Overview (February 2007) - International Law Office

Reform
General Procedure
Cartels
Vertical Restrictions of Distribution
Merger Control
Dominant Market Position

Reform

On January 1 2006 the Cartel Act 2005, which fundamentally reforms the Austrian cartel law, came into force. The new act mirrors the majority of EU cartel legislation. The most important changes are as follows:

• The various categories of cartel and the special regime for vertical distribution agreements have been eliminated;



• A leniency programme for cartel offences has been introduced; and



• The procedural rules for merger notifications have been amended.

General Procedure

The Cartel Act 2005 contains antitrust regulations on cartels, merger control and abuses of dominant market positions. Apart from exceptional infringements of criminal law provisions (ie, bid rigging), proceedings in cartel matters take place before the Cartel Court, a special division of the Court of Appeal in Vienna. In most cases proceedings may be initiated by:

• the relevant parties;
  
  
• any other individuals or legal persons that actively and independently take part in business (and are not, therefore, engaged in a purely private activity) and whose legal or economic interests are affected; or
  
  
• specified institutions under public law - namely the Federal Competition Authority and the federal cartel prosecutor (the 'official parties').

Two of the former official parties (the Federal Chambers of Commerce and Labour and the Standing Committee of the Presidents of the Austrian Chamber of Agriculture), the major regulators (eg, telecommunications, media, electricity and railway networks) and, in certain cases, undertakings and associations of undertakings that have a legal or economic interest in the decision may still issue opinions or comments in proceedings pending before the Cartel Court.

Violations of antitrust regulations may result in fines of up to 10% of the worldwide turnover of the preceding financial year for any undertaking participating in the violation. In addition, the new law sets out a leniency programme granting, under certain preconditions, immunity from or a reduction in fines to undertakings that inform the Federal Cartel Authority of cartels and cooperate fully throughout the procedure. Most criminal sanctions against individuals under cartel law (except for anti-competitive collusive tendering) were abolished in 2002. The following are null and void and consequently cannot be enforced: (i) cartels not falling under the legal exemption; and (ii) mergers not approved by the Cartel Court (where such approval is necessary).

Violations of antitrust regulations may also give rise to interlocutory injunctions or claims for damages.

Cartels

Cartels based on agreements between independent undertakings or on recommendations or decisions by associations of undertakings, which have as their object or effect the prevention, restriction or distortion of competition (especially regarding production or demand), are prohibited and void. The Cartel Act 2005 mirrors the EU system of legal exemption from the general prohibition of cartels in Section 2 of the Cartel Act 2002. This means that cartels are no longer exempted by decision of the Cartel Court; rather, the undertakings themselves must decide whether the relevant agreement or concerted practice constitutes a prohibited cartel. The different types of cartel are no longer treated differently; in fact, the categories of cartel have been completely eliminated.

Vertical Restrictions of Distribution

Vertical restrictions of distribution are agreements between a binding entity and one or more bound entities which restrict the latter from purchasing or selling goods or receiving or rendering services. Since January 1 2006 vertical agreements have been subject to the general rules on cartels. Furthermore, the Ministry of Justice is expected to issue an ordinance mirroring the EU block exemption regulations. Thus, vertical restrictions of distribution will no longer be treated differently, except as provided by the block exemption regulations.

Merger Control

Mergers include:

• acquisitions of all or substantial parts of one undertaking by another;
  
  
• acquisitions (direct or indirect) of certain share percentages (25%, 50% or more);
  
  
• measures creating dominant influence over decision-making bodies; and
  
  
• joint ventures.

Pre-merger control (ie, approval by the Federal Cartel Authority or - if requested by the authority - the Cartel Court) applies if:

• the combined relevant turnover of the participating enterprises amounts to or exceeds €300 million worldwide (for the purpose of calculating this threshold, the turnover of a media undertaking or media service is multiplied by 200; the turnover of a credit institution is replaced by interest and similar earnings, revenue from shares and other certificates; and the turnover of insurance undertakings is replaced by the value of gross premiums);
  
  
• the combined relevant turnover of the participating enterprises amounts to or exceeds €30 million in Austria (turnover is generated in Austria if the recipient of deliveries or services is domiciled in Austria); and
  
  
• the turnover of each of at least two participating enterprises amounts to or exceeds €5 million worldwide.

A transaction where only one undertaking has a national Austrian turnover of more than €5 million and all other undertakings concerned together have a global turnover of not more than €30 million need not be notified, even though the general thresholds are met. Furthermore, recent Supreme Court decisions imply that even if the thresholds are met, a merger may not be notifiable if it does not affect the number of players on the Austrian market, which may be part of a bigger market (eg, the European Union). Such recent and slightly unclear decisions have mainly been rendered in relation to undisputed national markets (eg, retail banking, real estate), and have been strongly opposed by the Federal Cartel Authority.

Although competitors do not have the right to request an investigation (this is a privilege of the official parties), the Cartel Act allows competitors to file comments on a merger that has been notified and published within 14 days of publication.

Dominant Market Position

The abuse of a dominant position is expressly prohibited even without a relevant decision by the Cartel Court and may trigger fines. The Cartel Court can order the participating undertakings to cease abuse of a dominant market position. Orders changing the structure of undertakings may be issued only if no measures equally effective but less burdensome on the affected undertakings are available. Consequently, such orders could entail the sale of parts of the undertaking or its reorganization.

For further information on this topic please contact Dieter Hauck or Peter Resch at Preslmayr Attorneys at Law by telephone (+43 1 533 16 95) or by fax (+43 1 535 56 86) or by email (hauck@preslmayr.at or resch@preslmayr.at).