The “Act to Strengthen Fair Competition” has now passed the Bundestag and the Bundesrat. It is intended to help prevent or at least curb unjustified warnings and the abuse of warnings in general. The changes, particularly in the Unfair Competition Act (UWG), are considerable. Many of these amendments are reminiscent of corresponding provisions in copyright law.

As many of the amendments come into force just one day after the law is published in the Federal Law Gazette, errors are likely to occur more frequently at the beginning. This makes an initial overview of the most important amendments all the more important.

Content requirements for warning letters in competition law

The first amendment concerns new formal requirements for an effective warning. In § 13 para. 2 now lists the following five criteria that must be stated “clearly and comprehensibly” in the warning:

1. Name or company name of the warning party and, in the case of representation, the name or company name of the representative,
2. the requirements for entitlement in accordance with § 8 paragraph 3,
3. whether and to what extent a claim for reimbursement of expenses is asserted and how this is calculated,
4. the infringement, stating the actual circumstances,
5. in the cases of paragraph 4, that the claim for reimbursement of expenses is excluded.

This is reminiscent of the list of criteria in Section 97a para. 2 UrhG, which will also be minimally adapted with the “Act to Strengthen Fair Competition”.

Abusive warnings – catalog of examples to make abuse easier to recognize

The amendment also addresses and extensively takes into account the frequently disputed question of when a warning is abusive. A catalog of seven cases is included in the new Section 8c UWG. If one of these cases applies, the warning is to be assumed to be abusive “in case of doubt”. This should be the case if:

1. the assertion of the claims serves primarily to allow a claim to arise against the infringing party for reimbursement of expenses or the costs of legal action or the payment of a contractual penalty,
2. a competitor asserts a significant number of infringements of the same legal provision by means of warnings, if the number of infringements asserted is disproportionate to the scope of the competitor’s own business activities or if it can be assumed that the competitor will not bear the economic risk of its extrajudicial or judicial action itself,
3. a competitor sets the object value for a warning letter unreasonably high,
4. obviously excessive contractual penalties are agreed or demanded,
5. a proposed cease-and-desist obligation obviously goes beyond the infringement for which a warning has been issued,
6. several infringements, which could have been warned together, are warned individually or
7. for an infringement for which several infringers are responsible, the claims against the infringers are not asserted together without objective reason.

These groups of cases are generally known from case law. What is new is that there is a rebuttable presumption of abuse even if one of these cases exists. However, whether one of these cases has actually been realized will remain a major point of contention in court. This will only be clarified in detail by the highest and supreme courts. Until then, this change is likely to be accompanied by greater legal uncertainty than before.

No reimbursement of expenses for warning letters in competition law for certain infringements

The principle that in the event of a justified and effective warning, the infringer who has been warned must pay the legal costs remains in place for the time being. As in copyright law, however, the exception is made that even violations of the formal content requirements for the warning notice invalidate this claim. The same naturally also applies if the warning is otherwise unjustified or even abusive.

What is new, however, is that there are now even special cases for competitors in which they can never demand reimbursement of their own costs. On the one hand, this applies if the warning relates to breaches of statutory information and labeling obligations in electronic business transactions and in telemedia, e.g. on the internet. This concerns typical errors such as incorrect imprint information or breaches of the withdrawal policy for consumers.

On the other hand, there should no longer be a claim for reimbursement of expenses in the event of warnings due to data protection violations at companies and commercial associations with fewer than 250 employees.

Counterclaim of the warned party

Whereas in a considerable number of cases the warning party no longer has the option to claim reimbursement of expenses, the infringers receive several counterclaims. Thus, the warned parties receive their own claims for reimbursement of legal defense costs in all cases in which a warning is abusive or does not meet the formal requirements of Section 13 para. 2 UWG. This makes a defense against warning letters much more promising and at the same time increases the risk for all those who want to take action against legal infringements by third parties by means of warning letters.

Stricter requirements as to who may issue warnings under competition law

The legitimization in § 8 para. 3 has been tightened considerably. In order to be able to assert claims in future, competitors must “sell goods or services to a not inconsiderable extent and not only occasionally[en] or demand them. [en]“. This in itself restricts the circle of those entitled to claim and makes it more difficult for competitors to check whether they themselves can take action against anti-competitive behavior by their competitors.

However, the stricter requirements for associations are much more far-reaching. These are now only eligible if they meet the strict criteria of the new Section 8b UWG and are entered in the “List of Qualified Trade Associations” at the Federal Office of Justice (BfJ). The requirements include, for example, a minimum number of members and a minimum length of time since commencing business.

As this list must also be published online by the BfJ, it will be considerably easier to check the right to issue warnings in such cases in future.

Contractual penalty in competition law is significantly reduced

There are also significant changes to contractual penalties in the new UWG. On the one hand, the agreement of contractual penalties for cases in which a first warning is issued due to breaches of statutory information and labeling obligations or data protection violations is generally prohibited (Section 13a (2) UWG). However, this only applies as long as the company being warned regularly employs fewer than 100 employees.

In addition, the contractual penalty is capped at € 1,000.00 for a large number of cases. This particularly addresses cases close to the de minimis limit. This also affects all companies with fewer than 100 employees.

If a dispute arises regarding the amount of a contractual penalty due, the party receiving the warning is entitled in future to appeal to an arbitration board for mediation in accordance with § 15, even without the consent of the party issuing the warning.

Restrictions are placed on the flying jurisdiction in competition law

The so-called “flying jurisdiction” is also a constant source of discussion. On the one hand, it is credited with allowing a professionalization of the judges dealing with the cases. This ensures more predictable and consistent case law and thus reduces the risk of litigation. On the other hand, it is argued that this makes it possible for the party issuing the warning to sue in a court that is particularly favorable to them.

For this reason, there is now a significant restriction of local and subject matter jurisdiction. In most cases, the regional court in which the defendant has its general place of jurisdiction is now responsible for competition law actions. There are exceptions for cases in which the defendant is located abroad or the infringement has occurred locally within Germany.

However, the state governments may designate one of several regional courts with special jurisdiction for competition disputes. Whether and to what extent this will happen remains to be seen. In any case, this would be an effective method of preventing a complete erosion of specialist knowledge in competition law in the courts.