with regard to invalidity of illegal cartel agreements under civil law. The relationship between European Union competition law and national cartel law is complex. However, the harmonization of Austrian and European Union competition law has lessened the practical relevance of this problem. The cooperation between European and national competition authorities has intensified and is organized in a European Competition Network (ECN).

1.3. Advertising Law

The Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb - UWG) is strongly influenced by EU-Law. The Unfair Competition Act explicitly prohibits a number of advertising practices, for example

• misleading advertising (handled very strictly by courts)
• offering or granting promotional gifts (Zugaben) coupled with the purchase of principal products (with some exceptions) to retailers – however, since the European Court of Justice has held such prohibition to be incompatible with EU law in relation to consumers, it is most likely that the prohibition in relation to retailers will be abolished by an amendment to the UWG in the near future
• abuse of trade names and other well-known signs of another enterprise (trademarks are protected by the Trademark Act against identical, isleading or unfair usage)
• unfair passing-off.

In addition, the UWG generally prohibits unfair commercial practices which are used in the course of business, for example, the exertion of moral pressure to buy goods.

Comparative advertising is allowed if it is neither misleading nor unethical.

It is permitted to offer discounts (Rabatte) to the consumer. It may, however, be prohibited under cartel law and the UWG to sell systematically below costs.

According to the Cartel Act (Kartellgesetz) a company not acting as a retailer is prohibited from recommending prices for goods to the consumer (price maintenance), unless it is explicitly stated that these prices are not binding.

1.4. Public Procurement / Tender Provisions

Tender provisions regulate the procurement (Vergabe) of works, supply and service contracts by public authorities (e.g. federal government, provinces, municipalities and social security institutions) and certain related entities. In the so-called sector area (Sektorenbereich), which includes energy, water and traffic supply, postal, port and airport services, even private tenderees may have to obey such regulations.

The complexity of this area results from the multitude of sources of law to be observed on national and international levels. There is the Austrian Federal Procurement Act (Bundesvergabegesetz 2006) and there are nine provincial acts (one for each Austrian province). The Federal Act contains all substantial rules for procurement proceedings as well as procedural rules for legal remedies during pending procurement and review of completed procurement proceedings which have been conducted by federal public authorities or by certain entities which are publicly owned or controlled by federal legal bodies.

The nine provincial acts contain only procedural rules for legal remedies during pending procurement proceedings and review of completed procurement proceedings which have been conducted by public authorities or certain publicly owned or controlled entities of the respective province or of municipalities situated within the territory of the respective province.

Apart from that, EU law (especially procurement directives) and international treaties – such as the Agreement on Government Procurement (GPA) concluded within the scope of the World Trade Organisation – may also apply.

Tender provisions, which generally pursue the objective of ensuring fair and equal treatment of tenderers in public and semi-public economic areas, depend in particular on the authority inviting and on the amount and the object of the tender. After a strict, and in most cases, public tender procedure, the tenderee must award the contract to the tenderer with the best or cheapest offer.

During the tender procedure every tenderer has recourse to specialized procurement supervision authorities like the Federal Procurement Authority (Bundesvergabeamt) to protect his interests in being awarded the contract. The authorities may issue an order either to stop the tendering procedure or to cancel decisions of the tenderee.

After the contract has been concluded, a review of the procurement proceeding by the competent procurement supervision authority may be requested, which may also have effect on the concluded contract. In its decision the authority declares whether or not the contract was awarded, in compliance with the procurement rules, to the tenderer with the best or cheapest offer. If the award of contract is found illegal, the authority shall in certain cases decide that the contract is ineffective or impose alternative penalties on the tenderee, such as fines or the shortening of the duration of the contract. Furthermore, the tenderer with the best or cheapest offer may claim costs incurred in participating in the tendering procedure and/or lost profit. Such claims for costs/damages are decided by national courts.

To ensure the transparency of tender procedures, tenderees must also discharge extensive notification duties.

Last Update: 2013-Mar-27 Dieter Hauck - Preslmayr Rechtsanwälte
The contents of this page do not constitute legal advice or create an attorney- client relationship with the contributor. Do not apply anything you read here without contacting a professional.
Author: Dieter Hauck
Law Firm: Preslmayr Rechtsanwälte
Address: Universitätsring 12
1010 Wien
Telephone: +4315331695
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