Institutional/Procedural Changes
Changes in Substantive Law
Comment
Amendments to the Cartel Act and the new Act on the Establishment of a Federal Competition Authority were published on April 16 2002, to take effect on July 1 2002. The Cartel Court's controversial decision in the Formil Case and subsequent adverse publicity (outlined in Unwelcome Merger Accelerates Reform of Cartel Law) appear to have expedited the reforms.
Institutional/Procedural Changes
Federal competiton authority
The Federal Competition Authority (FCA) will replace the following official parties in cartel and merger proceedings:
- the federal Chambers of Commerce and Labour;
- the presidency of the Austrian Chambers of Agriculture; and
- the Law Office of the federal republic of Austria.
The FCA will be established at the Ministry of Economic Affairs and Labour although its head, the director general, will be independent. The FCA's staff will receive directives and instructions only from the director general.
The FCA is empowered to:
- participate in most proceedings before the Cartel Court, and request full (ie, second-phase) examinations in merger cases;
- examine potential restraints on competition on a case-by-case basis;
- undertake general examinations of entire business sectors, if it suspects that competition is being threatened;
- issue general statements with regard to questions of economic policy; and
- implement EU competition rules where neither the Minister of Economic Affairs and Labour nor the national courts are competent to do so.
In the course of its investigations the FCA may call upon and question the companies or individuals and witnesses concerned, and examine relevant business documentation.
The Cartel Court must allow the FCA to carry out house raids if they are necessary in cases of a substantiated suspicion of abuse of a dominant position, or infringement of a prohibition to implement a cartel or merger.
Competition commission
The new Competition Commission will partly replace the former advisory board (the members of which were nominated by the aforementioned official parties) and will advise primarily the FCA. In addition, the commission will issue opinions on competition matters and may recommend full investigations with regard to notified mergers. Members of the commission are independent.
Federal prosecutor
The federal prosecutor in cartel matters will represent public interest in competition matters and will be accountable to the minister of justice. Accordingly, the Cartel Court may no longer initiate proceedings ex officio. The federal prosecutor may be a party to proceedings before the Cartel Court and may request initiation of a second-phase procedure in merger cases.
Lay judges
The influence of lay judges in proceedings before the Cartel Court is reduced under the new legislation. In future, professional judges will hold the majority of votes in the panels of the Cartel Courts in all instances, although two professional and two lay judges will rule on first-instance cases. In the event of a split decision, the vote of the panel's president (a professional judge) will be decisive.
Abuse of a dominant position is expressly prohibited and may trigger huge fines. Previously, the Cartel Court could only order an individual or entity to refrain from the abuse and was able to impose fines only if such order was infringed.
The power to reverse company mergers is broadened where prior approval was based on false information provided by the parties or the conditions for approval were infringed.
In addition, fines levied by the Cartel Court upon enterprises are increased with maximum fines of up to €1 million or 10% of the previous year's global revenue. Most criminal sanctions against individuals under the Cartel Law are abolished.
The reforms aim to diminish political influence in cartel procedures. However, a certain amount of political influence will remain by virtue of the fact that the federal prosecutor for cartel matters is directly subordinate to the minister of justice and at least some of the individuals appointed as members of the Competition Commission are likely to have been members of the former advisory board, which consisted of delegates of the former official parties.
By establishing two new authorities in addition to the Cartel Court, three authorities will be competent in competition matters, not including specialized regulatory authorities (eg, for telecommunications, media, electricity and railway networks). Consequently, institutional structures and competences are slightly blurred.
Unfortunately, the new legislation does not reduce the timeframe for merger cases. The Competition Commission may recommend the initiation of a second-phase procedure to the FCA within three weeks of receiving a notification, and only after that period can the FCA decide whether to follow its recommendation. In addition, the federal prosecutor may still request initiation of a second-phase procedure.
The manner in which the new system will be implemented and the new authorities will operate remains to be seen.
For further information on this topic please contact Dieter Hauck, Bernhard Köck or Martin Nepraunik at Preslmayr & Partners by telephone (+431 533 16 95) or by fax (+431 535 56 86) or by email ([email protected] or kö[email protected] or [email protected]).