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28 July 2005
The new Cartel Act 2005 will take effect on January 1 2006 and brings domestic cartel law in line with European law, 11 years after Austria joined the European Union and about 18 months after EU Regulation 1/2003 entered into force. Amendments include the abolition of both various categories of cartels and the special regime for vertical distribution agreements and changes to the rules relating to merger notifications.
Mirroring EU cartel law, Section 1 of the Cartel Act 2005 prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices that have as their object or effect the prevention, restriction or distortion of competition.
Section 1(2) of the new act, which sets out examples, also repeats the wording of Article 81(1) of the EC Treaty. In addition, the EU system of legal exemption from the general prohibition of cartels (Article 81(3) of the EC Treaty) is mirrored in Section 2 of the new act. Accordingly, the registration of cartels will no longer be necessary or possible in Austria. Any registered cartel will be caught by the prohibition by December 31 2006 at the latest.
So far, all kinds of vertical agreements under Austrian law are subject to a special regime (except with regard to prices) and are not subject to the general rules on cartels. Generally, such agreements need only be registered with the court, and may be agreed and enforced legally unless a court explicitly prohibits them. Non-registration does not affect the validity of the agreement, but can only trigger (minor) fines. As of January 1 2006, vertical agreements will also be subject to the general rules - and prohibitions - on cartels. Furthermore, the Ministry of Justice is expected to issue an ordinance referring to or mirroring the EU Block Exemption Regulations in due course.
Section 5 of the Cartel Act 2005 - again closely following EU law - bans any abuse of a dominant position by one or more undertakings within the domestic market. Such abuse may consist of:
The rule on selling below costs goes beyond EU cartel law, thus following the rule of Article 3(2) of EU Regulation 1/2003 allowing member states to apply stricter rules to unilateral actions.
An undertaking has a dominant market position if it has no (or only minor) competition or has an outstanding position compared to its competitors. Furthermore, an undertaking is assumed to have a dominant market position if it enjoys (as seller or purchaser) a market share of:
In these cases the undertaking has the burden of proving that the conditions of a dominant market position are not met.
The rules of procedure in cartel proceedings again closely follow rules laid down in EU Regulation 1/2003. However, Parliament did not follow the Federal Cartel Authority's (FCA) request to give it the power to issue binding decisions on information requests to undertakings. Parliament rejected this request at the very last moment, so the FCA still has to request that the Cartel Court issue such decisions. Following a recent decision of the Supreme Court, the Cartel Court is granting undertakings the possibility to comment on any request, attempting to balance the interests of the FCA during the investigation process with the interests of undertakings in protecting the confidentiality of their business matters.
The new law also contains Austria's first leniency programme - copied from the 1996 EU programme - granting immunity or reduced fines to undertakings that inform (and cooperate with) the FCA regarding cartels. The manner in which the programme will be implemented has yet to be made clear.
A merger is defined as the acquisition of one undertaking by another undertaking or the direct or indirect acquisition of company shares where a stake of 25% or 50% is reached or exceeded. Thus, the definition continues to differ from the European version, as already the acquisition of a 25%-plus stake could constitute a notifiable event. Furthermore, the law has been amended to the effect that cooperative joint ventures will be regarded as mergers according to the act. Moreover, the court fees for merger notifications will be significantly raised from €75 to €1,500.
A merger must be notified if the (slightly increased) turnover thresholds are met (ie, if the participating undertakings in the acquisition had a worldwide turnover of more than €300 million in the business year prior to the transaction, more than €30 million in Austria and at least two of them each had a turnover of more than €5 million worldwide - special rules apply to media mergers). In many cases - especially when multinational, globally active undertakings are involved - these thresholds are met without the transaction having an appreciable effect on the domestic market. To date, a handful of cases have been heard on this matter (none of which were decided by the Supreme Court). As such, the point at which a transaction meeting the thresholds must be notified is uncertain. Section 24(2) of the new act states that the act is only applicable to the extent that an (eventually foreign) transaction has an effect on the domestic market. As a rule of thumb (as endorsed by the FCA), any transaction that meets the thresholds but meets the following criteria need not be notified in Austria: (i) the target has no present turnover in Austria and is unlikely to have one in the foreseeable future; and (ii) the purchaser does not acquire by way of the transaction resources (eg, finances, know-how or patents) that would appreciably enhance its Austrian market position.
The new act introduces a further exception: a transaction where only one undertaking concerned has a national domestic turnover of more than €5 million and all other undertakings concerned have a total global turnover of up to €30 million need not be notified despite the general thresholds being met.
Pursuant to Section 9(1) of the new act, the FCA rather than the Cartel Court must be notified of a merger. Immediately after receiving notification, the FCA must publish the information and forward it to the federal prosecutor in cartel matters. It is expected that this procedure will shorten the proceedings to around four to five weeks. Furthermore, the prohibition of implementation ceases with the expiry of the time limit; a decision by the Cartel Court need no longer be awaited. Pursuant to Section 10(1) of the Competition Act in the version of the Competition Amendment 2005, the FCA must publish the notification (and all other decisions) on its website. With regard to the implementation of a merger, the Cartel Court recently adjudicated a fine of €1.5 million against a company that had implemented a merger prior to clearance (despite it being subsequently cleared). The Supreme Court has yet to uphold the decision.
Although the new Cartel Act is, to a great extent, a copy of EU cartel law and does not fundamentally change the general lines of domestic cartel law, it introduces some interesting details that may have a considerable practical impact. This is especially true given that the FCA has been enforcing domestic and EU cartel law with increasing effort and effectiveness since its establishment in 2002.
For further information on this topic please contact Dieter Hauck or Karina Gries at Preslmayr Attorneys at Law by telephone (+431 533 16 95) or by fax (+431 535 56 86) or by email (email@example.com or firstname.lastname@example.org).
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