Draft law to strengthen fair competition

The German government has introduced a new bill to strengthen fair competition, which could help small and medium-sized companies in particular, as well as small providers of online stores, etc.

Warning letters do make sense, as they can sometimes avoid an expensive and possibly lengthy legal dispute. However, warnings should be issued in the interest of law-abiding competition and not to generate fees and contractual penalties. The Act against Dubious Business Practices of October 1, 2013
introduced regulations to reduce the value of disputes and counterclaims in order to protect against abusive warnings. These were intended to keep the legal fees to be reimbursed by the person being warned low, if applicable, and thus reduce the financial incentive for warning letters. The Act against Unfair
Competition has also been amended to include a provision according to which persons who have been abusively warned are entitled to compensation for the costs they have incurred.

However, this is only true to a limited extent, and recently there has been an increase in abusive warnings. In order to curb abusive warnings, the new draft law provides for higher requirements regarding the authority to assert claims, the reduction of financial incentives for warnings, more transparency and simplified options for asserting counterclaims
.

Should Section 8(3), for example, be amended to the effect that it is no longer every competitor who can issue a warning notice, but only “competitors who sell or request goods or services to a not insignificant extent and not only occasionally”?

Codified liability is also to be created in the event of abusive cease-and-desist letters:

§ Section 8b
Prohibition of abusive assertion of claims; liability (1) The assertion of claims under Section 8 (1) is inadmissible if
it is abusive in view of all the circumstances.

(2) An improper assertion shall be deemed to exist in particular if

1. the assertion of the claims primarily serves to give rise to a claim against the infringing party for reimbursement of expenses or costs of legal action or 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 the extrajudicial and judicial proceedings itself,
3. a competitor sets the value in dispute for a warning notice at an unreasonably high level,
4. significantly excessive contractual penalties are agreed or demanded or
5. a proposed obligation to cease and desist goes significantly beyond the infringement for which a warning notice has been issued
. (3) In the event of abusive assertion of claims, the
opposing party may demand compensation from the claimant for the expenses necessary for its legal defense. Further claims for compensation remain unaffected.”

It is also important that with the changes in the law, things such as warnings for missing information obligations, i.e. imprint errors and the like, can be dropped in such a way that competitors can no longer issue warnings for these, but only consumer protection associations, which, however, must be listed in a centrally managed list of qualified trade associations.

Entitlement to reimbursement of the necessary expenses pursuant to paragraph 3 shall be excluded for persons entitled to benefits pursuant to § 8 paragraph 3 number 1 in the following cases

1. violations of statutory information and labeling obligations committed in electronic commerce or telemedia, or

2. other breaches of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of individuals with regard to the processing of personal data, on the free movement of such data and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ. L 119, 4.5.2016, p. 1, L 314, 22.11.2016, p. 72) and the Federal Data Protection Act by micro-enterprises as well as small enterprises pursuant to Article 2 of the Annex to Commission Recommendation C(2003) 1422 and comparable associations, insofar as they are commercially active.

(5) Insofar as the warning is unjustified or does not comply with the requirements of paragraph 2 or a claim for reimbursement of expenses is asserted contrary to paragraph 4, the warned party shall have a claim against the warning party for reimbursement of the expenses necessary for legal defense. In the event of an unjustified warning, the claim pursuant to sentence 1 shall be excluded if the lack of authorization to issue a warning was not apparent to the person issuing the warning at the time the warning was issued. Further claims for compensation remain unaffected.

There shall also be an exclusion of the agreement of a contractual penalty for the first warning as well as a limitation of the amount to EUR 1,000 in case of insignificant impairment. There will also be restrictions on the so-called “flying jurisdiction”.