With the reform of competition law at the end of 2020, the legislator wanted to make it more difficult to prosecute some competition law infringements. With the failed reform, however, the legislator has probably made the situation even worse, as a decision by the Higher Regional Court of Nuremberg on the risk of repetition despite a cease-and-desist declaration shows.
Background to the risk of repetition
If someone commits an infringement of competition law, this creates a so-called risk of repetition, i.e. that such infringements will be committed again. In order to eliminate this risk of repetition out of court, someone who has received a cease and desist letter for such an infringement can submit a cease and desist declaration. It is important to note that, according to the established case law of the Federal Court of Justice, the declaration to cease and desist must be punishable by law. This means that the person who submits a cease-and-desist declaration undertakes to pay a contractual penalty in the event of a breach.
According to previous case law, a declaration to cease and desist without a promise of contractual penalty does not mean that the risk of repetition no longer applies. The person being warned must therefore expect to be sued for injunctive relief, which leads to additional legal costs.
Reform of competition law
Competition law was reformed at the end of 2020. In particular, the legislator wanted to make it more difficult for smaller companies to be sued for supposedly minor infringements. Since then, competitors may no longer demand a contractual penalty for violations of information and labeling obligations on the internet and violations of the GDPR. This was intended to eliminate the risk of contractual penalties in the event of infringements. With this regulation, the legislator may have done a disservice to the companies that this regulation was intended to protect.
OLG Nuremberg on risk of repetition despite cease-and-desist declaration
In its ruling, the OLG NurembergJudgment of 09.05.2023 – Ref. 3 U 3524/22 that the new legal regulation means that out-of-court dispute resolution is hardly possible any more.
The amendments to the UWG meant that the defendant could no longer eliminate the risk of repetition by means of a declaration of submission to the competitor issuing the cease and desist letter. The new legal regulation prohibits the conclusion of cease-and-desist agreements with a penalty clause against competitors in the cases regulated by law.
However, according to the Nuremberg higher regional court judges, this does not mean that the infringer can eliminate the risk of repetition by means of a “simple” declaration to cease and desist from the competitor issuing the cease and desist letter without a penalty.
The warned party can only eliminate the risk of repetition out of court by submitting a claim to an association or qualified institution entitled to make a claim.
The legislator did not intend to change the requirement of a cease-and-desist declaration with penalty clause to eliminate the risk of repetition with the new regulation, so that these principles continue to apply.
It is true that the court’s opinion leads to the intention pursued by the legislator to curb the generation of contractual penalties and warning fees being reversed. This is because the warned party must now expect to be burdened with court fees and lawyers’ fees for the court proceedings, which can place an even greater burden on the warned party overall. However, the legislator has deliberately accepted this problem.
Conclusion
This decision demonstrates the bungling of the legislator in the reform of competition law. Although the person being warned can avoid warning costs and contractual penalties in future, they will regularly have to invest higher costs for court proceedings in return. The possibility of out-of-court settlements has been made unnecessarily difficult or often impossible.
However, there is hope for those warned Decision of the OLG Schleswig of 03.05.2021 Ref. 6 W 5/21 which took the opposite view, namely that the risk of repetition in these cases is eliminated even without a promise of contractual penalty. It therefore remains to be seen which view will ultimately prevail.
