The procedure
In 2021, the Austrian Federal Competition Authority (AFCA) filed an application with the Cartel Court for termination of the infringement of the standstill obligation relating to mergers without notification and requesting the imposition of an appropriate fine on REWE. The AFCA considered the takeover of food retail space in the WELAS Park shopping centre by a REWE subsidiary on the basis of a lease agreement to be a notifiable merger transaction. Confronted with the AFCA’s legal opinion, REWE continued to maintain that the merger had not been subject to notification obligations and only submitted its notification retroactively, doing so on 23 August 2022 during the legal proceedings. With its decision of 15 May 2023, the Cartel Court confirmed the existence of a merger subject to notification obligations but, due to a lack of criminal liability on the part of REWE, dismissed AFCA’s applications for a fine and for findings. The AFCA and the Federal Cartel Prosecutor lodged appeals against this decision.
The Supreme Cartel Court upheld these appeals in November 2023 (press release of 29 December 2023) and ordered the court of first instance to set a “noticeable” fine. During the subsequent second legal procedure, the Cartel Court imposed a fine of EUR 1.5 million on REWE, with the AFCA and the Federal Cartel Prosecutor again appealing.
The Supreme Cartel Court has now upheld these appeals and increased the fine to EUR 70 million. The Supreme Court dealt with the issue of the range of fines as well as with the legal factors determining the amount of the fine, which are used to assess the severity of a certain conduct.
Pursuant to § 30 para. 1 of the Federal Cartel Act (KartG), when setting the amount of fines the Court must pay particular attention to the gravity and duration of the infringement, the enrichment achieved by such infringement, the degree of responsibility and the economic capacity. Para. 2 of § 30 KartG lists aggravating circumstances, and para. 3 mitigating circumstances. Fines in accordance with the KartG have preventive and punitive purposes. This means that they must be set at an amount that will have a deterrent effect.
Assessment of fines
The Supreme Cartel Court again addressed the assessment of fines in its decision and stated:
- The “preceding business year” used for calculating the amount of the fine is to be understood as the year preceding the issuance of the decision. The Supreme Cartel Court argued the same in another recent decision (16 Ok 6/23b).
- Consequently, the fine was assessed based on the REWE Group turnover of EUR 92.3 billion.
- The Supreme Court rejected REWE’s argument that neither the parent company’s turnover nor that generated by separate business fields should be taken into account.
- The Group’s total turnover is to be used as the basis for assessing the fine, with the rule of aggregation pursuant to § 22 KartG applied.
- Accordingly, it was the correct approach to assess the fine based on the group of companies as a whole given their close economic ties.
- The Supreme Court therefore referred to the 2023 annual turnover of the REWE Group and assessed the fine taking the upper limit of EUR 9.23 billion into account.
- In another procedure before the Cartel Court, REWE had already been fined for incorrect or misleading information (including in relation to the undisclosed operation of a branch) in 2018 (24 Kt 8/18h).
Constitutional concerns
- Regarding the objections raised in relation to the assessment factors and their weighting, the Supreme Cartel Court did not share the constitutional concerns about the sanctioning rules in the KartG and continues to assume sufficient definiteness.
- The Supreme Cartel Court set out the factors considered in the form of a bullet point list, e.g. the long duration of the infringement.
Fines need to be heavy
In conclusion, the Supreme Cartel Court again points to the need for fines to benoticeable. To effectively combat breaches of cartel law, fines in Austria need to be on the same scale as it has long been customary in many EU Member States.
Obligation to notify mergers – AFCA consultation service: swift and without red tape
“Our Legal Service Department has a dedicated service unit in place that can help to clear up any questions surrounding obligatory notifications. In 2024, it was consulted a total of 36 times. We always respond very swiftly, providing a clear answer on whether a merger needs to be notified or not. I encourage all companies to make use of this service,“ says Director General Natalie Harsdorf.
Breaches of the obligation to notify mergers prevent timely and efficient merger control, ultimately leading to market concentration with all the known negative consequences this entails (e.g. higher prices, fewer offers, lack of alternatives). Information on obligatory notifications can also be found on AFCA’s website.
Companies that remain unsure about whether the notification obligation applies to a specific merger can email their questions in advance to the following address: POST-Anmeldepflicht[at]bwb.gv.at. This service is easy to access and provides swift answers without any unnecessary red tape.
Significance of Merger control in Austria
Effective prosecution of illegal mergers lies in Austria’s interests, strengthening companies’ competitiveness within the business location. Concentration or even monopolisation in individual markets can have a negative impact on small and medium-sized companies in particular. The KartG therefore requires merger control procedures when certain thresholds are exceeded (turnover or transaction value).
Text of the decision (in German): 16Ok5/24g