Professor Wang Xiaoye Chinese Academy of Social Sciences Law Institute Law of Germany Against Restrictions on Competition Law(GWB) and its Application Professor Wang Xiaoye Chinese Academy of Social Sciences Law Institute EU-China Intellectual Property Meeting 2009-9-16

Background of GWB After World War II, under the influence of Freiburg Sect (Walter Eucken and Franz Boehm as the representatives), Federal Republic of Germany chose the "Social Market Economy" as its economic system model. Social Market Economy admits that free competition is the basis of the economic order, but considers that free competition would inevitably lead to economic concentration, thereby to damage the competition. Conclusion: Due to the market has its own shortcomings and deficiencies, the governments should establish appropriate social policies and economic policies, so as to establish the legal system regulating the market order and realize the combination of freedom, efficiency and social equity. EU-China Intellectual Property Meeting 2009-9-16

Statues of GWB By means of the "Basic Law", Germany had made some principle rules in respect of economic freedom (including freedom of association, freedom of contract, freedom of movement, freedom of employment, protection of property ownership and inheritance rights), and enacted the GWB in 1957 to confirm basic principles of social market economy and national competition policy by law. GWB is intended to protect effective competition as much as possible and to remove all the factors which hinder competition in the market. GWB is the main legal basis for fully implementing the competition policy under the condition of modern market economy in Germany. This Law establishes the German social market economy order and competition order. In order to illustrate the profound significance of this Law, people called said Law "economic constitution". EU-China Intellectual Property Meeting 2009-9-16

Content of GWB The content of GWB (7th revision in 2005) includes: Part 1: the Substantive Law, including restrictions on competitive agreements, abuse of market dominance and merger control, the authority of Federal Cartel Office, the Monopoly Commission and the relationship with EC Treaty as well as special provisions in respect of agriculture and newspapers and periodicals. Part 2: Federal Cartel Office Part 3: Procedures, including procedures before Federal Cartel Office, accusation, legal charge, the fines procedures, enforcement, and civil litigation, etc. Part 5: the State-owned enterprises, the extraterritorial application, and "Energy Economy Law" The 7th revision abolishes: the distinction between horizontal and vertical agreements, some Cartel exemptions, procedures of Cartel exemption, exemptions in banking and insurance sectors; and increases: the special provisions on television rights of sports association and the relationship with the EC Competition Law. EC Community Law shall prevail over the laws of State Members is the main reasons for the 7th revision of GWB. EU-China Intellectual Property Meeting 2009-9-16

Law Enforcement Organs of GWB Federal Cartel Office is the main authority of GWB. It is an independent agency of Federal government, the current head of which is Bernhard Heitzer. Federal Cartel Office has 11 Decision Departments, the Second Department of which is responsible for the agriculture, forestry, food, textile, consumer goods and automobile manufacturing sectors in accordance with the industry division. The paragraph 1 of Article 42 provides that: "In some cases ... the Minister of Economic Affairs of Federal may approve the decision made by Federal Cartel Office for merger prohibition". According to Article 63, the Supreme Court of the State where the Federal Cartel Office located shall exclusively make a verdict against accusations. According to the Article 74, the federal courts have the right to make a verdict against legal charge. According to Article 87, the county courts have exclusive jurisdiction against civil actions. EU-China Intellectual Property Meeting 2009-9-16

Private Actions under GWB The paragraph 1 of Article 87 provides that: any civil dispute arising from the Article 81 and 82 hereof, regardless of the size of subject matter, shall be under the exclusive jurisdiction of county courts. If dissatisfaction to the judgments of county courts, the appellant may appeal (the competition tribunals have been established between county courts and the courts of appeal). If dissatisfaction to the judgments of the court of appeal, the appellant may appeal before the federal court (legal review). Private Claims: to stop infringement (paragraph 1 of Article 33); in the case of the offender has the intent or negligence, to claim for damages (paragraph 3 of Article 33). Qualification of the plaintiff: competitors and other market participants who suffer damage from illegal activities, the illegal activities lead to an excessive price of goods or services, even if such goods or service has been resold, the damage still exit. EU-China Intellectual Property Meeting 2009-9-16

Requirements to claim for Civil Compensation The paragraph 4 of Article 33 under GWB provides that: if to assume any liability for damages arising from the Article 81 and 82 hereof, the court hearing the case shall confirm that such activities are illegal under the decision in force made by the Federal Cartel Office, the European Commission or other competent agencies or courts of EC State Members. The paragraph 4 of Article 33 is intended to promote private assumpsit, but this article shall not apple to any legal dispute, such as the plaintiff requests the court to confirm an agreement which breaches the GWB invalid. However, in this case, the court of State Member shall consider the paragraph 1 of Article 16 under EC 1/2003 Regulation. The paragraph 1 of Article16: the decisions of the court of State Member who makes a judgment against the treaties or decisions or actions which have been already made by EC Commission under the Article 81 and 82 of the EC Treaty shall not violate the decisions made by the EC Commission, and shall avoid to make any decision which conflict with he decision made by EC Commission. Accordingly, the courts of State Member may decide whether to continually hear the case or not. EU-China Intellectual Property Meeting 2009-9-16

Discontinuance of Limitation of Action The paragraph 5 of Article 33 under GWB: if the Federal Cartel Office triggers the procedure under the GWB or the Article 81 and 82 of EC Treaty, or the EC Commission or other competent competition authorities or courts undertaking the similar function of the State Members trigger the procedure, the limitation of action of claim for damages shall be discontinued. EU-China Intellectual Property Meeting 2009-9-16

Overview of the enforcement of GWB private action The private action of GWB traditionally is to request the court injunction rather than the claim for damages. The number of assumpsit gradually increases in recent years: 34 pieces in 2005, 106 pieces in 2006, and 123 pieces in 2007. There are three characteristics of private action in general: Both the competitor and the consumer have the right to make a suit; The Federal Cartel Office’s decision is the premise of compensation (follow-on cases); The court confirms the actual damage under the Article 287 of Civil Procedure Law. EU-China Intellectual Property Meeting 2009-9-16

Trends of Private Actions of GWB The private actions of GWB become more important. Comparing with the Antitrust Law, the private actions of GWB is in the second status: Class Action (opting in, focus on the private governance); Burden of Proof; Indirect Purchaser in the cartel cases. How to protect the legitimate interests of all parties? How to promote private action, and meanwhile not to impact the law enforcement? EU-China Intellectual Property Meeting 2009-9-16

Thank you! EU-China Intellectual Property Meeting 2009-9-16