Overview (November 2002) - International Law Office

Reform

On July 1 2002 the long-awaited fundamental reform of Austrian cartel law (outlined in Unwelcome Merger Accelerates Reform of Cartel Law and Fundamental Reform of Cartel Law Goes Ahead) came into force. The major amendments comprise changes in procedure, structure of authorities and replacement of (most) criminal sanctions for business executives with a system of fines for the undertakings concerned.

General Procedure

Austrian cartel (antitrust) law is governed by the Cartel Act, which includes special regulations on vertical distribution agreements, merger control and abuse of a dominant market position. Except for infringements of criminal law provisions, 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 entities 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 prosecutor (new official parties).

The former official parties (the Federal Chambers of Commerce and Labour and the Standing Committee of the Presidents of the Austrian Chamber of Agriculture, but not the Law Office of the Federal Republic of Austria), as well as the most important regulators (eg, telecommunications, media, electricity and railway networks), may still issue opinions in all proceedings pending before the Cartel Court.

Violations of antitrust regulations may result in fines of up to €1 million, or up to 10% of the worldwide turnover of the preceding financial year for any undertaking participating in the violation. Most criminal sanctions against individuals under cartel law are abolished (except for anti-competitive collusive tendering). The following are null and void and consequently cannot be enforced:

• illegal cartels;

• cartels declared to be prohibited by the Cartel Court; and

• mergers not approved by the Cartel Court (if such approval is necessary).

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

Cartels

Cartels based on (i) agreements between independent undertakings, or (ii) recommendations or decisions by associations of undertakings, are prohibited and void where their aim or effect is to prevent, restrict or distort competition (especially with respect to production, demand or prices in the mutual interest of the agreed undertakings). However, they may be permitted by the Cartel Court in certain circumstances (eg, if they are not expressly prohibited by law or immoral, or if they are justifiable in terms of the domestic economy).

Cartels that are created by concerted practices (without agreement) or by agreements without the intention to restrict competition, and which remain below certain thresholds with regard to market shares, are treated differently.

Vertical Restrictions of Distribution

Vertical restrictions of distribution are agreements between a binding entity and one or more bound entities whereby the latter is restricted in purchasing or selling goods, or receiving or rendering services. The Cartel Court must be notified of such restrictions – except those covered by the block exemption identical to the EU block exemption on vertical restraints - prior to their implementation. The Cartel Court may prohibit the implementation of the restrictions if they are expressly prohibited by law, are immoral or are not justified in terms of the domestic economy. Vertical restrictions of distribution falling within the scope of Article 81(1) of the EC Treaty are not prohibited to the extent that the relevant EC block exemption applies. Preliminary injunctions are available. If price maintenance is also involved, the agreement is subject to the provisions concerning cartels.

Merger Control

Mergers include:

• the acquisition of all or substantial parts of one undertaking by another;

• the acquisition (directly or indirectly) of certain portions of shares (25%, 50% or more);

• measures creating dominant influence over decision-making bodies; and

• certain joint ventures.

Pre-merger control (ie, approval by the Cartel Court) applies if:

• the combined relevant turnover of the involved undertakings 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, revenues 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 exceeds €15 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 €2 million worldwide.

Although competitors do not have the right to request an investigation (this is a privilege of the specified institutions), 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 now expressly prohibited even without a respective decision by the Cartel Court, and may trigger huge fines. Where a motion is filed the Cartel Court must order the participating undertakings to cease abusing a dominant market position. If such an order is issued to a media undertaking or service, the Cartel Court may also take measures to reduce the dominant market position if the abuse is likely to impair the diversity of the media and further abuse is expected. 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 Martin Nepraunik at Preslmayr & Partners by telephone (+431 533 16 95) or by fax (+431 535 56 86) or by email (hauck@preslmayr.at or nepraunik@preslmayr.at).