Main areas of activity of the state competition authority

Many obstacles to competition can be eliminated before formal proceedings are initiated. As a result of the state competition authority informally pointing out the impermissibility of certain behaviour, many companies give up their objectionable behaviour. Of similar importance is the counselling of medium-sized companies in particular on the permissibility of certain forms of cooperation.

The State Cartel Office of Hesse offers the option of informally coordinating a project with it before contracts are notarised or major investments are made.

The Federal Cartel Office has also published fact sheets on the "Cooperation options for small and medium-sized companies under the Cartel Act" and on the legalisation of other cartels.

In addition, a large part of the day-to-day work of the Cartel Office involves advising other departments of the state and local authorities on antitrust and other competition law issues. Finally, legal and economic policy initiatives are also developed from the experience of enforcing the law, which are fed into the work of the Bundesrat committees from the Cartel Division.

An act of discrimination, i.e. the refusal of a company to (possibly re-)enter into a contractual relationship with a buyer or supplier, is often linked to other antitrust offences.

For example, a manufacturer's refusal to supply is occasionally preceded by a corresponding request from a retailer who sees its previous exclusive position in its catchment area in the sale of certain products jeopardised by the addition of another distribution partner.

Under antitrust law, such conflicts must always be resolved by weighing up the interests involved "with particular regard to the objective of the Antitrust Act, which is aimed at freedom of competition" - as the Federal Court of Justice has consistently held. The interest of a retailer in remaining the only supplier of a particular product in a given location must - except in special, contractually regulated cases - generally take second place to the interest of another company that is trying to create or strengthen competition by offering its own products. If the call for a supply freeze is therefore "unreasonable", it constitutes an administrative offence punishable by a fine of up to €1 million.

Prohibition of cartels

A cartel is said to exist when several competing companies coordinate their behaviour on the "relevant market", which must be specified in each individual case, in order to impair competition. In the case of public sector tenders, for example, this occurs through price or contract agreements, otherwise through agreements on quantities or territories. As such agreements prevent, restrict or distort competition, they are prohibited under Article 101 (1) of the Treaty on the Functioning of the European Union (TFEU) and Section 1 ARC.

Vertical restraints of competition

In contrast to cartels, vertical restraints of competition have an effect at different economic levels, e.g. between suppliers and customers. Vertical restraints of competition are also prohibited in principle.

A simple example of such a restriction of competition is a goods manufacturer dictating to a retailer what prices the latter should charge end consumers.

However, there are exemptions from the prohibition of vertical restraints of competition, which can be found in the European Commission's so-called Vertical Block Exemption Regulation of 20 April 2010 (OJ L 102/1).

According to the Vertical Block Exemption Regulation, typical agreements between companies at different stages of production or distribution are exempt from the prohibition of vertical restraints of competition if the share of both the supplier and the buyer in the relevant market in which they sell the contract goods or services does not exceed 30%.

The Vertical Block Exemption Regulation also regulates important exceptions to this exemption. For example, the prohibition of "resale price maintenance" applies; however, the supplier may set maximum selling prices and make price recommendations, provided that these do not actually have the effect of fixed or minimum selling prices as a result of the exercise of pressure or the granting of incentives.

In addition, there are exceptions for essential clauses in selective distribution systems (e.g. the restriction of sales to dealers not authorised by the supplier).

Special regulations on the prohibition of fixed prices are contained in the Act on Fixed Prices for Publishing Products(BGBl 2002 I p. 3448) and Section 30 GWB, which applies to newspapers and magazines.

Abuse of a dominant market position

Dominant companies may not exploit their market position for abusive behaviour, such as demanding excessive prices.

A company is dominant if it has no competitors on the relevant market, is not exposed to any significant competition or has a superior market position in relation to its competitors. A dominant market position is presumed to exist from a market share of at least 40%, see Section 18 (4) ARC. Special regulations apply to water suppliers that have a monopoly in their supply area (Sections 31 et seq. ARC).

In particular, dominant companies may not unfairly hinder other companies, treat them differently from similar companies without objectively justified reason or demand charges that would not arise in the case of effective competition.

Companies with a strong market position on which small and medium-sized enterprises are dependent are also prohibited from certain types of behaviour by the ARC. In particular, they may not unfairly hinder the companies dependent on them or request that they grant them advantages without an objectively justified reason. Unfair obstruction is deemed to exist, for example, if a company with a strong market position demands higher prices for the supply of goods than it itself charges on the distribution market (margin squeeze) or sells food below cost price.

The boycott prohibition applies to all Companies regardless of their market position. This prohibits companies from requesting other companies to block deliveries or purchases from third parties.

Another important focus of the antitrust authorities' work in Hesse is to support small and medium-sized companies in enforcing their claims against dominant or strong suppliers.

Newcomers in particular have neither the financial resources nor the corresponding expertise to enforce supply claims against manufacturers of major branded goods, for example. The state cartel authority therefore endeavours within the scope of its possibilities to spare the impeded SMEs costly civil proceedings and to contribute to a viable solution to the conflict with the supplier.

A decisive criterion for the application of the prohibition of discrimination in the retail sector is the question of whether the unsupplied retailer can reasonably be expected to divert the customer's interest in a non-existent product to a competing product or whether the fact that the retailer in question does not carry the well-known and sought-after product in its range significantly impairs its reputation and thus its competitiveness.

The public sector , as an often strong market demander of certain (construction) services, is also occasionally targeted by the antitrust authorities. The award of public contracts and their review is specifically regulated by law (Section 97 et seq. of the German Act against Restraints of Competition (GWB)) and the public procurement tribunals and the public procurement panels of the higher regional courts are also frequently called upon, the ban on discrimination under antitrust law has lost significance in this respect.

Until now, the subject of discrimination proceedings has been very different requests. For example, it was about the supply of

• well-known perfumes
• highly sought-after sports shoes
• surfing articles
• Spare parts for technical devices
• Newspapers and magazines
• Optical glasses

and for authorisation as

• further system operators in accordance with the Packaging Ordinance
• Ambulance transport companies
• Point of sale for local transport tickets
• Towing company for mediation via a central emergency call centre
• Exhibitors at trade fairs
• Taxi companies for radio switching

and for

• the rental of vehicle registration centre premises to sign manufacturers
• Reference commitments in stand rental contracts at public festivals

For many years, the state cartel authority in Hesse has had one of the highest numbers of proceedings among the federal states for the prosecution of price fixing in public procurement procedures. The intensive co-operation with prosecution and police authorities in Hesse is exemplary and enables effective use of the scarce resources of all Government agencies involved.

Since the Anti-Corruption Act came into force in 1997, the antitrust authorities have been solely responsible for imposing fines on legal entities (Section 30 OWiG) and their executives who have committed a breach of supervisory duties (Section 130 OWiG); the colluder is prosecuted by the public prosecutor's office in accordance with Section 298 StGB or, if the criminal proceedings are discontinued, also by the antitrust authority (in accordance with Section 81 GWB). Investigation proceedings are usually very labour-intensive and time-consuming due to the large number of accused persons and affected tenders.

According to the experience of the Hesse state cartel authority, the construction industry is primarily, but not exclusively, susceptible to price and contract agreements. The following market segments have been or are the subject of administrative offence or administrative proceedings:

• Drinking water pipeline construction
• Heating/ventilation/air conditioning/plumbing
• Swimming pool renovation
• Electrical work
• Telecommunications systems
• Police firing ranges
• Road and other civil engineering
• Track construction
• Noise protection window installation
• Screed work
• crash barrier construction
• Well construction
• Sewage systems
• Waste disposal
• Driving schools
• Advertising rates in the daily press
• Outpatient treatment by hospitals
• Tendering of contract doctors' practices

A supplier may also not force a retailer to honour the "non-binding" recommended retail prices by threatening to suspend or even reduce deliveries.

This is becoming increasingly important when small and medium-sized retailers have put a lot of effort into setting up an online shop and want to sell branded goods there at favourable prices. Manufacturers are allowed to set certain quality requirements when selecting their retailers. However, no influence may be exerted on pricing. In individual cases with restrictive effects on competition in Hesse, the state cartel authority is available to assist retailers.

Likewise, any threat or addition of disadvantages and any promise or granting of advantages that is intended to induce other entrepreneurs to engage in behaviour that is prohibited under the Cartel Act is prohibited (Section 21 (2) ARC).