On 14 March 2017, the Austrian National Council’s Justice Committee adopted a government bill on the amendment of the Kartell- und Wettbewerbsrechts-Änderungsgesetz (Act Amending the Antitrust and Competition Act) 2017. We have summarised the most significant changes outlined in the bill for you:
Significant (planned) changes:
- Presumption of harm caused by cartels (between competitors): facilitates the enforcement of claims by injured parties.
- Passing-on defence: Favourable rules on the burden of proof for direct and indirect purchasers of cartels.
- Disclosure: Disclosure of evidence by the opposing party or by any third party by court order in legal proceedings concerning harm caused by antitrust violations – Easier access to evidence and new challenges for courts.
- Limitation period:
- Actions for damages are time-barred five years after the injured party becomes aware of the damage and the identity of the infringer (absolute period of limitation is ten years after the occurrence of harm) – the limitation periods do not start to run before the infringement of antitrust law has ceased and are suspended for as long as the proceedings/investigations of the competition authority are pending;
- The notification of an investigation to at least one participant in the infringement interrupts the time limit for imposing a fine.
- Additional jurisdictional threshold: amount of consideration represents a new (additional) jurisdictional threshold triggering the obligation to notify a merger/concentration ("size of the transaction test").
- Filing fee: for mergers/concentrations (phase I) is more than doubled (EUR 3,500 instead of EUR 1,500)
- Entry into force/Scope of application:
- new rules apply to all harm (caused by an antitrust infringement) incurred after 26 December 2016;
- applications for disclosure can also be submitted for "prior cases" (as long as the proceedings were commenced after 26 December 2016);
- new limitation rules for actions for damages apply to all claims that are not time barred as of 26 December 2016; and
- a new jurisdictional control threshold ("size of the transaction test") applies as of 1 November 2017.
On 28 February 2017, the Austrian Government approved the draft of the Austrian Cartel and Competition Law Amendment Act 2017 (KaWeRÄG 2017). The KaWeRÄG 2017 shall become effective as of 1 May 2017 (whereby several provisions shall also apply retroactively). The KaWeRÄG 2017 amends the Austrian Cartel Act (KartG), the Austrian Competition Act (WettbG) and the Austrian Act on Improvement of Local Supplies and Conditions of Competition (NahVersG).
Substantive provisions on damages caused by infringements of antitrust law
As regards substance, the amendment introduces a new regime for harm caused by antitrust infringements (i.e. violations of the prohibition on anticompetitive agreements or concerted practices, prohibition on abuse of a dominant position, prohibition on retaliatory measures by dominant undertakings, Art 101 et seq TFEU and similar national provisions in other member states of the EU and the EEA). The proposed amendments in the KartG and WettbG shall implement the EU Directive on Antitrust Damages Actions (Directive 2014/104/EU, the "Directive"), with the wording of the proposed draft closely following the text of the Directive.
Fault-based liability and presumption of harm
The provisions in Sections 37a et seqq KartG propose new rules for actions for damages caused by antitrust infringements. As previously, the rules prescribe a fault-based liability: Thus, a claim for damages for antitrust infringements requires that an unlawful and culpable infringement be causal for the occurrence of harm. In this context, it is important to note that (as previously) final decisions rendered by competition authorities have a binding effect for the establishment of an infringement (37b No.2 KartG in connection with 37 No.3 KartG).
In cases where a cartel (between competitors) is present, the occurrence of harm is presumed. This presumption is rebuttable, with the burden of proof lying with the infringer. As proving the occurrence of antitrust damages has been a rather difficult task for claimants in the past, the presumption of harm should facilitate the enforcement of claims by parties who have suffered harm from a cartel.
However, the amendment does not propose any additional incentives in excess of the rules contained in the Directive that could help establish Austria as a favourable venue for parties harmed by an antitrust infringement (e.g. by introducing a rebuttable presumption concerning the amount of overcharge caused by an infringement, as is provided for in other jurisdictions). Therefore, the quantification of antitrust damages will continue to pose considerable difficulties for potential claimants.
Both actual losses and lost profits are compensated for (plus interest accruing from the occurrence of harm – 4 % p.a. according to Section 1000 of the Austrian Civil Code and pursuant to Section 456 of the Austrian Enterprise Code for transactions between enterprises).
Passing on of overcharges
The draft contains a specific provision governing the passing-on defence which is frequently introduced by (defendant) cartel members (i.e. objecting the occurrence of harm based on the argument that the cartel overcharges were fully or partially passed on to the next level of the supply chain). In principle, the burden of proof for passing-on lies with the defendant. Additionally, the amendment stipulates a presumption for a passing-on of damages to the indirect purchaser if the indirect purchaser can prove that (i) the defendant committed an antitrust infringement, (ii) this infringement has resulted in an overcharge for the defendant's direct purchaser and (iii) the indirect purchaser has purchased goods or services that were the object of the infringement or contain/derive from such goods or services. The infringer can rebut this presumption by way of prima facie evidence.
To prevent overcompensation, the passing-on of damages will often require a joinder to third-parties. Where a joinder is made, the direct or the indirect purchaser who has been invited (in a timely manner) to participate in a dispute will be bound by the court's final decision concerning the question of the passing-on of harm.
Joint and Several Liability
In cases of antitrust infringements by joint behaviour (e.g. price fixing), the infringers shall be jointly and severally liable for the entire harm caused by the infringement. Therefore, an injured party can also claim damages from other parties to the infringement from which it did not purchase goods or services (e.g. if its own supplier who participated in the cartel is insolvent). Certain exceptions exist for SMEs and leniency/immunity recipients (which in principle are only liable for damages caused to their direct and indirect purchasers or suppliers).
Contribution among parties of the infringement
If an infringer is made liable as joint and several debtor, he can recover a contribution from the other participants of the infringement. The amount of contribution depends on the relative responsibility of the participant (e.g. market share, role in the infringement). Where settlements between an injured party and one of the infringers are made, complex and specific rules governing the (joint and several) compensation among the participants will be introduced by the amendment. These rules will likely raise difficult questions regarding the allocation of harm between the participants of the infringement.
The right to claim damages is time barred after five years from the date the injured party knows or reasonably should have known of (i) the identity of the infringer, (ii) the antitrust infringement and (iii) the fact that the antitrust infringement has caused harm to it. Additionally, an absolute limitation period of ten years as of the occurrence of harm applies (objective limitation period). The limitation periods do not start to run while the antitrust violation is still on-going. Moreover, they are suspended by pending proceedings before competition authorities as well as by settlement negotiations.
Procedural rules on damages caused by infringements of antitrust law
The amendment also foresees significant procedural changes for the assertion of actions for damages caused by infringements of antitrust law:
Disclosure of evidence
According to the amendment, a party can make a reasoned application for the disclosure of evidence by the opposing party or by a third party. Apart from the disclosure of (certain) evidence, the amendment will, for the first time, also provide for the possibility to request the disclosure of categories of evidence. To avoid a US–style “discovery” and so-called “fishing expeditions”, the evidence/categories of evidence need to be defined as precisely and as narrowly as possible, taking into account the facts and information reasonably available to the party requesting the disclosure.
The court has to limit a disclosure order to that which is proportionate, taking into account the legitimate interests of all parties (including third parties) concerned. The interest of companies in avoiding actions for damages caused by infringements of antitrust law is not relevant for this assessment. The disclosure may also comprise evidence containing confidential information: The confidentiality of information has to be taken into account by the court when assessing the proportionality of a disclosure request and if necessary special arrangements to protect the confidentiality of such information have to be mandated (e.g. excluding the public from the proceeding, redacting confidential information from documents and restricting the right of access to evidence to a particular group of persons).
Moreover, a party subject to a disclosure request can, by invoking a legal obligation of secrecy (e.g. the legal professional privilege) or certain rights to refuse to give evidence (Section j para 7), demand that certain individually specified pieces of evidence may only be disclosed to the court. In such case, the court screens the specified pieces of evidence and decides whether the disclosure is admissible.
A decision ordering the disclosure of evidence can be individually challenged by the party subject to the disclosure order. However, a decision on the rejection of a disclosure request can only be challenged in an appeal against the final judgement.
In addition to the disclosure of evidence from a party to the proceedings or from third parties, a court can also request the disclosure of evidence from the files of courts and authorities (especially competition authorities). However, such disclosure is subsidiary and shall only take place if the requested evidence cannot be obtained with reasonable effort from the parties to the proceedings or a third party.
As regards disclosure requests concerning information from files of a competition authority (in Austria, the Cartel Court also qualifies as a competition authority), the following applies: The disclosure of leniency statements or settlement submissions (so-called “black lists” of evidence) is never permitted. The disclosure of documents (i) prepared specifically for the proceedings before the competition authority, (ii) drawn up by the competition authority and sent to the parties or (iii) containing withdrawn settlement submissions (so-called “grey lists” of evidence) may only be ordered after the proceedings before the competition authorities have been closed. In order to avoid any circumventions of these provisions (i) the parties are also not allowed to disclose any information (black list) or are only allowed to disclose any information after the proceedings have been closed (grey list) and (ii) a ban on the use of evidence for which a disclosure would be inadmissible has been implemented.
Apart from the presumption of harm caused by cartels, the provisions on the disclosure of evidence are one of the key novelties introduced by the proposed amendment. It can be expected that courts will face a number of exciting and difficult questions when dealing with disclosure requests. In particular, the proportionality test which is required for the assessment of every disclosure request will be quite challenging, as the relevant evidence subject to the disclosure request will normally (with the exception of cases specified in Section 37j para. 7) not be inspected by the court, which will then have to base its assessment solely on the assertions of the parties.
The provisions on disclosure will probably result in the proceedings lasting longer. This prediction is, inter alia, based on the following grounds:
a. several rounds for disclosure can be made during the same proceeding (a party will often only be able to fulfil the requirement of precisely and narrowly defining the relevant pieces of evidence after other documents have been disclosed); and
b. defendants (being the alleged tortfeasor) will also make requests for disclosure (especially in order to bolster a claim that an overcharge was passed on to the next level of the supply chain).
Entry into force
As the deadline for the implementation of the Directive expired on 26 December 2016, the proposed provisions on the compensation of harm caused by infringements of antitrust law (Sections 37a to 37m KartG) shall enter into force retroactively as of 27 December 2016 (apart from the provision in Section 37m concerning the imposition of fines).
The newly proposed substantive provisions shall apply to harm incurred after 26 December 2016.
The new statute of limitations shall apply to all actions for damages that are not time-barred as of 26 December 2016 (the new limitation periods shall only apply if they are more favourable for the injured party when compared to rules applicable until 26 December 2016). Thus, "old cases" can also benefit from the more favourable statute of limitations.
The new procedural rules apply to proceedings in which the action initiating the proceedings is made after 26 December 2016. Thus, the new rules on the disclosure of evidence also apply for disputes over harm incurred prior to 26 December 2016.
Although the majority of the amendment deals with issues related to antitrust damages, additional changes to the KartG and WettbG are proposed:
Merger control: New jurisdictional threshold
In addition to the existing (turnover-related) filing thresholds pursuant to Section 9 para 1 KartG, an additional jurisdictional threshold for mergers/concentrations based on the amount of consideration ("size of the transaction test") has been introduced in Section 9 para 4 KartG.
On the basis of the proposal, mergers/concentrations also need to be notified to the Federal Competition Authority ("FCA") when the undertakings concerned:
- have a combined aggregate turnover in the last financial year prior to the concentration exceeding
- EUR 300 million worldwide and
- EUR 15 million in Austria; and
- the amount of consideration for the merger/concentration exceeds EUR 200 million; and
- the target is to a relevant extent active in Austria.
The proposed amendment would create a precedent in Austria while the European Commission, in the context of a revision of the EU Merger Regulation, is still in the process of holding public consultations on a possible implementation of a jurisdictional threshold based on the value of the transaction. According to the legislative materials, the new jurisdictional threshold based on the purchase price is intended to prevent monopolisation in the sensitive field of the digital economy. The legislative rationale behind the provision is to make acquisitions of companies without significant turnovers for which a high purchase price is paid (e.g. due to the value of data collected by such company) subject to merger control rules. However, the proposal leaves a wide space for interpretation, in particular by using the terms "amount of consideration" and the target being active in Austria "to a relevant extent", which is not beneficial for legal certainty in particular, as it directly concerns the important aspect of whether a filing obligation exists. As the time required for a merger notification (due to the statutory deadlines pursuant to Section §§ 11, 14 KartG) is in practice often much shorter than the completion of proceedings pursuant to Section 28 para 2 KartG (determination of the scope of application of the Austrian cartel act) which are not subject to a statutory deadline, it can be assumed that the new jurisdictional threshold will in particular increase the number of non-critical merger notifications.
In addition to the new jurisdictional threshold, the notification fee for phase I shall be increased from EUR 1,500 to EUR 3,500.
Amendments concerning fines and periodic penalty payments
EUR 1.5 million of the fines collected from infringements of antitrust law shall every year each be allocated to the FCA and the Austrian Association for Consumer Information (Verein für Konsumenteninformation) respectively. This provision may potentially increase the level of fines in Austria as it could put some "pressure" on the FCA to collect at least EUR 3 million of fines per year.
The limitation period of five years for requesting the imposition of a fine for antitrust infringements shall now be suspended where investigations are ongoing against at least one undertaking involved in the infringement. After each suspension, the limitation period commences anew. The absolute period of limitation is ten years from the termination of the infringement, with the intention being that it be aligned with the absolute limitation period for actions for damages caused by an antitrust infringement.
Another novelty is that the cartel court may impose periodic penalty payments on an undertaking of up to 5% of the average daily turnover of the preceding business year for each day the undertaking fails to provide access to evidence which is electronically accessible from the premises subject to an inspection. According to the legislative materials, no "failure/delay" shall be assumed as long as preparatory measures are still required to enable access.
Publication of decisions
The amendment stipulates that final decisions rejecting or dismissing a claim and decisions concerning a request that interim measures (preliminary injunctions) be adopted shall be published online in the so called Ediktsdatei. In addition, the BWB will be obliged to publish on its website the verdicts of binding prohibition, determination and fine decisions as well as decisions declaring commitments binding. Such publications may also contain the name of the undertaking(s) and the business sector(s) concerned.
In addition, the public relation work of the FCA shall be regulated by the rules on the public relation work of prosecutors, as according to the Austrian Public Prosecutor's Act (Staatsanwaltschaftsgesetz). In this context, it is worth noting that any information from the public shall (i) respect business and company secrets and (ii) not infringe the privacy rights of the persons concerned, the principle of the presumption of innocence and the right to a fair trial.
The key elements of the proposed amendment are the provisions implementing the EU Directive on Antitrust Damages Actions (2014/104/EU). As the wording of the proposed amendment closely follows the text of the Directive, it is highly likely that Austrian courts will submit requests to the ECJ for preliminary rulings regarding the interpretation of individual provisions of the Directive. However, in general the proposed amendment creates the impression that there is little interest in establishing Austria as an attractive forum for antitrust damages proceedings. The Federal Government's impact assessment even assumes that the amendment will not change the workload of the Austrian judiciary, as the positive and negative effects on the workload balance each other out. It remains to be seen whether this assessment applies in practice as the amendment includes some far-reaching changes both as regards substantive and procedural matters (e.g. regarding the new provisions governing the disclosure of evidence by the opposing party or by a third party).
In addition to the new provisions on antitrust damages, important practical changes include, inter alia, the new jurisdictional threshold based on the purchase price of the transaction and the increase of the filing fee for mergers. It remains to be seen whether the new jurisdictional threshold is able to satisfy its goals and proves effective in practice.