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Warning Notices for Unfair Competition: What German Companies Need to Know

Warning Notices for Unfair Competition: What German Companies Need to KnowIn the case of competition law disputes between two companies in Germany, written warning notices are a cost-effective way to settle disputes out of court. Otherwise, disadvantaged competitors would have to seek the immediate way through the legal system. This, however, can result in higher costs for both sides. In addition to the warning notice, reimbursement of legal fees, damages and information about the disputed conduct can also be demanded.

Requirements for warning notices to another company

In order to be able to issue a warning notice to a competitor, the parties must be involved in a specific competitive relationship. This is usually the case if both companies sell similar or even identical products or services to the same type of customers.

Moreover, companies that violate competition law may not only be issued with warning notices by competitors. So-called competition associations can also serve warning notices for infringements nationwide.

What can be objected to in warning notices to competitors?

Generally speaking, German companies can issue a warning against any unfair business practice by which a competitor violates competition law. For this purpose, the conduct under complaint must be described by the party issuing the warning and its anti-competitive nature must be explained in legal terms.

What is the aim of a warning notice?

The aim of the warning notice is to oblige the competitor to refrain from unfair competition in the future. In order to achieve this goal, the competitor is requested to sign a cease-and-desist declaration, subject to a penalty. By signing the declaration, the entrepreneur is obliged to refrain from the anti-competitive conduct. If he/she fails to do so, he/she is in breach of contract. This is now actionable and can be sanctioned on the basis of the cease-and-desist declaration.

Cease and desist declaration can be attached to a warning notice

In practice, pre-formulated cease-and-desist declarations are often sent out together with the warning notice. However, the person being issued with the warning notice is not obliged to sign this exact template. If he/she does, however, he/she agrees to the scope of the warning notice with regard to the prohibited conduct.

Our recommendation: a warning notice first, then legal action

The warning notice is not a prerequisite for the judicial enforcement of an injunctive relief claim. However, if a company foregoes issuing a warning notice prior to bringing an action, it runs the risk of falling into a financial trap. If the opposing party immediately recognizes the motion for a temporary injunction or a complaint, the plaintiff bears all costs of the litigation. This trap can only be circumvented by means of a prior warning notice.

Lawyer’s fees can also be recovered

If the asserted claim for injunctive relief is justified, the company issuing the warning notice can also demand reimbursement of its own legal fees, which it was forced to pay to carry out the warning notice.

The company that has been issued with a warning notice has to bear a proportionate share of the costs even if only part of the infringements for which a warning has been issued is actually anti-competitive. The amount of the legal fees to be reimbursed depends on the value of the respective property. This is an advantage for companies concerned: They do not have to bear the costs of enforcing fair competition themselves.

WINHELLER supports companies in creating legally compliant warning notices

Despite the wide-ranging advantages, warning notices should not be handled lightly. It is true that a company that has been issued with an unjustified warning notice cannot issue a warning notice itself for that reason alone. However, enterprises often fight back by scrutinizing the issuing company itself in order to find a reason to send out a counter-notice and thus put the company under pressure.

In addition, legal fees and costs of any subsequent court proceedings can only be reimbursed if the claim for injunctive relief is actually justified. In this sense, it is advisable to check the legal foundations of a warning notice in detail before it is issued. This is the only way to turn the warning notice into a cost-effective tool for establishing fair competition.

Your competitor uses unfair practices? Feel free to contact us at any time!

Continue reading:
Legal Counsel and Representation in Specific Areas of Competition Law

Stefan Winheller

Attorney Stefan Winheller has specialized in tax law for about 20 years, especially in the areas of cryptocurrencies, foundations/nonprofits and international tax law.

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