Competition Economics Handbook 2020

Germany

E.CA Economics

German competition policy enforcement has stepped into the limelight of political debate with several high profile cases and important policy initiatives characterising the past year. In particular, in digital markets enforcement activity remains high, with the Facebook decision being delivered and the Amazon case being closed. Furthermore, the telecommunication case Vodafone/Unitymedia, while being decided by the EU Commission, will have a strong impact on the German market. However, also in traditional industries the intervention rate stays high. The prohibition decision of the Remondis/Duales System Deutschland takeover was decided on mostly vertical grounds and featured prominently in the press due to its impact on German citizens. Equally, and in response to the failed Alstom/Siemens merger, the ministerial approval of the MIBA/Zollern joint venture highlights the commitment of the German government to support small and medium-sized German enterprises. In the cartel area, administrative fines have increased again to its second highest level over the past 10 years.

Facebook, Vodafone/Unitymedia and digital markets

In February 2019, the Federal Cartel Office (FCO) delivered its final legal assessment on the Facebook abuse case, considering Facebook to be dominant on the German market for social networks for private users, with a market share of 95 per cent of daily active users. The authority holds the view that Facebook is abusing this dominant position by making the use of its social network conditional on it being allowed to limitlessly amass every kind of data generated by using third-party websites and merge it with the user’s Facebook account. These third-party sites include, firstly, services owned by Facebook such as WhatsApp or Instagram and, secondly, websites and apps of other operators with embedded Facebook application programming interfaces. This behaviour of Facebook is, according to the assessment of the FCO, in violation of the General Data Protection Regulation and is considered to be an exploitative abuse based on § 19 (1) of the German Competition Act. In a judgment from August 2019, the Higher Court of Dusseldorf sided with Facebook and suspended the decision of the FCO, expressing doubts that the conduct infringed competition rules. The FCO announced its commitment to appeal this decision.

Another decision that may shape the digital landscape in Germany relates to the German broadband infrastructure. In July 2019, Vodafone won approval to take over Liberty’s cable business in Germany and in several Eastern European countries. This transaction will reunite the regionally separated nationwide cable network and thereby allow infrastructure-based competition between Deutsche Telekom and Vodafone on a national scale. As the European Commission – in close consultation with the FCO – raised serious doubts due to horizontal overlaps between Vodafone’s retail digital subscriber line business and Liberty Global’s cable footprint, the merger was approved only in Phase II with remedies. Telefónica, one of the leading mobile operators in Germany, received exclusive access to cable wholesale products for a specified period, thereby enabling cable wholesale access for the first time in Germany. Additional remedies were imposed to limit the bargaining power of the new entity vis-à-vis TV broadcasters. The transaction will have a substantial impact on the rollout of high-speed internet infrastructure in Germany.

On the whole, Germany remains very active in shaping the European policy agenda on digital markets. The proceedings against Amazon came to an end in July 2019 after Amazon agreed to change its general terms and conditions, and to strengthen the rights of third-party suppliers on Amazon’s open market place in relation to liability, cancellation rights and mandatory publication rights of product descriptions. The decision will affect Amazon’s practice across the globe. Provisions related to access to and usage of information on sales of open market place suppliers, ranking issues or issues related to Amazon’s Buy Box are being looked at in a parallel proceeding at the European Commission and were, as a result, not addressed in these proceedings. Issues related to Amazon’s own sales were also not looked at.

Remondis and vertical mergers

In another landmark case, the takeover attempt of Duales System Holding GmbH & Co KG (DSD) by Remondis, the FCO prohibited a by-and-large vertical merger in the German waste collection industry. DSD, a former state owned monopolist who is by now exposed to fierce competition, is active in the market of ‘dual systems’. DSD organises the collection and disposal of packaging waste, including plastic, glass and paper waste. Remondis is one of the leading waste collectors in Germany, thereby providing services to DSD. The FCO was expecting foreclosure both of rivals of DSD as well as of Remondis, relying in its prohibition decision on raising rivals’ costs and customer foreclosure strategies. In contrast to the standard prognosis horizon in merger proceedings of three to five years, it considered a horizon of up to 10 years appropriate due to institution setting in this industry. Despite remedies being offered by the parties, the case ended with a prohibition, a decision that came meanwhile under appeal.

Miba and ministerial approval

An earlier prohibition decision by the FCO was thwarted by the German Economic Minister Peter Altmaier. The deal between the bearings makers Miba and Zollern was overturned by the minister, using his – rarely used – ministerial right to overrule the FCO’s decision. This ministerial approval is based on the condition that the parties commit to a €50 million investment, spread over four years, in research and innovation in green energy technology, supporting the German energy transition and sustainability goals. This decision was taken by the ministry despite the fact that the German Monopoly Commission advised against such an approval.

Cartel enforcement

Administrative procedures have led to fines totalling over €208 million in 2015, €125 million in 2016 and €66 million in 2017. This is a significant reduction compared to the record fine level in 2014 of over €1 billion, bringing it back to the levels of earlier years. In 2018, this declining trend in administrative fines came to a halt: the FCO imposed fines totalling approximately €205 million on six special steel companies, a trade association and 10 individuals for concluding price-fixing agreements and exchanging competitively sensitive information, bringing the total fines in 2018 to the second highest level over the past 10 years at €376 million.

Regarding private enforcement, Germany continues to be one of the preferred jurisdictions for private litigation cases within Europe, leading to complex empirical work by economists in the quantification of damages. With 120 companies applying for access to the decision division’s files, the Sugar Cartel case has become one of the most intensively litigated private damages cases in Germany. Equally, the Truck Cartel case has come under broad litigation. A wave of cases have also been triggered by the liquidators of the victims, which went bankrupt in the meantime: the liquidator of Schlecker, a drugstore that went bankrupt in 2012, is claiming total damages of more than €300 million from its suppliers. However, a recent judgment, dismissing the claim owing to insufficiently specified foreign turnover and elapsed limitation periods, brought this action to a temporary hold. With settlements between DB AG and Lufthansa AG in a multibillion-euro claim pending at German courts in the Air Cargo Cartel case and a new multimillion claim brought by Idealo against Google in the Google Shopping case, Germany has cemented its position in Europe as a central litigation hub.