Austria

The Cartel Court (Kartellgericht) and the Supreme Cartel Court (Kartellobergericht) are the decision-making bodies of Austrian competition law. They are the only competition authorities able to issue binding decisions.

The Federal Competition Authority (Bundeswettbewerbsbehörde, FCA) is located at the Federal Ministry of Economics and Labour as an independent body. Its main function is to investigate and detect potential restrictions on competition, and to file petitions with the Cartel Court. It guards competition on the Austrian market and acts ex officio.

The FCA has extensive investigation powers, ranging from questioning witnesses and parties involved to searching premises if ordered by the Cartel Court. Upon request, the proprietors of enterprises have to furnish any requested information and grant access to any requested business documents, unless by doing so they risk criminal prosecution.

The Federal Cartel Prosecutor (Bundeskartellanwalt, FCP) represents the public interest in competition matters and acts ex officio, though they are bound by the Ministry of Justice's instructions. The FCP falls within the Cartel Court and is empowered to bring cases before the Cartel Court. The prosecutor's function replaces the former right of the Cartel Court to initiate proceedings ex officio. They have not been given any investigation powers, though they may request information from the FCA, inspect records of the FCA and require the FCA to conduct investigations.

The FCA and the FCP are the official parties.

The Commission on Competition (Wettbewerbskommission) serves as advisory body to the FCA. The Commission, as a board of experts, supplies expert opinions on issues regarding competition law. The Commission is further authorized to furnish recommendations in merger cases. In carrying out their activities, the Commission members are not bound by any instructions and are bound by official secrecy.

Joint ventures

The Cartel Act (Kartellgesetz) does not provide specific provisions on joint ventures. It is merely in respect to merger control that it distinguishes between concentrative full-function joint ventures (that is, joint ventures performing all the functions of an autonomous economic entity that do not give rise to anti-competitive behaviour), which are deemed a concentration and so are subject to merger control, and cooperative joint ventures (joint ventures that, in contrast to concentrative joint ventures, bring about an increased coordination of competitive behaviour), which are regarded as cartels.

Merger control

A transaction that qualifies as a concentration within the meaning of s 41 of the Cartel Act and meets the thresholds of s 42a(1) of the Cartel Act is subject to mandatory pre-merger notification to the Cartel Court. The exception to this is if the transaction is subject to European merger control because it has a European dimension, in which case the European merger control regime prevails over the Austrian provisions and notification in Austria is not necessary (with the exception of the media sector, where special rules apply).

Concentration

The following transactions are deemed concentrations:

• the acquisition of the whole or a substantial part of an undertaking, especially by merger or transformation;
• the acquisition of a right to the operational facility of another undertaking by means of company surrender agreements or business management agreements;
• the direct or indirect acquisition of shares in an undertaking if the shares held after the acquisition are or exceed 25% or 50%;
• a transaction that causes at least half the members of the management bodies or the supervisory boards of two or several companies to be identical;
• any other connection of undertakings that confers on one undertaking a direct or indirect controlling influence over another undertaking (blanket clause).

Setting up a concentrative full-function joint venture is also deemed a concentration, as is the conclusion of contractual obligations by banks within the meaning of s 30(2a) of the Banking Act (Bankwesengesetz, BWG) (see below for details).

If all enterprises involved belong to the same corporate group, there is no concentration.

Thresholds

Concentrations are subject to notification if, in the last financial year before the transaction:

• the combined aggregate worldwide turnover of the undertakings concerned was at least €300 million ($363 million);
• the combined aggregate turnover on the Austrian market of the undertakings concerned was at least €15 million; and
• the worldwide turnover of at least two of the undertakings concerned was at least €2 million each.

For the purpose of the calculation, the aggregate turnover, excluding intra-group turnovers, of all undertakings linked to each other as defined in s 41 of the Cartel Act must be taken into consideration. Depending on the relevant market and the possibility of influence, the turnover of certain undertakings holding only minority shares can be disregarded. The calculation of turnover in the media and insurance sector is subject to special rules, as is the calculation of turnover in the banking sector (see below for details).

Notification

A concentration can be notified as soon as a plan has been formulated for the exact structure of the envisaged transaction. There is no deadline within which a notification has to be filed after an agreement is signed, though the concentration must not be carried out before clearance is granted. Each undertaking in the concentration is entitled to file for clearance. Joint notification is permitted, but not a requirement. Notifications have to be filed with the Vienna Appellate Court as Cartel Court (Oberlandesgericht Wien als Kartellgericht).

Notifications of concentrations have to contain all material information required for assessing the concentration. The FCA has published a form for the notification of concentrations in May 2003. Its use is not mandatory, though it is highly recommended, as it usually ensures that the authorities concerned dispose of any information required, minimizing the risk of rejection or time-consuming investigations. This "Form for the notification of concentrations" is published on the FCA's website at http://www.bwb.gv.at/bwb/english/default.htm.

Upon receipt, the Cartel Court publishes the notification in the federal gazette (Amtsblatt zur Wiener Zeitung). Within 14 days of publication, any enterprise whose legal or economic interests are affected by the concentration may file a written submission with the Cartel Court. The concerned enterprise does not have any right to specific treatment of its submission.

The official parties (and only the official parties) may within four weeks of receipt of the notification apply for an in-depth examination of the concentration. The CC may furnish the FCA with a written recommendation to file an application, which in case the FCA fails to do has to be published along with the FCA's reasons for not filing.

Before the four-week period expires, the official parties may also waive their right to apply for an in-depth examination. If the official parties do not file an application for an in-depth examination, waive their right to file such an application, or withdraw any such applications already filed, the concentration is cleared.

If an in-depth examination is applied for, the Cartel Court may, after conducting investigations, prohibit or clear (possibly with restrictions and conditions) the concentration by decision solely within five months, else it is deemed to be cleared.

Substantive assessment

A concentration will be prohibited, if it is expected that it will cause or strengthen a market-dominating position. An undertaking is deemed to hold a market-dominating position if it is exposed to no or only insignificant competition or if it has a superior market position in relation to its competitors, customers or suppliers.

Furthermore, s 34 of the Cartel Act provides a disprovable presumption (burden of proof is placed upon the undertaking concerned) that an undertaking holds a market dominating position, if, on the relevant market, it either:

• holds a share of at least 30%; or
• holds a share of more than 5% and is exposed to the competition of no more than two other undertakings; or
• holds a share of more than 5% and is one of the four largest undertakings in this market, which together hold a market share of at least 80%.

Even if a concentration is expected to cause or strengthen a market-dominating position it may still be cleared (possibly with restrictions and conditions) if it could lead to improvements in the conditions of competition that outweigh the disadvantages, or if it is necessary for the maintenance or improvement of the international competitiveness of the enterprises involved and is economically justified.

A media concentration will further be prohibited if it could possibly impair media diversity.

Prohibited implementation

Concentrations subject to notification must not be carried out until clearance has been granted. Any contracts violating this prohibition are legally void. Implementation will be considered prohibited implementation if it differs from the notification, or if imposed restrictions are not followed.

A prohibited implementation of a concentration can lead to a fine ranging from €10,000 to €1 million or up to 10% of the worldwide turnover achieved by each of the enterprises involved in the violation.

Appeals procedure

The Cartel Court's decisions are subject to appeal to the Supreme Court as Supreme Cartel Court (Oberster Gerichtshof als Kartellobergericht) by all notifying parties, as well as the official parties, which has to be filed within four weeks from service of the decision. The other parties may file a counter-statement within four weeks. The Supreme Cartel Court has to decide within two months after receipt of the last counter-statement.

Restrictive agreements and practices

Cartels

The Cartel Act identifies several types of cartels:

• Cartels by agreement are contracts or informal agreements enforced by economic or social pressure. It is further differentiated whether the restriction on competition is intended (cartels by intent) or involuntary (cartels by effect).
• Cartels by conduct are concerted practices that are neither accidental nor determined by the market. They too are divided into cartels by intent and cartels by effect.
• Cartels by recommendation are recommendations to observe specific prices and rebates, although recommendations that are expressly non-binding and non-enforced are exempted.

Cartels with a market share of less than 5% of the domestic market and less than 25% of the relevant local market are regarded as minor cartels.

Cartels by intent and cartels by recommendation must not be implemented until approved by the Cartel Court. Applications for approval must contain all material information required for assessing the cartel. Approval is granted for a period to be fixed by the Cartel Court, no longer than five years, after which it may be extended if the conditions for approval are still met. The approval may be revoked at any time if the conditions are no longer met.

Cartels by effect and minor cartels may be implemented without approval, unless the Cartel Court has issued an individual prohibition.

The Cartel Court may also grant interim protection as well as reduce contractual penalties and provide judicial assistance against boycotts imposed for the breach of a non-prohibited cartel.

The Cartel Court's decisions are subject to appeal to the Supreme Court as Supreme Cartel Court, which has to be filed within four weeks after the decision is served. The other parties may file a counter-statement within four weeks.

Vertical distributional restraints

Vertical distributional restraints are contracts between a restraining enterprise and one or more restrained enterprises that limit the restrained enterprises' procurement or distribution of goods or their use or performance of services.

Vertical distributional restraints have to be notified to the Cartel Court by the restraining enterprise before their implementation. The Cartel Court may prohibit the implementation upon application by the official parties, affected enterprises or associations of enterprises, the Austrian Economic Chamber, the Federal Chamber of Labour, the Presidential Conference of the Austrian Chambers of Agriculture and the regulators, if it violates a statutory prohibition or public policy or if it is not economically justified.

Cartels and vertical distributional restraints are legally void if their implementation is prohibited. Carrying out a prohibited implementation can further lead to a fine ranging from €10,000 to €1 million or up to 10% of the worldwide turnover achieved by each of the enterprises involved in the violation.

Government monopoly enterprises, provided that they exercise monopoly powers conferred on them by law, are exempted from the provisions on cartels and vertical distributional restraints.

Abuse of a market-dominating position

The abuse of a market-dominating position is prohibited per se. The Cartel Act, following the wording of Art 82 of the EC treaty, contains a non-exhaustive list of abusive practices. It is particularly deemed an abuse if the market-dominating company:

• directly or indirectly imposes unfair prices or business conditions;
• limits production, distribution or technical development to the disadvantage of the consumers;
• imposes different conditions on similar transactions;
• imposes conditions unrelated to the subject matter of the contract;
• sells goods below cost price without justification on material grounds (this constitutes a disprovable presumption, with the burden of proof being placed upon the undertaking concerned).

The Cartel Court may, upon application by the official parties, affected enterprises or associations of enterprises, the Austrian Economic Chamber, the Federal Chamber of Labour, the Presidential Conference of the Austrian Chambers of Agriculture and the regulators, order a company to cease and desist from the abuse in question.

The abuse of a dominant position may lead to a fine ranging from €10,000 to €1 million or up to 10% of the worldwide turnover of the enterprise involved. The Cartel Court may also grant injunctions.

Government monopoly enterprises, provided that they exercise monopoly powers conferred on them by law, are exempted from the provisions on the abuse of a market-dominating position.

Special provisions regarding the banking sector

The calculation of turnovers on the banking sector is subject to special rules. For banks, turnover is replaced by interest income and similar proceeds, income from shares, other equity interests and non-fixed-interest securities, income from stakes and from shares in associated enterprises, commission income, net income from financial transactions, and other operating income.

Restrictive trade practices and abuse of a market-dominating position

The provisions regarding cartels, vertical distributional restraints and abuse of a market-dominating position do not apply to circumstances that are subject to the supervision of the Financial Market Authority (Finanzmarktaufsicht, FMA) over banks. The provisions regarding cartels and vertical distributional restraints further do not apply to restrictive trade practices between the members of a banking group within the meaning of s 30(2a) of the Banking Act.

Mergers and acquisitions

For banks, the definition of which transactions constitute a concentration is extended to include the conclusion of contractual obligations by banks within the meaning of s 30(2a) of the Banking Act. Banks must set up an early detection system, provide mutual assistance in case of economic problems, and equalize business and market policy.

There is also an exemption to the notification obligation concerning the banking business. Merger control provisions do not apply to the acquisition of shares, if a bank acquires the shares for the purpose of reselling them, restructuring an insolvent company or securing its claims against a company.

If, without this exemption, the acquisition of the shares was a concentration subject to notification, the acquiring bank may not exercise the voting rights connected with the shares to influence the competitive behaviour of the undertaking. The voting rights may, however, be exercised to maintain the full value of the investment as well as to prepare the sale of the undertaking, its assets or its shares. Furthermore, the shares must be resold if they were acquired for the purpose of reselling them, within one year, or, if they were acquired for the purpose of restructuring an insolvent company or securing a claim against a company, after completion of the reorganization or securing task.

The Banking Act also contains additional regulations affecting mergers and acquisitions. The following transactions in the banking sector require prior approval by the FMA:

• any merger or unification of a bank, either with another bank or with any other enterprise (except for subsidiary companies);
• any splitting of a bank;
• any reaching, exceeding or falling below a share of 10%, 20%, 33% or 50% of the capital or the voting rights of a bank held by another bank (except for shares in the central bank of a banking group held by a member of this banking group);
• any change of the legal form of a bank (except for a general partnership being transformed into a limited partnership solely by including a limited partner); and
• in case of a business partnership, the inclusion of an individually liable partner with management and representation authority.

If anyone intends to acquire a qualified share (that is 10%) in a bank, or intends to increase their share in a way that a share of 20%, 33% or 50% is reached or exceeded or that the bank becomes their subsidiary, it has to be notified to the FMA in advance, which may, within three months of the notification, prohibit the transaction. This also applies to any disposition of a qualified share, the falling below a share of 20%, 33% or 50% and if a bank ceases to be a subsidiary.

Author biography

Claudine Vartian

Cerha Hempel Spiegelfeld Hlawati

Dr Claudine Vartian graduated as Master and Dr of Jurisprudence from the University of Vienna and received her legal education in Austria and Belgium (Brussels). She is an equity partner of Cerha Hempel Spiegelfeld Hlawati and concentrates, as one of the leading Austrian experts, on the field of technology, media and telecoms. She has handled major telecommunication cases, advising public fixed network and mobile telecom operators as well as value-added service and internet providers. Dr Vartian also advises corporate national and international clients in the fields of competition, antitrust and EU law. She is member of the Vienna Bar, the Austrian Jurist Association and the International Association of Young Lawyers (AIJA). Besides her function as university lecturer in a post-graduate programme she acts as a speaker at various seminars on business law.

Dr Vartian is the author of several articles and other publications on issues related to her practice. Resulting from her strong activities in the telecommunication and media sector in Austria she has published, among others, a Handbook on Telecommunication (1/1998), a Commentary on Private Television Law (2/2002), a Commentary on Private Association Law (9/2002) and most recently a Commentary on Telecommunication Law (12/2003).

Cerha Hempel Spiegelfeld Hlawati (CHSH)
Parkring 2, 1010 Wien
Austria
Tel: +43 1 514 350
Fax: +43 1 514 35 35
Web: www.chsh.at