Warning Letters in Competition Law: Requirements and Options for Action
The purpose of competition law is to ensure fair and undistorted competition. It protects companies, consumers and the public from unfair business practices. One of the central mechanisms for enforcing competition law are warning letters. It plays an important role in preventing and correcting anti-competitive actions and can also resolve competition disputes out of court. The warning letter is therefore an instrument through which competitors can directly control themselves.
The following article will guide you through the most important aspects of a warning letter in competition law: How is a warning letter structured and what are the minimum requirements for its content? How do I react to warning letters from competitors? How can I recognize abusive or unfounded warnings? How do I protect myself from warning letter abuse?
Content requirements of the warning letter
How a warning letter is structured and the content requirements it must meet are governed by the Unfair Competition Act (UWG).
If you recognize abusive conduct on the part of a competitor and suspect a violation of competition law, you must first describe it in detail: What are the facts of the case? Which principle of fair competition does the company’s action violate? How can the infringement be legally justified? From which standards does the illegality arise?
You must also demonstrate that you or your company are entitled to make a claim. In principle, competitors only have claims against each other if they are also in a competitive relationship with each other. The law also applies this requirement to the practice of out-of-court warnings. When are two companies in competition with each other? Above all, when it offers and sells similar services or goods on the same market. The courts understand this competitive relationship relatively broadly. For example, representatives of similar goods who operate in different forms of distribution can also be considered competitors. The same applies to companies from different sectors that are competing for the same customer base.
Claims and warning letters in competition law
Finally, you must specify in your warning letter which specific claims you are asserting and to what amount. As a rule, the warning letter contains a request to stop the anti-competitive behavior and in this context to submit a declaration to cease and desist with a penalty clause. With such a cease-and-desist declaration, your counterpart undertakes to refrain from the respective practice and to pay you a previously determined penalty in the event of violations. In addition, you should threaten legal action in the event of non-compliance and set a deadline for signing the cease-and-desist declaration. In practice, it has also become established practice to demand reimbursement of your own legal fees incurred as a result of the warning letter.
How do I respond to warnings in competition law?
You now know how you can issue warnings to your competitors for anti-competitive behavior. But what should you do if you receive a warning yourself?
It is not always clear whether a marketing campaign or other business activity is a violation of the Unfair Competition Act. The phenomenon of so-called serial warnings has also been a trend for some years now. Here, the sender sends the same warning letter to various companies. A warning letter does not automatically mean that there has been a breach of competition law. Some letters can also be a simple scam. Before you agree to pay a fine or sign a cease-and-desist declaration, you should first carefully review the letter. Seek legal support as soon as possible.
First check whether the warning letter correctly presents the facts on which the accusation is based. If the sender is claiming legal fees, you should also check whether it was necessary to involve a lawyer at all. You can also recognize abusive warnings, for example, if the penalty demanded is disproportionately high or the cease-and-desist declaration is formulated in very general and unspecific terms.
Options for action with tight deadlines
The practice of only setting very short deadlines in warning letters is particularly problematic. This often means that the company concerned does not have time to thoroughly review the allegations and consult a lawyer. What options for action are recommended here? Above all, it is important to react within the respective deadline. Otherwise, it may be threatened with a temporary injunction. This allows the courts to rule on the matter without an oral hearing. If you cannot clearly rule out an infringement of competition law on your part or it is obvious, you should at least consider signing the cease-and-desist declaration and only refusing to make the required payments. This will allow you to reduce possible court costs and at the same time comply with the warning period. However, beware of signing a cease-and-desist declaration if you cannot or do not want to comply with the behavior demanded in it. Violations of the declaration usually result in high contractual penalties.
Conclusion
It is neither smart to ignore warnings in competition law, nor should you sign a cease-and-desist declaration prematurely and without legal advice. Feel free to contact our lawyers at LLP Law|Patent to avoid falling for an abusive warning letter. Regardless of how the case is structured, you should react in any case. Even if the warning is unfounded, you should not leave the letter unanswered. Instead, inform the sender in writing that you will not sign the declaration and why. Otherwise, your silence could be misunderstood and the case could end in costly legal proceedings.
Robert Lankes | Rechtsanwalt (Lawyer)
Mr. Robert Lankes supervises the areas of corporate law, IP rights and construction and real estate law at LLP Law|Patent. He will support you in choosing the right legal form, for example, in forming a company, in disputes between shareholders and in company purchases. In the IP area, he will represent you in the context of competition, warnings and interim relief, and in the main proceedings. In construction and real estate law, he advises developers and tradesmen as well as tenants or co-owners. Mr. Lankes is an experienced negotiating partner and litigator in negotiations and discussions with third parties, as well as in court.
