Warning letter organisations: Once listed, always listed?

Background

Every day, companies breach applicable competition law, and they receive warnings for doing so almost just as often. This is made possible by Section 8(3) of the Unfair Competition Act (UWG), which grants claims for rectification and injunctions not only to competitors of the companies in question, but also, amongst others, to so-called ‘warning associations’ – in particular, qualified trade associations. If these are entered on the list created specifically for them in accordance with Section 8b of the UWG, they may take action against breaches of competition law.

But what if such a qualified trade association has managed to cheat its way onto the list and is now using it to issue warning letters to defenceless companies? Can these companies then take action against the trade association’s registration even before competition proceedings begin? The trail leads away from competition law and into the twists and turns of administrative law, all the way to the Higher Administrative Court for the State of North Rhine-Westphalia.

A bogus association before the Federal Office?

The story begins at the Federal Office of Justice with what initially appears to be an unremarkable event. The Federal Office adds an association – founded in 2016 and active in competition law – to the list of qualified trade associations. Shortly afterwards, an energy supply company lodged an objection to this registration with the Federal Office. It argued that some of the trade association’s members were closely linked to one another, that some members were, at best, nominal members, and that, in any case, the requirements of Section 8b(2) of the Unfair Competition Act (UWG) for registration had not been met. Furthermore, it was claimed that the association was a ‘fighting association’ which, under the guise of a qualified trade association, acted solely against the competitors of its members, who were affiliated with one another under company law.

The Federal Office responded with two letters:

1. In one decision, it rejects the objection on the grounds that the company lacks the standing to lodge an objection. The company is not directly affected by the trade association’s registration, but at most indirectly. However, the company would have to claim that a provision designed to protect it had been infringed. Section 8b of the Unfair Competition Act (UWG), however, merely lists the conditions that a trade association must fulfil in order to be registered. The provision is therefore directed solely at such associations and does not grant third parties, such as the claimant company, any right to review the registration retrospectively. In this respect, Section 8b of the UWG does not afford protection to third parties.
2. In a second information letter, the Federal Office later stated that it had reviewed the association’s registration and that all requirements had been met.

The energy supply company (now the claimant) subsequently brought an action against the Federal Office (now the defendant) seeking the removal of the trade association (now the intervener) from the list pursuant to Section 8b of the UWG. The claimant’s case was dismissed at first instance by the Cologne Administrative Court (VG Köln) and has now also been dismissed on appeal by the Higher Administrative Court of North Rhine-Westphalia (OVG NRW).

Higher Administrative Court on third-party protection under Section 8b of the Unfair Competition Act (UWG)

The claimant cannot demand the removal of the intervener from the list of qualified trade associations. Whilst Section 8b of the Unfair Competition Act (UWG) provides for specific requirements for registration, this serves the general interest in fair competition. It is not intended to protect the interests of third parties. This is also evident from the fact that the legislature has exhaustively regulated the subsequent review of registrations without, however, granting third parties the power to initiate such reviews themselves. Not even a competitor who is the subject of legal proceedings has the power to review a registration. Instead, the Act provides for reviews only ex officio or at the request of a court, namely where, in the course of legal proceedings, reasonable doubts arise as to compliance with the conditions for registration.

Furthermore, the fact that Section 8b of the Unfair Competition Act (UWG) is not designed as a provision protecting third parties does not infringe the claimant’s right to a fair trial. What is protected is solely the possibility for a defendant in competition proceedings to defend itself against abusive claims using all means available under the rule of law.

Nor has the guarantee of access to the courts been infringed. Article 19(4) of the Basic Law (GG) presupposes the infringement of a subjective right. However, no such right exists in the present case, as mere economic interests are not protected.

Practical note

For the time being, it is clear that, in the face of dubious practices by warning letter associations, companies can ultimately only lodge a complaint against the registration. However, as is well known, such a complaint is ‘informal, without a time limit and futile’, as is also evident from the Higher Administrative Court’s judgement. Companies therefore have no choice but to trust that the Federal Office of Justice’s regular reviews are carried out correctly.

If a company is involved in specific competition proceedings, it may also persuade the court to order a review of the registration in accordance with Section 4a(2) of the UKlaG. To do so, however, it must submit compelling evidence demonstrating that the warning association is not acting in good faith.