A letter of formal notice is an out-of-court request to cease conduct that has been alleged to be unlawful. It is neither an official decision nor a legal action, but a private letter in which the sender accuses the recipient of a specific infringement and requests that they refrain from such conduct in future. In competition law, the warning letter is expressly regulated in Section 13 of the Unfair Competition Act (UWG) and is regarded as the first step intended by the legislator: it is intended to give the recipient the opportunity to settle the dispute without going to court, thereby avoiding costly legal proceedings.
For online shops, the warning letter is effectively the most significant legal risk in day-to-day business. It rarely concerns serious offences, but mostly formal errors: an out-of-date legal notice, a missing price indication, or a deactivated link that still appears in the legal notice. Anyone who understands how a warning letter works, who is authorised to issue it and what steps make sense to take upon receipt can take much of the fear out of the letter.
What a warning letter represents and how it differs from other correspondence
A warning letter serves two purposes simultaneously. Firstly, it documents the infringement and gives the recipient the opportunity to remedy it voluntarily. Secondly, it serves to eliminate the so-called ‘risk of repetition’: According to case law, it is presumed that someone who has breached a competition rule once will do so again. This presumption can usually only be dispelled by submitting a declaration of discontinuance subject to a penalty clause. This is precisely why almost every warning letter under competition law is accompanied by a pre-formulated declaration of discontinuance.
The warning letter differs significantly from similar correspondence:
- Warning letter vs. legal action: A warning letter is an out-of-court procedure. If the recipient fails to respond or responds inadequately, the party issuing the warning may apply for an interim injunction or bring legal proceedings. Only then is a court involved.
- Warning letter vs. a warning under employment law: Under employment law, a warning letter addresses misconduct on the part of the employee and paves the way for a possible dismissal. This is a completely different process from a warning under competition law, even though both bear the same name.
- Warning letter vs. a warning issued by a public authority: A public authority such as the market surveillance authority acts in an official capacity and may impose fines. A warning letter under competition law, on the other hand, comes from a private party, usually a competitor or an association.
Who is entitled to issue a warning: standing to bring proceedings under Section 8(3) of the UWG
Not everyone is entitled to issue a valid warning. Since the 2021 reform of the UWG – the ‘Act to Strengthen Fair Competition’ – the group of authorised parties has been narrowed in Section 8(3) of the UWG, specifically to curb abuse. The following are authorised:
- Competitors who, to a not insignificant extent and not merely occasionally, market goods or services comparable to those of the party receiving the warning. A ‘sham competitor’ who maintains a competing offering merely for form’s sake does not fall within this category.
- Qualified trade associations that are entered on an official list maintained by the Federal Office of Justice. This registration has been a prerequisite since 2021; without it, an association can no longer issue warnings regarding competition law infringements.
- Qualified organisations such as consumer protection associations, which are included on the relevant list.
Any third party with no connection to competition law cannot therefore issue a valid warning letter. Anyone receiving a warning letter should therefore always first check whether the sender is at all entitled to take such action. In practice, most warning letters in e-commerce originate from direct competitors and from a handful of specialised associations; the Competition Centre regularly features in this context.
What must be included in a valid warning letter
The content of a warning letter is prescribed by law in Section 13(2) of the Unfair Competition Act (UWG). If any of these details are missing, the warning letter is formally invalid – and the recipient may, under certain circumstances, even be entitled to claim reimbursement of their legal defence costs (Section 13(5) of the UWG). A valid warning letter must state clearly and comprehensibly:
| Detail | Meaning |
|---|---|
| Name / company name of the party issuing the warning | Who is issuing the warning? In the case of representation, the authorised representative as well. |
| Conditions for entitlement to a claim | On what is the right to bring proceedings based (competitor, trade association)? |
| Whether and to what extent reimbursement of costs is claimed | Transparency regarding the costs claimed and their calculation. |
| The specific infringement | Which infringement is being alleged, with details of the factual circumstances? |
A legitimate warning letter must specify the alleged infringement with sufficient precision to enable the recipient to understand and remedy it. General allegations without specific reference to the part in question do not meet the requirements.
The attached cease-and-desist declaration
The actual financial leverage lies not in the warning letter itself, but in the pre-formulated cease-and-desist declaration that is usually attached. Anyone who signs it without amendment generally commits themselves permanently to refraining from the behaviour in question and agrees to pay a contractual penalty for any future infringement. This declaration is often broader in scope than the specific circumstances warrant. It should therefore never be signed without scrutiny but – if the allegation is justified – replaced by a self-drafted, so-called ‘modified’ cease-and-desist declaration.
The cost aspect: reimbursement of expenses and the cap under Section 13(4) of the Unfair Competition Act (UWG)
A justified warning letter generally entitles the party issuing the warning to claim reimbursement of necessary expenses – in the case of warnings issued by a solicitor, this means the solicitor’s fees, calculated on the basis of the value in dispute. However, the 2021 reform of the UWG has excluded this claim in two categories of cases that are central to online shops. Under Section 13(4) of the UWG, there is no entitlement to reimbursement of expenses if a competitor issues a warning letter on the grounds of:
- breaches of information and labelling obligations in electronic commerce or in telemedia – this includes, in particular, the legal notice requirement;
- breaches of the GDPR against companies and persons engaged in commercial activities with, as a rule, fewer than 250 employees.
The traditional warning letter citing a formal error due to an incomplete legal notice therefore no longer entitles the competitor issuing the warning to a fee. This significantly reduces the financial incentive for mass warning letters in precisely this area. However, it is important to note that the removal of the right to reimbursement of costs does not eliminate either the obligation to cease and desist or any contractual penalty that may subsequently be incurred. The actual lever remains the declaration of cessation.
Abuse of the law: when a warning letter is inadmissible
In 2021, the legislature introduced Section 8c of the Unfair Competition Act (UWG) specifically to combat the ‘warning letter industry’. Under this provision, the assertion of a claim for an injunction is inadmissible if, taking all circumstances into account, it constitutes an abuse of rights. Indications of an abuse of rights include, for example, a significant number of similar warning letters, an unreasonably high value in dispute, an obviously excessive contractual penalty, or warning letters that serve primarily to generate fees. Where there is an abuse of rights, the party receiving the warning letter is liable neither for injunctive relief nor for reimbursement of costs and may, in turn, claim reimbursement of their legal defence costs.
A specific example from e-commerce
A retailer advertises an item on its product page with ‘5-year manufacturer’s warranty’ without specifying the warranty conditions required under Section 479 of the German Civil Code (BGB). A competitor notices this and instructs a solicitor to issue a warning letter. The letter sets out the infringement (incomplete warranty advertising), bases its justification on the competitive relationship, demands a cease-and-desist order and encloses a pre-formulated declaration of discontinuance with a contractual penalty of 5,100 euros per infringement. As this case does not concern a mere obligation to provide information under telemedia law, but rather misleading advertising, the cost cap under Section 13(4) of the Unfair Competition Act (UWG) does not apply – the retailer bears the legal costs, provided the warning letter is justified and does not constitute an abuse of rights. The sensible course of action is now to: amend the warranty terms immediately, meet the deadline, but have the attached declaration reviewed by a solicitor and, if necessary, submit a modified version, rather than signing the excessive original.
How to respond correctly to a warning letter
A warning letter requires a considered but timely response. The most important steps:
- Make a note of the deadline; do not ignore it. The deadlines set are short, often just a few days. Anyone who fails to respond risks a preliminary injunction. Inaction is the most expensive of all options.
- Check the legitimacy and content. Does the sender have standing to bring the claim? Does the warning letter meet the formal requirements of Section 13(2) of the Unfair Competition Act (UWG)? Has the alleged infringement actually taken place?
- Do not sign it on impulse. The attached cease-and-desist declaration is permanently binding. A modified declaration can limit its scope to what is actually owed.
- Rectify the infringement. Regardless of the legal assessment, it almost always makes sense to rectify the alleged breach immediately so as to prevent any further infringements.
- If in doubt, seek legal advice. A professional assessment is particularly worthwhile where the sums in dispute are high or the legal situation is unclear.
Historical background: from the warning letter system to the 2021 reform
The warning letter as an out-of-court instrument is significantly older than modern e-commerce. Even in traditional competition law, it served to settle disputes between companies without going to court. However, with the growth of online retail from the 2000s onwards, a side effect emerged that gave the instrument a bad reputation: the mass, and in some cases commercial, issuing of warning letters over minor formal errors. Because a single typo in the cancellation policy or an outdated reference to a section in the legal notice looks the same across thousands of shops, it became possible to make money by sending out standardised warning letters in bulk – through reimbursement of expenses and through contractual penalties imposed at a later date.
The legislature has responded to this with the ‘Act to Strengthen Fair Competition’, which was promulgated in December 2020 and came into force in 2021. It pursues three main objectives: It narrows the circle of those entitled to issue warning letters (Section 8(3) UWG), it removes the right to reimbursement of costs for competitors in typical cases of formal errors (Section 13(4) UWG), and it explicitly defines an abuse of rights for the first time (Section 8c UWG). For online retailers, this reform means one thing above all: issuing a warning letter based solely on a formal error relating to the legal notice or a telemedia information requirement has become financially unattractive for competitors. The risk is therefore lower, but has not disappeared – the obligation to cease and desist and the contractual penalty remain in place, and infringements outside the capped case groups can still be subject to warnings with full costs payable.
The contractual penalty: why the cease-and-desist declaration is the real risk
The financial crux of a warning letter almost never lies in the reimbursement of costs, but in the contractual penalty promised in the cease-and-desist declaration. A cease-and-desist declaration must be ‘subject to a penalty’ in order to eliminate the risk of repetition – that is, the signatory undertakes to pay a sum of money for every future infringement. Traditionally, in accordance with the ‘Hamburg custom’, this sum is not specified as a fixed amount, but is left to the creditor’s reasonable discretion and reviewed by the court in the event of a dispute; alternatively, the declaration specifies a fixed amount, which is often in the four-figure range.
The time frame is crucial: once issued, a cease-and-desist declaration is generally binding in perpetuity, i.e. for years to come. A single recurrence – for example, because an outdated text block reappears following a shop update – can trigger the contractual penalty. This shifts the risk from the time of the warning letter to the distant future. Anyone signing such a declaration should therefore ensure that the issue in question is permanently resolved, both technically and organisationally. Since the reform, Section 13a of the Unfair Competition Act (UWG) has limited the amount of the contractual penalty in certain cases, but it does not eliminate the underlying risk.
Frequently asked questions about warning letters
Is a warning letter the same as a lawsuit?
No. A warning letter is an out-of-court measure intended precisely to avoid legal action. Only if the recipient of the warning letter fails to respond adequately can the party issuing the warning take legal action.
Do I have to sign the attached cease-and-desist declaration?
Not without checking it first. The pre-formulated declaration is often too broadly worded. If the allegation is justified, the risk of repetition can also be eliminated by a self-drafted, modified cease-and-desist declaration that covers only what is actually required.
Can anyone issue me with a warning letter?
No. Under Section 8(3) of the Unfair Competition Act (UWG), only competitors, registered qualified trade associations and qualified organisations may issue valid warning letters. A third party with no connection to the competition is not entitled to do so.
How much does a warning letter cost?
In the case of justified warning letters, the party issuing the warning may claim reimbursement of their necessary expenses, which are determined by the value of the dispute. However, in the case of breaches of telemedia information obligations (e.g. legal notice) and GDPR breaches by smaller businesses, Section 13(4) of the UWG excludes reimbursement of costs for competitors issuing warnings. In any case, the greatest cost risk is not the warning letter itself, but a subsequent contractual penalty arising from the cease-and-desist declaration.
What happens if I do not respond?
If the recipient of the warning letter fails to respond within the deadline, the party issuing the warning may apply for an interim injunction or bring legal proceedings. This is significantly more expensive and takes effect more quickly than the warning letter itself. A timely, considered response is therefore always advisable.
The full text of the legal basis for a warning letter under competition law can be found at Section 13 of the UWG on gesetze-im-internet.de; a general overview is provided by the Wikipedia article on warning letters.