BEIRA Corona Task Force Update

EU and Austrian Competition Law in Times of COVID-19 – An Overview (as per 30 March 2020)

Currently, there is hardly any area not affected by the COVID-19 pandemic. Competition law is no exception to this. The following overview provides a snapshot of selected competition law topics that may be relevant for undertakings in this time of crisis:
 

MERGER CONTROL

Procedural Timelines

At the European level, the European Commission's Directorate-General for Competition ("DG COMP") encourages undertakings, if possible, to postpone their submissions of merger control notifications. DG COMP assumes that it will be more difficult for case teams to obtain information from third parties (such as customers, competitors and suppliers). In addition, DG COMP's staff has worked increasingly from home since 16 March 2020. However, deadlines have so far not been suspended on a general level.

For Austria, the 2nd COVID-19 Act affects the deadlines for merger control proceedings: For notifications received by the Austrian Federal Competition Authority ("FCA") prior to 30 April 2020, the deadline for the FCA and the Federal Cartel Prosecutor to request an in-depth review pursuant to sec 11 of the Austrian Cartel Act (phase I) will only start to run from 1 May 2020. For merger control notifications submitted prior to 21 March 2020 (i.e., prior to the 2nd COVID-19 Act), the FCA stated that the phase I-deadlines remain unaffected by the 2nd COVID-19 Act. For notifications which were or will be filed after 21 March 2020 (for which the period for submitting a request for review to the Cartel Court will not end before 29 May 2020), obtaining early waivers of review from the FCA and the Federal Cartel Prosecutor is still possible.

However, for proceedings in phase II, which were pending before the Cartel Court at the time when the 2nd COVID-19 Act entered into force or which will be put on the Court's docket before 30 April 2020, the decision deadlines for the Cartel Court will only commence on 1 May 2020. This applies regardless of when the respective merger notification was filed with the FCA.

In Germany, the Federal Cartel Office has also called on representatives of companies to consider whether a project should be submitted to the Office at this stage or whether it could possibly be filed at a later stage. However, the deadlines have not yet been formally changed.

Obtaining all necessary merger control clearances will therefore, in many cases, take longer than usual during the COVID-19 crisis. This should be anticipated in ongoing M&A negotiations by adjusting the transaction schedule and affected SPA clauses (such as long stop dates) accordingly.

Personal Meetings and Digital Submissions

The FCA does currently not receive parties or their representatives in person and does not accept submission of merger notifications via its front desk. Since the latter is not staffed continuously, the FCA also discourages parties from submitting merger notifications by mail. Following a successful test operation, however, merger filings can now be submitted to the FCA by means of the Austrian electronic legal communication system "ERV" (Z008239).

At DG COMP it is, in principle, still possible to submit merger notifications in person, but restrictions may occur. DG COMP also accepts notifications by e-mail (comp-merger-registry@ec.europa.eu) or via the eTrustEx system.

Scenarios of Insolvency; Failing Company Defence

The acquisition of companies or parts thereof is still subject to merger control rules, even if insolvency proceedings have been initiated by or are pending against the target company.

If a financially ailing company is to be taken over, the "failing company defence" can be of importance in the substantive assessment conducted during merger control proceedings. This line of argument suggests that the target company is financially so weak that it would exit the market without a takeover, and that the market shares of the target company would then transfer to other market participants. This is the hypothetical scenario to be used when calculating the increase in the acquirer's market share. Essential for arguing the "failing company defence" is that there are no other potential buyers for the target company who would experience a smaller increase in market share, eg because they had not been active on the relevant market so far.

Evidence that the target company would exit the market without a takeover has to be provided to the competition authority during the merger control proceedings. Pending or imminent insolvency proceedings are considered a meaningful indicator.

Temporary Modification of Commitments from Previous Proceedings

If clearances in past merger control proceedings were only granted subject to commitments or conditions, it may be possible to modify or suspend ongoing behavioural commitments during the COVID-19 crisis.

For example, the acquisition of the Austrian TV channel ATV+ by the ProSieben-Sat 1-Puls 4 Group in 2017 was cleared by the Austrian competition authorities subject to commitments, inter alia, to continue their news program "ATV Aktuell" under defined minimum requirements. These commitments also contained a "revision clause" on the basis of which the ProSieben-Sat 1-Puls 4 Group applied, in March 2020, for an amendment to the commitments regarding "News & Information" in order to be able to react to the changed news production situation during the COVID-19 crisis. As a result, the commitments were, until the end of the COVID-19 crisis or 30 April 2020 (whichever date is earlier), suspended in so far as necessary to maintain the operation of the newsroom.

If commitments or obligations were part of a clearance decision by the Cartel Court in Phase II, they can be modified even without an explicit "revision clause" in the commitments themselves: If the relevant circumstances change after such clearance, the Austrian Cartel Act empowers the Cartel Court to modify or withdraw restrictions or obligations at the request of an undertaking concerned.
 

ABUSE OF DOMINANCE

Controlling the unilateral behaviour of dominant undertakings is also of relevance in the COVID-19 crisis: Not only the above-mentioned acquisition of a failing company may lead to an increase in market shares of the acquirer during and after the crisis. Also, the market exit of undertakings may result in an increase in a competitor's market share to such an extent that the latter could be qualified as dominant for the first time. From this point on, stricter rules would apply to such competitor which rules seek to prevent abusive market behaviour by dominant undertaking. A shortage of certain products can also lead to a dominant position.

The "European Competition Network" ("ECN") published a joint statement by all national competition authorities on 23 March 2020. According to this statement the competition authorities will not hesitate to act against dominant undertakings in relation to products considered essential at this time (eg face masks or sanitiser gel), if they exploit the crisis by unjustifiably increasing prices. Additionally, the FCA announced that it would give priority to investigating any suspicion of excessive prices, artificial supply shortages or other abusive behaviour in the area of health protection products.
 

AGREEMENTS BETWEEN UNDERTAKINGS

General

In the EU Member States, including Austria, European and national competition laws continue to apply to agreements between undertakings. However, in its statement of 23 March 2020, the ECN recognised that the current crisis might require extraordinary measures, including cooperation agreements between competitors or between undertakings at different market levels. Taking these circumstances into account does not require any special legislation, but can be accomplished with the existing mechanisms of national and EU competition law. The ECN states that, under the present circumstances, competition authorities will not actively intervene in necessary and temporary measures taken by undertakings to avoid supply shortages.

Also DG COMP acknowledges that businesses are currently facing particular challenges which may call for specific cooperation initiatives in order to overcome the crisis to the ultimate benefit of consumers. In order to swiftly receive informal guidance from DG COMP on the compatibility of such cooperation initiatives with EU antitrust law, undertakings can contact DG COMP via a dedicated email inbox which was newly established on 30 March 2020 (COMP-COVID-ANTITRUST@ec.europa.eu). If the cooperation initiative primarily concerns one specific Member State, the national competition authority of the respective Member State would be the best point of contact.

There might be agreements which are concluded by undertakings only in order to fulfil statutory obligations. Such agreements do not violate competition law. Eg, if the legislator decides that certain products (such as sanitiser gels) may only be sold through certain channels or to certain end customers, an agreement between a supplier and its distributor that reflects this restriction does not contravene applicable competition law. However, such an agreement must not be excessive or stay in effect for longer than the statutory laws it intends to implement.

Vertical Agreements

The crisis may also justify agreements of a different nature, such as exclusive purchase and supply obligations, in particular if they guarantee security of supply. It is important that these agreements are limited to subject matters indispensable to the achievement of such objectives, and that they are terminated immediately once their justification ceases to apply.

Fixing resale prices by imposing either minimum or fixed prices, though, still amounts to a hardcore restriction and cannot be justified by the crisis. However, competition law does give producers the possibility to set maximum prices for their products in order to put a stop to unjustified price increases at downstream market levels – the ECN expressly refers to this possibility in its statement from 23 March 2020.

Horizontal Agreements

In the case of agreements between competitors, the crisis may justify measures that would otherwise violate competition law. Necessary and temporary measures may be allowed if they (i) either do not amount to restrictions of competition at all or (ii) produce efficiencies that outweigh the negative effects of the restriction.

An example of such an exception to the ban on anti-competitive agreements are short-term deliveries to a competitor who, without any fault on his part, suffers from a supply bottleneck regarding an input product. This might happen, for example, when borders are suddenly closed. Other possibilities to protect against a supply interruption, such as forming purchasing groups, are also conceivable. However, as the competition law rules remain fully applicable, a careful assessment should be made in each case, weighing the necessity of the envisaged measure against its restrictive effects on competition. Restrictions of competition must be minimised, and the benefits gained from the cooperation must be passed on to the customers.

In this context, it should be noted again that various European national competition authorities announced that they are focusing on certain areas that are currently prone to prohibited horizontal agreements, such as price fixing for goods in particularly high demand. The Austrian FCA has announced that it will investigate any suspicion of cartel agreements in the area of health protection products (such as face masks or sanitiser gels) and give top priority to such complaints.
 

CONCLUSION

Austrian and EU competition law remain fully applicable in this time of crisis.
Competition authorities in Austria and elsewhere have declared that they will focus their market monitoring efforts on certain goods which are currently in particularly high demand (e.g. protective masks or sanitiser gels) and that they will give priority to prosecuting competition law violations affecting these areas. At the same time, applicable competition rules give undertakings a room for manoeuvre to react to the crisis with special measures – even if this requires agreements with competitors.

With regard to merger control, delays must be expected throughout, notwithstanding that the FCA and other competition authorities switched to digital communication channels for the purpose of submitting merger control notifications. In insolvency scenarios the merger control rules remain applicable, but the "Failing Company Defence" may lead to (fast) clearance by the authorities.

Regardless of whether measures could qualify as restrictive agreements, abuse of a dominant position or require merger control: even during the COVID-19 crisis, undertakings should carefully examine every action that might infringe applicable competition law.
 

Contact: Isabella Hartung, E: hartung@beira.at

BEIRA Corona Task Force Update

Overview of legal measures to mitigate the financial impact of the Coronavirus crisis on companies (as per 20 March 2020)

The Austrian legislator has extended the measures adopted so far and has introduced new measures to mitigate the financial effects of the crisis in connection with "SARS CoV 2" or "COVID-19" ("Coronavirus") for companies. Existing measures, which can be reviewed in our overview of 17 March 2020, remain in place. The following is an overview of the new measures:
 

RELIEF EFFORTS FOR AFFECTED COMPANIES

Crisis Management Fund

According to the Austrian legislator, the implementation of the financial support under the "COVID 19 Crisis Management Fund" pursuant to the COVID-19 Fund Act is to be carried out via the Federal Government's "Abbaubeteiligungsaktiengesellschaft" ("ABBAG").

The regulation of the Federal Minister of Finance on the guidelines for the granting of financial aid from the COVID-19 Crisis Management Fund has already been issued and regulates the utilisation procedure and the conditions for utilisation applicable to the individual ministries that want to take certain measures to manage the Coronavirus crisis. One such measure that has already been taken is the Hardship Fund endowed with one billion euros from the COVID-19 Crisis Management Fund (see below).

Export Guarantees

The Austrian federal government provides an export credit facility of two billion euros via "Österreichische Kontrollbank" ("OeKB") to support the liquidity of Austrian export companies. These funds are made available via a new refinancing framework (COVID-19-KRR). Export companies, together with their financing bank, can apply for a credit line of 10% (for large enterprises) or 15% (for small or medium-sized enterprises) of their export turnover at OeKB. The maximum amount is 60 million euros per customer; the financing is initially limited to two years (with the possibility of an extension). The costs are based on the existing refinancing framework, with a slightly increased fee on the guarantee in respect of the relevant promissory notes.

Assistance for Small or Medium-Sized Enterprises

In order to support small or medium-sized enterprises, the Austrian legislator, in the SME Assistance Act, has provided for an expansion of the guarantee frameworks of both the "Österreichischen Hotel- und Tourismusbank" (ÖHT) and the "Austria Wirtschaftsservice" (aws). Such expansion will be implemented by a regulation to be issued by the Federal Minister of Finance together with any any other minister competent in the respective matter.

Hardship Fund

The establishment of a hardship fund (endowed with one billion euros from the COVID-19 Crisis Management Fund; see above and our overview of 18 March 2020) is intended to mitigate hardship cases in SPs, freelancers, NPOs and micro-enterprises caused by legal and economic consequences of the Coronavirus crisis. The implementation of this subsidy programme will be based on a directive issued by the Minister of Finance in agreement with the competent ministers on the basis of the SME Assistance Act. The actual processing will be carried out by the Austrian Chamber of Commerce.

Artists' Social Security Fund

In order to mitigate the loss of income for artists due to the Coronavirus crisis, the Austrian legislator has resolved that the Artist's Social Security Fund may grant additional subsidies in the total amount of up to five million euros in the calendar year 2020. Separate directives will be issued for the granting of such subsidies, which may also provide for support for cultural agents.

Fees and Administrative Charges

As an additional financial relief, the Austrian legislator has exempted (retroactively as of 1 March 2020) writings and official acts that are or will be made directly or indirectly on the basis of the measures necessary in connection with the Coronavirus crisis from fees and federal administrative charges payable on them.
 

PROCEDURES AND DEADLINES

General Rules

Among other things, the Austrian legislator has resolved on the temporary suspension of court proceedings, the suspension of time limits, the restriction of court operations, the reduction of visiting rights in prisons, the use of video technology for interrogations and hearings, and the possibility of circular decisions/resolutions by the Constitutional High Court and the Administrative High Court.

Specifically, all time limits in court proceedings (civil proceedings, non-contentious proceedings, land register and commercial register matters as well as enforcement and insolvency proceedings) will in principle be suspended until 1 May 2020 and will start to run anew on 1 May 2020, whereby such suspension period may be extended by the Federal Minister of Justice if necessary. The only exception to the suspension of proceedings are proceedings concerning detention measures.

However, the competent court may shorten the duration of the suspension of proceedings for reasons of urgency (to avert a danger to life and limb, security or freedom or to avert substantial and irrecoverable damage to a party to the proceedings).

Oral hearings and personal interviews should, if possible, only be conducted for the above-mentioned reasons of urgency and, if so necessary to be conducted, they should be conducted by suitable technical means of communication (e.g. video conferences).

Largely similar rules have also been resolved for deadlines in proceedings under the Austrian Federal Fiscal Code and the Austrian Fiscal Penal Code.

In addition, deadlines under substantive law are also deemed suspended until 1 May 2020; i.e. the period from 23 March 2020 up to and including 30 April 2020 is not included when calculating the period in which an action or application is to be filed or a declaration is to be made.

During this period, a written reminder in respect of a liability that became due after 23 March 2020 will not lead to a default in insolvency restructuring proceedings.

For merger control notifications received by the Federal Competition Authority prior to 30 April 2020, the deadline for the examination request shall run from 1 May 2020, and for examination requests that are pending before the Austrian Cartel Court on 23 March 2020 or that are made by the end of 30 April 2020, the deadline for a decision shall run from 1 May 2020.

As long as the periods mentioned in this point are suspended, certain alleviations apply to notifications requiring proof of delivery.

Insolvency and Enforcement Proceedings

In the Austrian Insolvency Code as well as in the Austrian Enforcement Code, the Austrian legislator has included a clarification that epidemics and pandemics fall under the term "natural disaster". If a natural disaster is (partly) responsible for the insolvency of a company, the time period for the obligatory filing for insolvency is extended to 120 days. It should be noted that such extended period (same as the regular period) may only be utilised as long as there is the prospect of a successful restructuring.

If a person is affected by a natural disaster that puts him or her in economic difficulties and if this leads to the initiation of enforcement proceedings, the enforcement is to be delayed at the request of the obligated person without the provision of security if (i) such enforcement would otherwise destroy the economic existence of the obligated person and (ii) there is no risk of substantial damage to the creditor caused by such delay of enforcement.
 

SPECIAL MEASURES IN COMPANY LAW

In respect of company law, the legislator has taken two measures in the form of a separate act (COVID-19 Company Law Act, "COVID-19-GesG")

Meetings of Shareholders and Board Members

As long as the measures relating to the Coronavirus crisis persist, meetings of shareholders and members of the bodies of a corporation, partnership, cooperative, foundation or association, mutual insurance association or small insurance association may be held without the physical presence of the participants (whether or not such form of meeting is provided for in the company's documents). The Federal Minister of Justice will stipulate by regulation how these meetings are to be held, in particular to ensure a comparable quality of the decision-making process.

Annual General Meetings of Stock corporations

In the calendar year of 2020, the annual general meeting of stock corporations must no longer be held within the first eight months of the financial year of the relevant stock corporation, but only within the first twelve months thereof.
 

Our specialists with the respective expertise are at your disposal.

BEIRA Corona Task Force

Overview of legal measures to mitigate the financial impact of the Coronavirus crisis on companies (as per 18 March 2020)

The Austrian legislator, the Austrian federal government and the Austrian social security agencies have taken various measures to mitigate the financial impact of the crisis in connection with "SARS CoV 2" or "COVID-19" ("Coronavirus") for companies. The following is an overview of these measures:
 

RELIEF EFFORTS FOR AFFECTED COMPANIES

Crisis Management Fund

The "COVID-19 Crisis Management Fund" pursuant to the COVID-19 Fund Act ("Fund") has been established at the Federal Minister of Finance ("BMF") and is administered by the BMF with the aim of providing the necessary financial resources to cope with the Coronavirus crisis situation. The Fund is endowed with up to four billion euros, which can be used, for example, for "measures to mitigate the loss of revenue as a result of the crisis". The funding guidelines are currently being elaborated by the BMF and, according to BMF's information, affected companies should be able to submit respective applications as of calendar week 13.

It should be noted that with the establishment of the Fund, the legal entitlement to full compensation under the Austrian Epidemics Act (e.g. for loss of earnings in case of state-imposed business closures) no longer exists.

Immediate Measures for Tourism Companies and Sole Proprietors/Small or Medium-Sized Enterprises

The Federal Minister of Agriculture, Regions and Tourism has announced guarantees for bridge financings of up to 100 million euros as an emergency aid measure for sole proprietors/small or medium-sized enterprises in the tourism and leisure industry. The support will be provided in form of federal guarantees in an amount of up to 500,000 euros per sole proprietor/small or medium-sized enterprise (with a maximum federal liability rate of 80%). Applications by affected tourism and leisure businesses (including mixed businesses) can be submitted to the "Österreichische Hotel- und Tourismusbank" (www.oeht.at) since 11 March 2020 and must be made jointly with the financing bank. The costs (processing fee and ongoing guarantee commission) will be borne by the Austrian federal fund.

Federal guarantees for bridge financings are also offered for sole proprietors/small or medium-sized enterprises in the commercial and industrial sectors outside of the tourism and leisure industry in an amount of up to 2.5 million euros per sole proprietor/small or medium-sized enterprise (with a maximum federal liability rate of 80%). Applications can be submitted to the "Austria Wirtschaftsservice" (www.aws.at) since 11 March 2020 and must be made via the financing bank.

Emergency Measures at State Level

The City of Vienna, together with the Vienna Chamber of Commerce, has resolved upon an initial aid package for companies affected by the Coronavirus. The focus thereof is on sole proprietors/small or medium-sized enterprises. The initial package includes 12 million euros for guarantees to strengthen the liquidity of Viennese small or medium-sized enterprises, 20 million euros for an emergency fund for sole proprietors and micro-enterprises ("Emergency Fund of the Vienna Chamber of Commerce") and 3 million euros to increase the resources of the Vienna Workers' Promotion Fund (waff) for labour foundations. Further measures will be presented on 18 March 2020.

Guarantees: The City of Vienna provides, via the "Wiener Kreditbürgschafts- und Beteiligungsbank" (WKBG), state guarantees in the total amount of 12 million euros. Such state guarantees (by the City of Vienna or the Vienna Chamber of Commerce) will secure loans of up to EUR 500,000 per small or medium-sized enterprise, with a maximum state liability rate of 80%. The costs of the WKB guarantee (handling fee and ongoing guarantee commission) will be borne by the City of Vienna and the Vienna Chamber of Commerce.

Emergency fund: Sole proprietors and micro-enterprises can receive aid from the Emergency Fund of the Vienna Chamber of Commerce in the event of severe distress (drop in turnover > 50%). Details will be presented in the upcoming days.

The province of Lower Austria provides state guarantees in the total amount of 20 million euros via the "NÖ Bürgschaften und Beteiligungen GmbH" (NÖBEG) for Lower Austrian small or medium-sized enterprises in the trade and tourism industry which are adversely affected by the financial impact of the Coronavirus crisis. Such state guarantees by the province of Lower Austria will secure loans of up to 500,000 Euro per SME, with a maximum state liability rate of 80%. The costs of the NÖBEG guarantee (handling fee and ongoing guarantee commission) will be borne by the province of Lower Austria.

Further Measures Planned

According to the Austrian Chamber of Commerce, further measures planned include a hardship fund for freelance artists, sole proprietors and micro-enterprises, direct loans to affected companies and the expansion and expedition of OeKB export credits. Details of such further measures are not known yet.
 

TAXES AND DUTIES

On 14 March 2020, the BMF published measures to mitigate the financial impact of the Coronavirus crisis for companies in terms of tax/duty laws. The following concrete measures are available:

Reduction of Advance Payments of Income Tax or Corporate Tax

Taxpayers affected by a loss of income due to the Coronavirus crisis can apply for a reduction of already assessed income tax or corporate tax advances (limit: zero euros) for the calendar year 2020 until 31 October 2020.

Non-Assessment of Advance Payments of Income Tax or Corporate Tax

Taxpayers whose liquidity is so severely affected by the Coronavirus crisis that they are unable to pay income tax or corporate tax advance payments may propose that such advance payments for the calendar year 2020 are not assessed in their entirety or are assessed in a reduced amount (limit: zero euros).

Non-Assessment of Additional Claim Interest

If the discontinuation or reduction of advance payments results (or would result) in additional claim interest upon the assessment of income tax or corporate tax for the calendar year 2020, such interest shall not be actively assessed by the tax authorities.

Deferrals and Instalments; Late Payment Surcharges

Taxpayers can further request a deferral or payment in instalments of taxes/duties and can also propose the non-assessment of statutory deferral interest.

Taxpayers can also apply for a reduction in, or non-assessment of, late payment surcharges, assuming that the late payment is not due to their gross negligence.

Credible Demonstration

The utilization of the above-mentioned measures is subject to the condition that there is or has been a credible demonstration of a liquidity shortage specifically due to the Coronavirus crisis. According to the BMF, this includes, for example, unusually high cancellations of hotel reservations, cancellations of sporting or cultural events due to official prohibitions, failure or impairment of supply chains or loss of earnings due to changes in consumer behaviour. For the (unbureaucratic) provision of such credible demonstration, text modules are available on the BMF's website.

Competence and Dealing

The above-mentioned requests and/or proposals must be submitted to the taxpayer's competent tax office. The competent tax office must deal with such applications and/or proposals immediately.
 

SOCIAL SECURITY

Social Security Agency for Self-Employed Persons

Anyone who is directly or indirectly affected by the Coronavirus crisis (through illness, quarantine or potentially substantial losses in earnings) and thereby runs into liquidity issues may, upon request, have its social security contributions deferred or pay them in instalments or may request a reduction of its contribution basis. It is also possible to obtain a full or partial leniency for default interest. The respective applications can be submitted to the Social Security Agency for Self-Employed Persons by e-mail or online form.

Austrian Health Insurance Agency

The Austrian Health Insurance Agency has put together a package of measures to support employers in the event of short-term liquidity bottlenecks, which includes deferrals (for a maximum period of three months) or payments in instalments (for a period of up to 18 months) of due social security contributions, as well as a leniency for late payment surcharges and the suspension of enforcement actions or insolvency applications in individual cases.
 

Our specialists with the respective expertise are at your disposal.

Barnert Egermann Illigasch are delighted to announce Victoria Ranegger's admittance to the bar

Victoria Ranegger (30) joined Barnert Egermann Illigasch in 2019 as an associate and was admitted to the Austrian bar in January 2020.

Victoria will continue to support the team around Clemens Egermann. Her main focus is in Dispute Resolution, Litigation and Arbitration. "Victoria Ranegger is a proven expert in her field. It is a great pleasure that she will continue to support our team. This will strengthen our practice groups." says Clemens Egermann.

Meet representatives of Barnert Egermann Illigasch at the RecruitersNight on 28 October 2019

RecruitersNight at the University Vienna

more4.95 MB

Barnert Egermann Illigasch are delighted to announce Michail Fouzailov's admittance to the bar

Michail Fouzailov (31) joined Barnert Egermann Illigasch in 2018 as a senior associate and has been admitted to the Austrian bar in September 2019.

Michail will continue to support the team around Alexander Illigasch. His main area of focus is in Banking and Finance as well as Restructuring and Insolvency. "We are delighted that Michail Fouzailov continues to support our team with his expertise." says Alexander Illigasch.