Concept and Functions of Competition Authorities
Competition authorities are state or supranational institutions whose main task is the enforcement and monitoring of competition law. They monitor compliance with regulations designed to protect competition and prevent market abuse. Their responsibilities include, in particular, the detection and prosecution of cartels, the control of corporate mergers (merger control), and the sanctioning of violations of competition law such as abuse of dominant market positions.
Competition authorities act within the framework of legal requirements and may exercise extensive investigative and sanctioning powers. The objective is to ensure a functioning competitive environment in the interest of consumers, the economy, and the public.
Legal Framework of Competition Authorities
National Competition Authorities
In Germany, the Federal Cartel Office (Bundeskartellamt, BKartA) is the central competition authority at the federal level. It operates on the basis of the Act Against Restraints of Competition (GWB). In addition to the Federal Cartel Office, some federal states have their own regional authorities for the control of regionally significant matters (regional competition authorities).
Federal Cartel Office (BKartA)
The Federal Cartel Office is responsible in particular for the following tasks:
- Cartel Prosecution: The prohibition of anti-competitive agreements (§ 1 GWB) and the prosecution of illegal cartels are at the center of its work.
- Merger Control: Mergers above a statutory turnover threshold (§§ 35-43a GWB) are subject to control. The aim is to prevent or eliminate dominant market positions.
- Abuse Supervision: The authority monitors cases of abuse by dominant or powerful companies (§§ 19, 20 GWB).
The Federal Cartel Office acts ex officio, but also in response to complaints from third parties or upon applications under specific regulations (e.g., ministerial authorization).
Supranational Competition Authorities
European Commission – Directorate-General for Competition (DG Competition)
The most important supranational competition authority in the European internal market is the European Commission, represented by the Directorate-General for Competition (DG Competition). Its work is based on Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), which contain the prohibition of cartels and the prohibition of abuse.
- Investigative Powers: The Commission can conduct investigations, require companies to provide information, carry out searches (so-called dawn raids), and issue Statements of Objections.
- Sanctioning Powers: The European Commission can impose substantial fines and require the cessation of violations of competition law.
International Cooperation
Competition law matters are often not limited to national markets. Therefore, competition authorities of various countries cooperate, for example within the International Competition Network (ICN), the OECD, or through bilateral agreements. The aim is to coordinate investigative actions and to avoid conflicting decisions.
Organization and Procedures of Competition Authorities
Investigative Powers
Competition authorities have extensive investigative powers:
- Searches and Seizures: They may search business premises and secure relevant documents.
- Questioning and Requests for Information: Companies and their employees are obliged to provide information.
- Rights to Refuse Testimony: Certain groups of people may claim a right to refuse testimony, for example regarding privileged information (e.g., attorney-client privilege).
The procedural rights of affected parties are established by law; for example, rights to a hearing and access to files apply.
Powers to Order and Sanction
Competition authorities may penalize violations of competition law through various means:
- Fines: Fines may amount to significant sums depending on the severity of the violation – for particularly serious infringements, up to 10% of the group’s worldwide turnover.
- Cease and Desist Orders: Authorities may order companies to cease anti-competitive practices.
- Transparency: Decisions and fines may be published, resulting in additional reputational damage for affected companies.
Leniency Program
There are special incentives for cooperation in cartel investigations, such as the leniency program. Companies that contribute early and substantially to the detection of a cartel can be exempted from or benefit from a reduction of fines. These provisions are regulated in § 81h GWB as well as in EU regulations.
Legal Protection and Oversight
Legal Remedies against Measures of Competition Authorities
Affected companies may appeal against administrative measures and decisions (e.g., fine notices, merger prohibitions). In Germany, judicial oversight is typically provided by the Higher Regional Court of Düsseldorf (§§ 63 ff. GWB), and at the European level, in particular, by the General Court of the European Union and the Court of Justice of the European Union.
Oversight by Parliament and Other Institutions
Parliamentary oversight and independent bodies partly accompany competition authorities and review their activities for legality and proportionality.
Significance and Position of Competition Authorities in Competition Law
Competition authorities play a central role in the protection of functioning markets. They ensure enforcement of competition law, prevent distortions of competition, and contribute to price stability, quality assurance, and innovation. Their actions protect both consumers and market participants. In the European internal market, national and European authorities cooperate in a coordinated and division-of-labor manner within the so-called European Competition Network (ECN).
References and Sources
For further reading related to competition authorities, the following literature is recommended, in particular:
- Act Against Restraints of Competition (GWB)
- Contractual Foundations: TFEU Arts. 101 and 102
- Publications of the Federal Cartel Office and the European Commission (DG Competition)
- Commentaries and Handbooks on Competition and Antitrust Law
Due to the comprehensive range of responsibilities and powers, competition authorities are among the most important actors in ensuring and promoting fair competition in modern market economies.
Frequently Asked Questions
When and in what cases do competition authorities intervene in business operations?
Competition authorities become active as soon as there are indications of violations of competition law – in particular the prohibition on cartels and the abuse of a dominant market position. They monitor corporate mergers (merger control), investigate anti-competitive agreements such as price or territorial agreements as well as coordinated practices, and examine whether individual companies are abusing their market power, for example through exclusionary practices or obstructing competitors. Market transparency or information exchanges between competitors may also be scrutinized if they could adversely affect competition. The authorities act both reactively on the basis of information from market participants, competitors, or through leniency programs as well as proactively through market investigations or random checks.
What legal powers do competition authorities have in their investigations?
Competition authorities have far-reaching instruments at their disposal in their investigations to clarify facts. They may demand information from companies, inspect files, request business documents, and in certain cases order searches (so-called dawn raids) of company premises. These measures are authorized by special legal provisions, such as §§ 57 ff. GWB (Act Against Restraints of Competition) in Germany or Articles 18 ff. of the EU Competition Regulation (Regulation 1/2003). The authorities may question witnesses, secure electronic communications, and gather other evidence. Fundamental rights must be observed, particularly the right to be heard and the protection of trade and business secrets. In addition, coercive fines can be imposed to enforce cooperation obligations.
What sanctions and legal consequences can arise from unlawful conduct?
If violations are established, competition authorities can impose substantial fines on the companies involved and, in some cases, also on individuals. For example, the GWB provides for fines of up to ten percent of the annual global turnover of the company involved. In addition, orders may be issued to cease anti-competitive conduct or to unwind illegal mergers. Violations can also give rise to civil claims for damages by injured third parties, contracts violating competition law may be void, and in cases of serious infringements, criminal proceedings may be initiated in certain Member States. The authorities regularly publish decisions and notices of fines, which can result in significant reputational damage.
What legal remedies are available to companies against measures or decisions of competition authorities?
Companies have the possibility to challenge measures or decisions by competition authorities in court. This includes remedies against search warrants, orders to provide information, or fine notices. Under German law, for example, a complaint against administrative orders may be filed with the Higher Regional Court, with a subsequent appeal to the Federal Court of Justice. At the European level, actions may be brought before the General Court of the European Union (GC) and, subsequently, the Court of Justice of the European Union (CJEU). During ongoing appeals or court proceedings, interim legal protection or suspensive effect may be applied for. The legal review covers both formal aspects (procedural errors, jurisdiction, obligation to state reasons) and substantive legal issues.
How is cooperation between national and European competition authorities organized?
Competition law is enforced in Europe both at the Union and national levels. As part of the European Competition Network (ECN), the European Commission and national competition authorities coordinate, share information, and coordinate investigations to avoid parallel proceedings and to ensure consistent application of the law. The main legal basis is the EU Competition Regulation (Regulation 1/2003). National authorities are required to inform the European Commission of significant measures and may, under certain circumstances, involve officials from other authorities in support. The enforcement of European rules can also be carried out by national bodies, especially when a competition infringement affects the internal market.
What role do leniency and bonus programs play?
Leniency programs are a key tool in competition authority investigations. They allow companies and individuals involved in cartel violations to obtain a reduction or waiver of sanctions by providing active support in the investigation. The usual precondition is the early and comprehensive disclosure of information about the cartel and the submission of evidence that is crucial to the clarification of the case. Leniency and bonus programs are regulated both in the GWB (§ 81h ff.) and at the EU level (Leniency Notice 2006/C 298/11). Their purpose is to facilitate the detection and dismantling of cartels by creating incentives for self-reporting. The authority reviews and decides on the granting of fine reductions based on defined criteria.
What obligations to cooperate and participate do affected companies have?
During a competition law investigation, companies are obliged to cooperate. This includes responding to requests for information, providing documents, and allowing site visits and/or searches. The obligation to cooperate is complemented by the threat of sanctions in the event of refusal, incomplete, or untruthful information. However, there are also legal limits, such as the privilege against self-incrimination and the protection of certain internal information and communications (for example, legal correspondence, known as legal privilege). Companies should organize their cooperation carefully but also safeguard their rights and, in cases of doubt, seek legal advice.
