· An article by Dr. Norman Dauskardt

Cease-and-Desist Letters under Competition Law – What to Do When You Receive One

Stay Calm

A cease-and-desist letter under competition law typically arrives without warning. It often contains a short deadline, a pre-drafted cease-and-desist declaration, a demand for reimbursement of costs, and a threat of legal proceedings.

For those affected, the situation is frequently stressful: Is the party issuing the cease-and-desist letter even entitled to do so? Do I have to pay? Should I sign the cease-and-desist declaration? What happens if I do not respond?

The most important answer upfront is:

Take the cease-and-desist letter seriously – but do not sign anything or make any payment without first having it reviewed.

A cease-and-desist letter under competition law can have significant consequences. At the same time, not every such letter is well-founded, not every cost demand is enforceable, and not every cease-and-desist declaration in the form presented is acceptable.

Summary for Those in a Hurry:

  • A cease-and-desist letter under competition law is an out-of-court demand to refrain from a particular commercial practice in future § 8 para. 1 UWG, § 13 UWG. Take it seriously – but do not sign anything or make any payment without first having it reviewed.
  • Note the deadline immediately: missing it risks an application for a preliminary injunction § 12 UWG.
  • Reimbursement of costs is not automatically owed. Where a competitor issues a cease-and-desist letter concerning information and labelling obligations in electronic commerce or certain GDPR infringements (generally by businesses with fewer than 250 employees), the right to reimbursement of costs is excluded under § 13 para. 4 UWG.
  • The enclosed cease-and-desist declaration is usually broadly drafted and creates a permanent, penalty-secured obligation. Rather than signing it without review, a modified declaration that goes no further than necessary is typically the right course of action.
  • Before responding, check: standing § 8 para. 3 UWG, mandatory particulars § 13 para. 2 UWG and the costs claimed. Otherwise, rejection, a counter-claim § 13 para. 5 UWG, or abuse of rights § 8c UWG may be available.

1. What Is a Cease-and-Desist Letter under Competition Law?

A cease-and-desist letter under competition law is an out-of-court demand to refrain from a particular commercial practice in future. It is regularly based on an alleged claim for injunctive relief under § 8 para. 1 UWG.

Under § 13 para. 1 UWG, those entitled to assert a claim for injunctive relief are required to issue a cease-and-desist letter to the party in breach before commencing court proceedings and to give that party the opportunity to resolve the dispute by providing a cease-and-desist declaration secured by an appropriate contractual penalty.

In simple terms: the cease-and-desist letter is intended to avoid court proceedings in the first instance. It gives the recipient of the cease-and-desist letter the opportunity to resolve the alleged competition law infringement out of court.

Typical allegations include, for example:

  • misleading advertising, for instance under § 5 UWG,
  • misleading conduct by omission of material information, in particular under §§ 5a, 5b UWG,
  • infringements of market conduct rules under § 3a UWG,
  • unlawful e-mail advertising or telephone advertising under § 7 UWG,
  • incorrect price statements,
  • incomplete mandatory information in an online shop,
  • infringements of imprint or information obligations,
  • unlawful guarantee advertising,
  • missing labelling,
  • misleading promotional discounts,
  • unlawful comparative advertising under § 6 UWG,
  • incorrect information about products, delivery times, or rights of withdrawal.

If a cease-and-desist letter is responded to incorrectly or not at all, court proceedings may follow quickly.

2. The Three Most Important Immediate Rules

If you have received a cease-and-desist letter under competition law, the following three points in particular should be observed:

(1) Note the deadline immediately.
The deadlines set are often very short. If the deadline is missed, an application for a preliminary injunction may follow.

(2) Do not sign anything without having it reviewed.
The enclosed cease-and-desist declaration is frequently broadly drafted and may bind you permanently. If the obligation is subsequently breached, a contractual penalty may become due. § 13a UWG contains special provisions governing contractual penalties.

(3) Do not pay prematurely.
Whether reimbursement of costs is actually owed depends on the circumstances of the individual case. The right to reimbursement of costs is governed in particular by § 13 para. 3 UWG. In the case of certain cease-and-desist letters issued by competitors, the right to reimbursement of costs may be excluded under § 13 para. 4 UWG.

In short: do not ignore it, do not react hastily – have it reviewed by a lawyer.

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3. Who Is Actually Entitled to Issue a Cease-and-Desist Letter?

Not everyone is entitled to issue a cease-and-desist letter under competition law. Who may assert claims on grounds of unfair commercial practices is set out in § 8 para. 3 UWG.

Those with standing include in particular:

Where cease-and-desist letters are issued by alleged competitors, the first step is therefore to examine whether an actual competitive relationship exists at all. A competitive relationship does not arise merely because both businesses are commercially active. The decisive question is whether both businesses offer or seek similar goods or services within the same market.

Trade associations too must satisfy certain requirements. In particular, trade associations with legal capacity must be entered in the list of qualified trade associations.

Standing is not a mere formality. Under § 13 para. 2 no. 2 UWG, the cease-and-desist letter must state the conditions for standing clearly and comprehensibly. A failure to do so may be decisive for the defence.

4. What Information Must a Cease-and-Desist Letter Contain?

The law imposes certain minimum requirements on cease-and-desist letters under competition law. These arise from § 13 para. 2 UWG.

A cease-and-desist letter must state clearly and comprehensibly:

  • the name or company name of the party issuing the cease-and-desist letter, and where applicable the name or company name of any representative,
  • the conditions for standing under § 8 para. 3 UWG,
  • whether a claim for reimbursement of costs is being asserted and, if so, the amount claimed, together with the basis on which the claimed reimbursement is calculated,
  • the alleged infringement, with details of the relevant facts,
  • and where applicable, whether the proposed cease-and-desist obligation extends significantly beyond the infringement alleged in the cease-and-desist letter.

These particulars are intended to enable the recipient of the cease-and-desist letter to assess it properly. They should allow the recipient to identify who is making a claim against them, on what grounds, in respect of what specific conduct, and what costs risk is being asserted.

If a cease-and-desist letter does not satisfy the requirements of § 13 para. 2 UWG, this may have significant consequences. In particular, the right to reimbursement of costs may fall away. Furthermore, under the conditions set out in § 13 para. 5 UWG, the recipient of the cease-and-desist letter may have a counter-claim for reimbursement of their own costs of legal defence.

5. Do I Have to Pay the Costs of the Cease-and-Desist Letter?

Where a cease-and-desist letter is well-founded and properly formulated, the party issuing it may under § 13 para. 3 UWG in principle claim reimbursement of the necessary costs. In practice, this usually concerns legal fees, calculated on the basis of the value of the matter in dispute. In competition law, this can quickly give rise to significant sums.

However, not every cost demand is well-founded.

In the case of cease-and-desist letters issued by competitors in particular, the law provides for important limitations. Under § 13 para. 4 UWG, the right to reimbursement of necessary costs for competitors under § 8 para. 3 no. 1 UWG is excluded in certain cases.

This applies in particular to:

  • infringements of statutory information and labelling obligations committed in the course of electronic commerce or in digital services,
  • certain data protection infringements under the GDPR or the BDSG by businesses or commercial associations that as a rule employ fewer than 250 employees.

This point is particularly important for online retailers, service providers, and smaller businesses. If a competitor challenges, for example, certain mandatory information in an online shop, an information obligation in electronic commerce, or certain data protection infringements, it must be examined carefully whether reimbursement of costs may be claimed at all.

The amount of the costs claimed should also be checked. The value of the matter in dispute, the fee rate, and the calculation are not automatically correct.

6. What Are the Consequences of Providing a Cease-and-Desist Declaration?

The most important part of a cease-and-desist letter is often not the demand for payment but the accompanying cease-and-desist declaration.

Under § 13 para. 1 UWG, the purpose of the cease-and-desist letter is regularly to resolve the dispute by means of a penalty-secured cease-and-desist declaration. Anyone who signs such a declaration typically undertakes on a permanent basis to refrain from a particular course of conduct in future. If the obligation is subsequently breached, a contractual penalty may become due.

Pre-drafted cease-and-desist declarations can often be very broadly worded. They may go beyond the specific allegation, contain unclear obligations, or include contractual penalty provisions that give rise to economically significant risks.

For this reason, the enclosed cease-and-desist declaration should as a rule not be signed without first being reviewed.

Where the allegation is well-founded, a modified cease-and-desist declaration may be the appropriate course of action. This must satisfy the legally required claim for injunctive relief but should not go further than necessary.

Importantly, a cease-and-desist declaration that is too weak or insufficient may not reliably eliminate the risk of court proceedings. The wording should therefore be drafted with care.

Would you like to have the enclosed cease-and-desist declaration reviewed? Contact us now!

7. What Options Are Available for Responding?

The appropriate response depends on whether the alleged competition law infringement actually exists and whether the cease-and-desist letter is formally and substantively well-founded.

The following options may in particular be considered:

  • Providing a modified cease-and-desist declaration
    Where the infringement exists, a modified cease-and-desist declaration may be advisable in order to eliminate the risk of repetition and to avoid court proceedings. The basis is regularly the claim for injunctive relief under § 8 para. 1 UWG.

  • Rejecting the cease-and-desist letter
    Where the cease-and-desist letter is unfounded, it may be rejected. This may be appropriate where no competitive relationship exists, the alleged infringement does not in fact exist, the party issuing the cease-and-desist letter lacks standing, or the letter does not satisfy the requirements of § 13 para. 2 UWG.

  • Negotiating costs or the contractual penalty
    Even where the claim for injunctive relief is well-founded, the costs, the value of the matter in dispute, or the contractual penalty provision may be excessive or inadmissible. In particular, § 13 para. 3 and para. 4 UWG as well as § 13a UWG should be examined.

  • Examining a counter-claim
    Under the conditions set out in § 13 para. 5 UWG, the recipient of the cease-and-desist letter may claim reimbursement of their own costs of legal defence.

  • Asserting abuse of rights
    Where there is a case of abusive enforcement, § 8c UWG may apply.

  • Filing a protective brief
    Where an application for a preliminary injunction is to be anticipated, a protective brief under § 945a ZPO may be filed as a precautionary measure in appropriate cases. This allows the recipient's own position to be presented to the court before any decision is made.

Which strategy is appropriate cannot be determined as a blanket answer. What is decisive is a review of the specific allegation, the party's standing, the deadline, the costs claimed, and the cease-and-desist declaration.

8. Counter-Claims of the Recipient under § 13 para. 5 UWG

An unfounded or formally defective cease-and-desist letter can not only be resisted. Under certain conditions, the recipient may under § 13 para. 5 UWG also claim reimbursement of their own costs of legal defence.

Such a counter-claim may in particular be available where:

  • the cease-and-desist letter is unfounded,
  • the cease-and-desist letter does not satisfy the requirements of § 13 para. 2 UWG,
  • reimbursement of costs is demanded contrary to § 13 para. 4 UWG.

However, the counter-claim is subject to a cap on the amount recoverable. There are also exceptions, in particular where the lack of entitlement to issue the cease-and-desist letter was not recognisable to the party issuing it at the time it was sent.

A counter-claim should therefore be carefully assessed and not asserted prematurely.

9. Abusive Cease-and-Desist Letters under § 8c UWG

Some cease-and-desist letters are not primarily aimed at the fair enforcement of competition rules but above all at generating costs or contractual penalties. In such cases, § 8c UWG may apply.

Under § 8c para. 1 UWG, the assertion of claims under § 8 para. 1 UWG is inadmissible where it is abusive having regard to all the circumstances.

Indicators of abuse of rights may include under § 8c para. 2 UWG for example:

  • the assertion serves primarily to generate reimbursement of costs or contractual penalties,
  • a competitor issues a significant number of cease-and-desist letters that bear no reasonable relationship to their own commercial activity,
  • the value of the matter in dispute is set at an unreasonably high level,
  • manifestly excessive contractual penalties are demanded,
  • the proposed cease-and-desist obligation extends significantly beyond the infringement alleged in the cease-and-desist letter.

However, the threshold for establishing abuse of rights is high. The mere impression that a cease-and-desist letter is unfair or excessive is insufficient. Specific indicators are required, which must be identified in the circumstances of each individual case.

10. What Can Happen If You Do Not Respond?

Anyone who ignores a cease-and-desist letter under competition law risks legal proceedings. An application for a preliminary injunction frequently follows.

What this means in practice: the party issuing the cease-and-desist letter may in certain circumstances obtain a court-ordered prohibition very quickly, cf. § 12 UWG.

A preliminary injunction may prohibit the affected party from engaging in certain commercial practices by court order. If a court-ordered injunction is breached, further significant consequences may follow, in particular coercive measures.

A cease-and-desist letter should therefore never simply be set aside or ignored. Even where the cease-and-desist letter appears to be unfounded, a timely and strategic response is required.

Conclusion: Respond Promptly, Calmly, and Strategically

A cease-and-desist letter under competition law must be taken seriously. It is not, however, a reason for hasty decisions.

What is decisive is a prompt and careful review.

Those who respond correctly can frequently avoid excessive demands, limit the scope of any cease-and-desist obligations, and reduce the risk of a preliminary injunction.

Have you received a cease-and-desist letter under competition law? We will review at short notice whether the cease-and-desist letter is well-founded, what cost risks exist, and how best to respond.

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It is also important to distinguish the position from other areas of law. Not every cease-and-desist letter is a cease-and-desist letter under competition law governed by the UWG.

In practice, cease-and-desist letters based on trade mark law, copyright law, design law, or data protection law also arise.

Different rules apply in part to these. In particular, the special cost exclusions under § 13 para. 4 UWG and the protective provisions relating to contractual penalties under § 13a UWG do not automatically apply to cease-and-desist letters under trade mark law or copyright law.

See also our article on cease-and-desist letters in trade mark law

Frequently Asked Questions on Cease-and-Desist Letters under Competition Law

I have received a cease-and-desist letter – what should I do now?

Note the deadline immediately; do not sign anything or make any payment without first having it reviewed. Then have it assessed whether the allegation is well-founded and the cease-and-desist letter is formally compliant § 13 para. 2 UWG.

What does a cease-and-desist letter under competition law cost?

Where a cease-and-desist letter is well-founded, the right to reimbursement of costs arises under § 13 para. 3 UWG, usually consisting of legal fees calculated on the value of the matter in dispute. However, where a competitor issues a cease-and-desist letter in respect of certain online and GDPR infringements, the right to reimbursement of costs is excluded under § 13 para. 4 UWG.

What happens if I ignore the cease-and-desist letter?

An application for a preliminary injunction § 12 UWG may follow – that is, a swift court-ordered prohibition, enforceable by coercive measures in the event of breach.

Do I have to sign the cease-and-desist declaration?

Not in the form presented; it is usually too broadly drafted and creates a permanent, penalty-secured obligation. If the allegation is well-founded, a modified declaration is the appropriate course of action.

How do I know whether the cease-and-desist letter is well-founded?

The decisive factors are the actual infringement, the competitive relationship, standing § 8 para. 3 UWG, and the mandatory particulars § 13 para. 2 UWG. If any of these are lacking, rejection, a counter-claim § 13 para. 5 UWG, or abuse of rights § 8c UWG may be available.

How much time do I have to respond?

The operative deadline is the specific – often very short – deadline set in the cease-and-desist letter itself, not a statutory default period. If it is missed, an injunction application may follow immediately.

Do I need a lawyer?

There is no obligation to instruct a lawyer at the out-of-court stage, but given the permanent consequences in terms of costs and the cease-and-desist declaration, it is regularly advisable.