On 14 May 2020, the German Parliament adopted temporary amendments to the Act against Restraints of Competition (ARC) to mitigate consequences resulting from COVID-19 in the field of competition law. See BT-Drucksache 19/18963.
In order to enable the Federal Cartel Office (FCO) to continue investigating mergers and their impact on the market concerned under the special conditions resulting from COVID-19 (in particular, contact bans as well as disruption to workforce), merger review periods will be temporarily prolonged as follows:
- The phase I review period is extended from one month to two months, and phase II will be extended from four months to six months. The new rules will apply to all mergers notified between 1 March 2020 and 31 May 2020.
In addition, the amended law provides that the obligation to pay interest on fines for which payment arrangements have been granted – such as deferment or payment by instalments – is suspended until 30 June 2021.
The Federal Council has decided not to convene the mediation committee. Therefore, the law will enter into force on the day following its promulgation by the federal president in the federal law gazette. The temporary amendments to the ARC are expected to enter into force in June 2020.
Temporary extension of review periods in the field of merger control
Transactions subject to German merger control must be notified to and cleared by the FCO before they can be implemented.
1. Status quo
According to the provisions of the ARC, the FCO has one month to examine whether the transaction impedes effective competition, in particular whether it creates or strengthens a market dominant position (phase I). If the FCO considers that further investigation is necessary, it initiates an in-depth investigation (phase II). The review period in phase II is four months from receipt of the complete notification.
2. Temporary amendments to the ARC
The two review periods are now extended as follows: phase I is extended from one month to two months, and phase II from four months to six months. The new rules will apply to all mergers notified between 1 March 2020 and 31 May 2020.
According to the draft legislation, in the situation caused by the current pandemic, the necessary merger control investigations either cannot be carried out or cannot be carried out within the required time frames because third-party market participants are currently not responding to the FCO’s requests or are delayed in responding.
The draft legislation states that this is particularly true in the retail food sector, where regular market surveys in numerous regional markets are necessary. In these and other sectors, it cannot be ruled out that due to constraints caused by the pandemic, feedback from third parties is difficult to obtain, and competition investigations in these markets cannot be conducted.
The temporary amendments to the ARC apply to ongoing proceedings as well as to cases referred to the FCO by the European Commission.
However, the extended examination periods do not apply if, on the date of entry into force of the amended laws, the FCO has already cleared the transaction or the applicable waiting periods have elapsed with the consequence that the transaction is deemed to be cleared.
There is no retroactive effect on proceedings already concluded.
Suspension of the obligation to pay interest on fines for which payment arrangements have been granted
Against the background of the measures to combat the COVID-19 pandemic, the suspension of the obligation to pay interest on fines for which payment arrangements have already been granted pursuant to section 18 or section 93 of the Act on Regulatory Offences will be suspended until 30 June 2021. The main goal is to reduce additional economic pressure from those companies that have already proven to the competition authority that the conditions for granting payment arrangements have been met.
German lawmakers stated that as a result of the COVID-19 pandemic, the financial situation of companies can deteriorate quickly so that payment plans are required. It was reported that the FCO had informed the Federal Ministry for Economic Affairs and Energy that it had received notifications from companies that were unable to pay their fines due to liquidity shortfalls caused by the pandemic.
Payment arrangements do not have to be in place at the time the law enters into force. The obligation to pay interest is waived if payment plans are granted at a later date. However, the suspension of the obligation to pay interest is limited to the period for which the payment plans are granted. It is not sufficient if payment arrangements were granted in the past and no longer exist.
Due to the temporary suspension of the obligation to pay interest on fines for which payment arrangements have been granted, a loss of interest in the federal budget amounting to approximately €120,000.00 is expected. If the safeguard measures are maintained over a longer period of time, further applications for payment plans are likely. This may further increase the loss of interest.