Law to strengthen fair competition amends Unfair Competition Act

The main purpose of this law is to improve protection against an abusive use of warning letters. Therefore, amendments were primarily made to the German Unfair Competition Act (UWG or UWG-E).

Restrictions on the “flying jurisdiction”

Previously, the so-called “flying jurisdiction” allowed competitors in many cases to choose the appropriate court for filing an infringement action. This will now be restricted for so-called e-commerce or tele media infringements. As infringements of unfair competition law are often not regionally restricted, in particular infringements occurring on the internet, the general place of jurisdiction of the defendant will apply in future, Sec. 14 (2) No. 1 UWG-E. The exact definition of a violation on the internet in the context of the changed jurisdiction has neither been substantiated by the government, nor has it been further elaborated from what point an infringement in e-commerce or tele media is deemed to have occurred under the new draft law. It thus remains to be seen what infringement on the internet means in practice, especially as regards advertising and submitted proof hereto.

Strengthening requirements for the right to bring an action

In order to counteract future abuse, requirements for the right to bring an action will be significantly increased. In the future, competitors must prove that they are actually engaged in business activities and that they sell or demand the goods or services to a not inconsiderable extent and also not just occasionally. Trade associations are only entitled to bring an action if they are registered as "qualified trade associations", Sec. 8b (2) No. 1 UWG-E. An association must meet requirements according to the new competition law, like eg having at least 75 members in order to be registered as a qualified association.

Reduction of financial incentives

The reduction of financial incentives also aims at helping to reduce an abusive use of warning letters. Competitors will no longer be entitled to claim reimbursement of their legal costs of a warning letter if they (only) claim an alleged breach of the information and labelling obligations on the internet or of data protection regulations if the alleged infringer has less than 250 employees. A contractual penalty shall be excluded in the future in case of a first warning letter. This is intended to remove the basis for warning letters which in the past were often only issued for the purpose of generating contractual penalties. The claim for a contractual penalty is limited to €1000 for only minor infringements. This new rule on contractual penalties is therefore only applicable if the entrepreneur has fewer than 100 employees. In the future, it will be easier for those who have been warned to take action against abusive warnings by bringing forward a counterclaim. For this claim it will already be sufficient that either there was no legal violation, or the formal requirement of the warning letter was not fulfilled.

Introduction of a repair clause in the design law

Additionally, there are new provisions for the Design Act (DesignG or DesignG-E). The law has been extended by a repair clause, which opens the market to competition for visible spare parts. This applies in particular to the automotive industry. Manufacturers have often protected the shape of spare parts as a design or registered design, which prevents competitors from copying it. Under Sec. 40a DesignG-E, there will be no design protection in the future for a design which is used as a component part of a product to enable it to be repaired. Freely exchangeable accessories, however, eg rims, will be excluded from this regulation.