Unfair Competition Law

Competition law in Germany is divided into unfair competition law and anti-trust law.

The law against unfair competition is intended to shield competition from distortion, misrepresentation and unfair practices in the interests of the competitors, consumers and other operators in the market. The legislation covers inter alia advertising law, unwanted advertising (e-mail spam, fax advertising), cases of misleading advertising, misrepresentation to clients, and legal warnings and terms of use and conditions on a website. Special protection is provided in competition law for confidential information, trade and business secrets and know-how. In certain circumstances the law also affords supplementary protection against product piracy and plagiarism.

There is a ban on unfair practices by competitors and market operators that may distort competition. The law on unfair competition contains an all-embracing general clause comprising an extensive list of unauthorized competition practices. It regulates the rights of competitors and other authorised parties as well as their enforcement. If a company discovers that a competitor is in breach of competition law, it can issue a warning, demand immediate cessation of the activity and call for recovery of the damages suffered. The competitor may then have to make a cease-and-desist declaration, under which he will be obliged to pay a contractual penalty in the event of any recurrence. Claims can also be made for damages and reimbursement of an attorney's fees. Interim injunctions before a court are an incisive weapon.

Anti-trust law, on the other hand, deals with anti-competitive behaviour and abuses of a dominant market position. There is a considerable degree of harmonisation between German competition law and European competition law, which coexist within the German legal system. German competition law is regulated by the Restriction of Competition Act (GWB), while European competition law is regulated by the Treaty of the European Community. Articles 1 and 2 GWB and Article 81 EC respectively prohibit agreements between companies and any concerted practices, the object or effect of which is the prevention, restriction or distortion of competition. Agreements on the price of products or the geographical area or quantity in which such products are sold are classical examples of anti-competitive agreements. There is also a ban on the abuse of a dominant market position enjoyed by one or more companies, unreasonable obstruction, and the unequal treatment of other companies for no justifiable reason.

Anti-trust legislation must also be taken into account when contracts are being drafted. This applies, in particular, to research and development contracts, license agreements and many distribution agreements. Exclusive distribution agreements and delivery obligations as well as open and hidden price targets should be reviewed critically and carefully. Restrictions of this kind are prohibited. However, they may be authorised in line with EU law by virtue of special European group exemption regulations. This requires a very precise and thorough analysis of the circumstances, however. In the field of intellectual property and technology sectors Regulation (EC) No. 772/2004 of 27 April 2004 (technology transfer) and Regulation (EC) No. 2659/2000 of 29 November 2000 (research and development agreements) are of particular importance, as is Regulation (EC) No. 2790/1999 of 22 December 1999 (vertical agreements), which is important for all sectors where there is a relationship between purchasers and suppliers.