In competition law, it is customary and provided for by law for the claimant to issue an out-of-court warning to the infringing company. Although the legal requirement under Section 12 UWG states that he “should” and not “must” do this, the warning letter will generally be the most cost-effective means of settling the dispute. Only in a few cases (e.g. particular urgency) can a warning letter be dispensed with before taking legal action such as an interim injunction.
Content of a warning letter in competition law
The object of a warning letter in competition law is in any case the request to submit a declaration to cease and desist and an undertaking with regard to the unfair conduct identified. The person being warned should therefore promise not to repeat the behavior for which a warning has been issued, with the assurance of a contractual penalty that would otherwise be due. For this purpose, it is of course necessary that the party issuing the warning precisely describes the specific infringement.
Obligations of the warned party
If the warning is justified, the person being warned has an obligation to respond and provide information. In their own interest, they should therefore respond within the set deadline and provide information about relevant facts. This includes, among other things, the fact that a declaration to cease and desist is not to be issued or that the risk of repetition has possibly already been eliminated by issuing such a declaration to a third party. If the warned party does not respond and the warning party incurs damages as a result, these must be borne by the warned party.
Reimbursement of the costs of a warning in competition law
In the event of a justified warning, the sometimes not inconsiderable costs that can arise from a warning under competition law must be borne by the person being warned. The statutory provision of Section 12 (1) sentence 2 UWG is clear here:
“If the warning is justified, compensation for the necessary expenses may be demanded.”
§ Section 12 (1) sentence 2 UWG
Whether the specific reimbursement of these costs is demanded in the first warning letter is up to the person issuing the warning. However, he should not wait too long to assert the claim – the claim becomes time-barred after six months in accordance with Section 11 (1) UWG.
No longer entirely new, but often still accompanied by a lack of understanding, is the obligation of the party issuing the warning to properly account for the costs of the warning (specifically the legal fees incurred). The Federal Fiscal Court has recognized the service of the warning letter as subject to VAT:
“Payments made to an entrepreneur by his competitors as reimbursement of expenses due to warnings under competition law are to be qualified under VAT law as remuneration in the context of a VATable exchange of services between the entrepreneur and the competitors warned by him – and not as non-taxable compensation payments.”.
BFH, judgment of 21.12.2016 – Ref.: XI R 27/14
Unjustified warning in competition law
A case of an unjustified warning exists in any case if the alleged infringement has not actually taken place. In this case, there is no entitlement to reimbursement of costs or to a declaration to cease and desist. The same applies in the case of an abusive warning. Contrary to popular opinion, however, this does not automatically result in a claim for reimbursement of the costs incurred (e.g. for consulting your own lawyer).
However, the unjustified party receiving the warning still has the option of asserting the lack of entitlement in court by means of a negative declaratory action. It is possible that further legal counterclaims will arise for the unjustifiably warned party in the future. The planned “Act to Strengthen Fair Competition” provides for this in any case.
Further options for responding to a warning letter in competition law
The term “counter warning” is often used in this context. This refers to the basic possibility of the person being warned to assert claims against the competitor issuing the warning. The prerequisite for this is, of course, that a corresponding claim exists under competition law. Irrespective of the question of whether you have been warned yourself.
In addition, the warned party can also file a protective letter with the court. This serves the purpose of informing the court in advance of his legal opinion in the event of possible preliminary injunction proceedings. The warning letter in competition law is often enough only the first step before initiating court proceedings. Accordingly, a warning letter should be treated seriously.
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