14 Jan 2021 | Unfair Competition

Act to strengthen fair competition - changes in the German Unfair Competition Act (UWG)

After months of waiting, the "Act to Strengthen Fair Competition" was published in the Federal Law Gazette on December 1, 2020. The law contains far-reaching amendments to the German Unfair Competition Act (UWG), which are intended to provide better protection against abusive warning letters. Here is a brief overview of the most important new provisions:

1. Capacity to sue - Competitors

As of December 1, 2021, the capacity to sue of competitors will be restricted and specified. According to the new wording of the law, the right to bring an action is made dependent on the competitor selling or requesting goods or services to a not insignificant extent and not only occasionally. According to the previous legal situation, every trader could demand the cessation of an anti-competitive act who had a concrete competitive relationship with the person being warned as a supplier or buyer of goods or services. As a result, case law has so far been quite generous in assuming that a person has the capacity to sue. The amendment to the law is now intended to act as a restrictive corrective. According to the explanatory memorandum, it is no longer sufficient for a competitor to merely "offer" goods or services and not actually sell or demand them. 

In the future, significantly higher requirements will be placed on the presentation of a competitor's status. Mere references to alleged online offers of goods, for example, will no longer be sufficient to establish the status of a competitor. It remains to be seen how courts will apply this corrective in practice. 

2. Capacity to sue – Trade associations 

The capacity to sue of trade associations will also be newly regulated in the future. The new section 8 (3) no.2 UWG makes trade associations’ capacity to sue dependent on being registered on a list of so-called qualified trade associations. This new regulation in the law is a reaction to allegations of abuse. It will come into force on December 1, 2021. 

Only those trade associations that fulfil the registration requirements of the new section 8b UWG will be admitted to the said list. These include, for example, that the trade associations have at least 75 entrepreneurs as members and that their activities are not primarily aimed at generating income from warning letters. Whether the registration requirements are met is to be determined by the Federal Office of Justice within the framework of an objective examination. 

Whether this new mechanism will actually lead to curbing the abuse of warning letters by dishonest trade associations must be left with a question mark. It remains to be feared that "black sheeps" will ultimately find their way onto the list and that it will then be all the more difficult for companies to defend themselves against such warning letters of trade associations. 

3. Mandatory information in warning letters 

As in Copyright Law - section 97a (2) of the German Copyright Act (UrhG) - warning letters in unfair competition law matters must in future also comply with certain content-related requirements. The details are regulated by the new section 13 (2) UWG, which has already been in force since December 2, 2020. In addition to information that is actually self-evident, such as the name or company of the person issuing the warning letter or the reference to the claimed infringement, stating the actual circumstances (section 13 (2) nos. 1 and 3 UWG), the warning letter must also state whether and in what amount claims for reimbursement of costs are asserted or whether a claim for reimbursement of costs is excluded (section 13 (2) nos. 3 and 5 UWG). In addition, the person issuing the warning letter must also submit information on the capacity to sue and thus regularly provide information on the status as a competitor, which means, at least as of December 1, 2021, that competitors must already show in the warning letter that they sell or request goods or services "to a not insignificant extent and not only occasionally" (new version of section 8 (3) no. 1 UWG). 

These requirements must be carefully observed in the future. In the event of non-compliance, the person issuing the warning letter not only loses the own claim for reimbursement of costs (section 13 (3) UWG). If the warning letter does not comply with the above requirements, the warned party even has a counterclaim against the warning party, namely a claim for reimbursement of the expenses necessary for its legal defence (section 13 (5) UWG). 

4. Exclusion of claims for reimbursement of costs 

According to the new section 13 (4) UWG, in certain cases competitors may no longer claim reimbursement of their expenses from the warned person. The provision has been in force since December 2, 2020. According to the wording of the law, a claim is excluded if it concerns violations of information and identification obligations committed on telemedia (e.g. violations of the imprint obligation, information obligations in distance contracts, the obligation to provide information on revocation, etc.) or other violations of the General Data Protection Regulation or the German Federal Data Protection Act by small businesses with usually less than 250 employees. 

The abuse of warning letters by competitors may actually be curbed by the restrictive new regulation, since in cases of minor infringements mentioned here, no reimbursement of costs can be claimed, which, according to experience, should reduce the incentive for competitors to send out warning letters at all. 

5. Cases of abuse of rights 

The new section 8c (2) UWG contains a catalogue of standard examples which determine when claims for injunctive relief under section 8 (1) UWG are abusively asserted. The provision replaced the predecessor standard on December 2, 2020 and adopts the essential case groups of the current case law. 

Cases in which an abusive assertion of rights is to be assumed in case of doubt exist if: 

  • the assertion of the claims predominantly serves the purpose of incurring fees, costs and contractual penalties (no. 1),
  • competitors assert a considerable number of infringements of the same legal provision and the number of infringements asserted is disproportionate to the scope of the own business activity (no. 2),
  • the value in dispute of the warning letter is determined unreasonably high by the competitor (no. 3),
  • an obviously excessive contractual penalty is agreed or demanded (no. 4),
  • a proposed cease-and-desist obligation obviously goes beyond the infringement warned against (no. 5),
  • several infringements, which could have been claimed together, are claimed individually (no. 6),
  • or for an infringement for which several infringers are responsible, the claims against the infringers are not asserted together without objective reason (no. 7). 

The wording "in case of doubt" could suggest that each of the listed standard examples in itself gives rise to the presumption of abuse of rights. However, one can hardly go that far and it remains to be seen how the courts will interpret the provision. In any case, it should be noted that section 8c (1) UWG continues to require a comprehensive overall assessment taking into account all circumstances to determine the abuse of rights. The standard examples will therefore in all likelihood only have an indicative effect, which can be refuted by the person being warned. It is not necessarily to be assumed that a fundamental change of the previous legal situation will accompany the amendment of the law. 

6. Restriction of the "flying place of jurisdiction" 

Since internet presences are usually accessible throughout Germany, acts of unfair competition on the internet are also committed nationwide. In cases of violations, it was previously possible for the claimant to bring an action before a Regional Court in Germany of his choice. This is referred to as "flying place of jurisdiction". 

The new section 14 (2) sentence 3 no. 1 UWG now considerably restricts this choice for the claimant. The "flying place of jurisdiction" for legal disputes arising from infringements in electronic commerce or telemedia has been abolished since December 2, 2020. According to the new law, the local jurisdiction of the court in the aforementioned cases is based on the general place of jurisdiction of the infringer. 

The place of jurisdiction of the tort is thus no longer applicable for the large number of unfair competition cases. This will have a significant impact on enforcement of claims. This applies not only to the question of where main court proceedings can be brought, but of course also to strategies for interim relief. In many cases, it will no longer be possible to choose the known and experienced courts in unfair competition matters.