Act against Restraints of Competition: Tips for entrepreneurs and consumers

The Act against Restraints of Competition is considered the basic law of the German economy. In colloquial language it is also referred to as the Cartel Act.

It ensures the principle of freedom of competition prevailing in the Federal Republic of Germany.

It thus serves entrepreneurs and consumers at the same time.

In this article, you will learn everything about the basic prerequisites of freedom of competition, the focal points of the Act against Restraints of Competition, the measures against discrimination and price destabilisation, and cartel law.

Content

1. Basic requirements of freedom of competition
2. The focal points of the Act against Restraints of Competition
3. The core of the law: antitrust law
4. Measures against discrimination and price destabilisation
5. The specialist lawyer as a contact

1. Basic requirements of freedom of competition

Freedom of competition means: all bidders active in the market must be able to determine their prices and the quality of their services under the same conditions. In order to ensure this and to exclude unfair competition, a number of preconditions must be met:

• There must be freedom of trade, freedom of contract and freedom of establishment.
• The market must be transparent and open.
• It must be supported by a functioning judiciary and a stable monetary system.
• It must not be ruled by cartels or monopolies.

If one of these conditions is disturbed, one speaks of a restriction of competition.

2. The focal points of the Act against Restraints of Competition

In the fight for freedom of competition, the Act against Restraints of Competition sets several priorities:

• Prevention of cartel agreements and other concerted market-dominating behaviour.
• Control over merger attempts by market-dominant companies,
• monitoring the abuse of market power
• Measures against discrimination or obstruction of market participants
• Prohibition of sales below cost price
• Prohibition of resale price maintenance

3. The core of the law: antitrust law

The core of the Act against Restraints of Competition are the regulations on cartel law and abuse of dominant positions. Secret agreements or open contracts for the purpose of abusing power in the market can be:

Collusion

A secret agreement between two or more legally autonomous companies.

For example: an understanding between participants in a tender to win a particular bid.

Cartel

A contract or decision between competitors to obtain or exploit a market position that restricts competition.

For example: agreements to increase prices among coffee roasters.

Concentration

The accumulation of anticompetitive market power through the disproportionate growth of one company or through the power-enhancing merger of several companies (amalgamation). It can also include a hostile takeover.

For example: the merger of Thyssenkrupp and Tata Steel, which the Cartel Office prohibited in order not to destabilise steel prices.

4. Measures against discrimination and price destabilisation

The Act against Restraints of Competition is a strong guarantor of fair prices and balanced competition in the market on legal ground. It also has important tasks outside its core area, antitrust:

Discrimination/obstruction of market participants

A company with a strong market position treats another company unequally. The unequally treated company cannot defend itself against this because it is in an economically dependent relationship with the large company. There is no reason for the unequal treatment.

For example: An important supplier company offers its goods to a certain other company at worse conditions than to the competition.

Sales below cost

The cost price is arrived at by deducting all discounts (rebates, cash discounts) and adding the transport costs. The cost price is the basis of calculation for the delivery of goods to companies.

It makes a fair price comparison of suppliers possible. The regulations of the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen) put a stop to its undercutting so that smaller companies can also buy at comparable prices on the market. Otherwise they would be forced out of the market by large retail chains.

Price fixing

This law serves to protect consumers. It allows leeway in the pricing of goods and services. It thus gives consumers the opportunity to choose the most attractive price for a good. Otherwise, he would be dependent on the price dictates of the manufacturers.

Within the framework of this regulation of the Act against Restraints of Competition, the phrase 'recommended retail price' has come into being. Every manufacturer of goods or services gives this to his dealers. The trader is free to adhere to it or not. Within the framework of the recommended retail price, infringements restricting competition can occur.

For example: A manufacturer only offers technical support to dealers who adhere to its MSRP.

5. The specialist lawyer as a contact

The Act against Restraints of Competition is a versatile legal instrument and is often called upon by companies when they feel disadvantaged by other market participants.

Only an experienced IP lawyer can decide whether an infringement within the meaning of the Act has occurred and how the aggrieved party can obtain justice.

Please contact me by telephone or email. I will advise you in detail and in a comprehensible manner on your legal matter.

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