Germany: private practice perspective

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Overview

On 6 July 2023, the German Parliament (Bundestag) passed the 11th amendment on the German Competition Act (GWB). Among other reform amendments, the attention has focused on the Federal Cartel Office’s (Bundeskartellamt) new powers in the context of sector inquiries (Sektoruntersuchungen). For the first time under German Competition Law, the Bundeskartellamt will obtain powers to take remedial measures following sector inquiries, even where the addressee has not been found to have engaged in anticompetitive conduct. Under the reform, the Bundeskartellamt will be able to take measures where it identifies a significant and continuing ‘disruption of competition’ in the relevant market. Such measures will include – as ultima ratio – divestment orders (new section 32 f. of the GWB). Apart from these ultima ratio measures, the Bundeskartellamt may also order other structural measures such as the accounting organisational separation of company or business divisions and the aforementioned unbundling, but only with respect to dominant undertakings.

Regarding what constitutes a ‘significant and ongoing market disturbance’, the law provides a list of classical features of problematic market structures (eg, strong barriers to entry, unilateral demand or supply power, parallel or coordinated conduct) that indicate a disturbance of competition. Further, such disturbance needs to be significant and perpetual and the Bundeskartellamt must find that traditional competition law enforcement measures would not be sufficient to resolve this disturbance. Overall, the law gives the Bundeskartellamt a broad leeway to decide issues on a case-by-case basis. However, the ultimate shape of the provision will only be revealed after the first court decisions.

The Bundeskartellamt may also order behavioural measures such as to require undertakings to grant access to data, interfaces and networks, impose requirements on business relationships with other businesses on the markets investigated or across different market levels. The Bundeskartellamt may also order companies to establish transparent and non-discriminatory terms and standards and may impose requirements for certain forms of contract or contractual arrangements as well as prohibit the unilateral disclosure of information if such information could induce parallel behaviour.

Other aspects of the 11th amendment, such as the facilitation of disgorgement of benefits, the DMA enforcement and new thresholds for merger control in particular cases will be discussed in the relevant context below.

The law still has to pass the review by the second chamber of the parliament (Bundesrat) but is expected to come into effect in September or early October 2023 at the latest.

10th GWB Amendment: Digitalisation Act

One of the most important provisions of the GWB Digitalisation Act, which came into force on 19 January 2021, is the modernisation of the rules of abuse control providing for a stricter approach with respect to so-called undertakings of ‘paramount significance for competition across markets’ (section 19a GWB). This new provision was designed against the background of the powerful digital tech companies and therefore the need for a more effective set of tools for the Bundeskartellamt, particularly by enabling an earlier intervention, a thereby more efficient control, and the possibility to impose special duties of conduct on such undertakings.

Moreover, provisions of the classical abuse control were modernised by introducing internet-specific criteria. At the same time, the so-called essential facility doctrine in section 19(2) No. 4 GWB was reworded, taking into account latest developments in EU practice and case law. Also, the scope of protection of section 20(1) GWB, which addresses prohibited conduct of undertakings with relative market power, now extends to large companies, as such companies may also be dependent on digital platforms. Additionally, section 20(1a) GWB now regulates a claim to data access in certain constellations in which access to data is of particular importance from a competition perspective. Finally, section 20(3a) GWB introduces a new element of intervention to reduce competition issues caused by the ‘tipping’ of markets. In 2021, this instrument was applied on practice by analysing the possibilities of tipping of German online real estate market.

Unilateral conduct

The crucial mechanism of the new section 19a GWB is that it focuses on effectiveness through prevention. Section 19a GWB is a modern tool providing for a two-stage procedure: at the first stage (section 19a(1) GWB) the Bundeskartellamt may issue a decision declaring that an undertaking that is active to a significant extent on markets is of paramount significance for competition across markets. The validity of such a decision is limited to five years after it becomes final. At the second stage (section 19a(2) GWB), the Bundeskartellamt may prohibit such undertaking from engaging in certain types of conduct. The legislator has opted for an exhaustive list of seven of them.

Another special feature of section 19a GWB is that the burden of proof that the respective conduct is objectively justified rests with the undertaking of paramount significance (section 19a(2)2 and 3 GWB).

Finally, it is important to highlight the newly introduced section 73(5) GWB, pursuant to which it is now for the Federal Court of Justice (Bundesgerichtshof) alone to decide in the first and last instance on all disputes against decisions of the Bundeskartellamt under section 19a GWB. This, once again, clearly shows the intention of the legislator to increase the effectiveness and accelerate the enforcement of abuse control provisions.

Current proceedings of the Bundeskartellamt under section 19a GWB

With the implementation of the newly introduced section 19a GWB, the Bundeskartellamt has ‘made good use of this provision’, according to Andreas Mundt, President of the Bundeskartellamt. It initiated four proceedings on the basis of section 19a GWB against the so-called GAFA companies (Google, Amazon, Facebook and Apple).[1] From the federal government’s point of view, the proceedings are considered to have an enormous significance for German (and EU) competition policy and a high practical relevance. All these procedures have in common that the companies are suspected of having set up an ecosystem that extends across various markets. Such positions of power are often difficult to challenge by other companies and are therefore considered to be indicative of a paramount significance across markets. As a result of the proceedings, the Bundeskartellamt has determined the paramount significance of each of the said companies. The validity in these decisions is five years during which GAFA companies will be a subject to special abuse control by the Bundeskartellamt.

The Bundeskartellamt also initiated the second stage proceedings against Google under section 19a(2) GWB to prohibit specific conduct and announced that it would deal in detail with Google’s data processing conditions in these proceedings. The central questions will be whether consumers are entitled to sufficient choice regarding the use of their data by Google when using Google services, how and for what purpose such data are processed. The Bundeskartellamt issued a statement of objections against Google’s data processing terms as a first intermediate step which gives the company an opportunity to present reasons justifying its practices or suggestions to dispel the Bundeskartellamt’s concerns.[2] This is an example of conduct specifically mentioned by section 19a(2) No. 4a GWB, which the Bundeskartellamt may prohibit for an undertaking with paramount significance across markets.

In parallel, the Bundeskartellamt initiated proceedings against Google Germany GmbH and Alphabet Inc, aiming to examine possible anti-competitive restrictions imposed by Google Maps Platform to the alternative map services providers.[3] Another proceeding concerning Google News Showcase was concluded by the Bundeskartellamt.[4] Following the Bundeskartellamt’s intervention, Google clarified that Showcase partners will also still be able to have their ancillary copyright collectively asserted by a collecting society.

There are furthermore two other ongoing proceedings against Amazon under abuse control provisions that were already in force before the 10th GWB amendment. The first proceeding addresses the question of the extent to which Amazon uses price control mechanisms or algorithms to influence the pricing of traders operating on the Amazon marketplace. In the second proceeding, it will be investigated whether agreements between Amazon and brand manufacturers, including Apple, which exclude third-party retailers from selling branded products on the Amazon marketplace constitute a competition infringement. The Bundeskartellamt announced that it had extended the mentioned proceedings in order to also include the application of the new instrument for more effective oversight over large digital companies (section 19a GWB).[5]

In the case of Apple, the Bundeskartellamt has received various complaints from associations and app developers against specific practices of Apple. The authority therefore has initiated proceedings[6] to review Apple’s tracking restrictions on users in connection with the introduction of the iOS 14.5 operating system, the exclusive pre-installation of the group’s own applications (which may constitute a self-favouring prohibited under section 19a(2) No. 1b GWB), the obligation to use Apple’s own system for in-app purchases and the commission rate of 30 per cent, as well as the marketing restrictions in the App Store.

Practical advice

With the GWB Digitalisation Act and the newly introduced section 19a GWB, the Bundeskartellamt now has access to a modern set of instruments that stands out in an international comparison and is suitable as a starting point to enable effective antitrust regulation of GAFA companies, which are omnipresent in a large number of markets. However, it can be expected that the Bundeskartellamt will keep a wary eye also on other companies’ positions and conduct, which will have to expect proceedings within the scope of section 19a GWB in the future.

It furthermore remains to be seen how the courts will position themselves on the proceedings initiated by the Bundeskartellamt and the new regulations. In view of the legislator’s certainly not unconscious decision to formulate broad areas of application, it can be expected that decisions issued by the Bundeskartellamt will not always be in line with the case law on the previous abuse control. It will be the task of the Bundesgerichtshof, on the one hand, to give effect to the overriding intention of the legislator pursued by the GWB Digitalisation Act and, on the other hand, to comply with the restraint in the application of the provision expressed in the explanatory memorandum to the Act, at least with regard to the delimitation of the group of addressees of section 19a GWB.

Finally, it has to be pointed out that the importance of the provisions for the protection of digital markets is not exhausted by the abuse control by the Bundeskartellamt. Section 20(3a) of the GWB also gives competing companies the opportunity to prevent markets from being tipped in the direction of a particular bidder. The first notable case of this kind is a preliminary injunction proceeding that was conducted before the Berlin Regional Court between two real estate portals (judgment of 8 April 2021, 16 O 73/21 Kart – Rabatt bei Immobilienanzeigen). The Court prohibited the market leader from using certain discount rates that had denied a competitor access to certain customers and customer data for the decisive phase of the real estate purchase.

CJEU: Infringements of GDPR by dominant undertakings may constitute an abuse of market power

Before the coming into effect of the 10th Amendment, the Bundeskartellamt had already started proceedings under the classical market abuse provisions such as section 19 GWB. In one of the cases against Meta (formerly Facebook), the Bundeskartellamt had found an abuse by Meta based on the finding that Meta had not complied with the GDPR. By a judgment of 4 July 2023, the Court of Justice of the European Union (CJEU) in a preliminary ruling had found that certain provisions of the GDPR must be interpreted as meaning that, subject to compliance with its duty of sincere cooperation with the supervisory authorities, the Bundeskartellamt can find, in the context of the examination of an abuse of a dominant position by an undertaking, that that undertaking’s general terms of use relating to the processing of personal data and the implementation thereof are not consistent with that regulation where that finding is necessary to establish the existence of such an abuse.

This judgment is a boost to the Bundeskartellamt’s endeavour to find abuses of dominant positions based on data protection infringements. The judgment was rendered according to the classical abuse provisions but the judgment may also be abused in applying section 19a GWB or provisions concerning the DMA.

Mergers

With the GWB Digitalisation Act, the legislator has further reformed individual aspects of merger control with regard to both procedural and substantive issues.

The arguably most important change is that the thresholds for the obligation to notify mergers were increased. While the combined aggregate worldwide turnover of all the undertakings concerned remains more than €500 million, the domestic turnover of at least one undertaking concerned increased from €25 million to €50 million and that of another undertaking concerned from €5 million to €17.5 million. Also, the so-called minor market clause of section 36(1) sentence 2 No. 2 GWB was increased from €15 million to €20 million.

While in 2021, a total of 1,000 mergers were notified to the Bundeskartellamt, the number of mergers to be examined decreased in 2022 to 800 merger projects.[7] The rationale behind the increase of the threshold was to relieve the burden on the economy, especially on small and medium-sized enterprises, as well as to enable the Bundeskartellamt to focus its capacities more strongly on complex cases, especially in the area of digitalisation.

Furthermore, section 39a(1) GWB was introduced, which is an instrument to enable the Bundeskartellamt to take action before a dominant position of large companies arises in certain markets. The extended notification obligation relates to specific economic sectors to be designated by the Bundeskartellamt. Accordingly, the Bundeskartellamt can require companies to notify mergers where the company has a worldwide turnover of more than €500 million, there are objectively verifiable indications that future concentrations could substantially impede effective competition in Germany in the sectors of the economy specified, and the undertaking supplies or procures at least 15 per cent of the goods or services in the sectors of the economy specified in Germany. However, the obligation to notify only applies to concentrations where the undertaking to be acquired achieved a turnover of more than €2 million in the past business year and achieved more than two-thirds of its turnover in Germany.

An important part of the 11th amendment is the reform of the new obligations to file notifications for merger control in the current section 39a(1) gwb. The Bundeskartellamt will be able to order undertakings in a relevant sector to notify any concentration where: (i) there are objectively reasonable grounds to believe that any future mergers may significantly impede effective competition; and (ii) the purchaser generated over €50 million turnover in Germany over the past financial year and the target company generated more than €1 million in Germany.

Moreover, section 35(1a) GWB, which was already introduced in 2017 as part of the 9th GWB amendment, is a transaction value threshold. This threshold has enabled the Bundeskartellamt to examine further mergers in innovation-driven markets without causing major compliance costs for business. As in case of acquisition of software division of the Swedish automotive supplier Veoneer Inc, the merger became subject to examination only by the high purchase price. Following the one-month investigation, the Bundeskartellamt cleared the transaction[8]. A ‘killer acquisition’ has not yet been identified or prevented.

Cartels

Despite more difficult conditions during the pandemic, the Bundeskartellamt uncovered several cartel agreements according to its Annual Report of 2022/23.[9] During the reporting period, the Bundeskartellamt imposed fines totalling €24 million in 2022 on a total of 20 companies and seven individuals. The sectors concerned included expansion joints for bridges and the industrial construction sector. In the first half of 2023, fines totalling almost €200,000 were imposed in the road construction sector, and this amount is expected to increase.

According to Andreas Mundt, President of the Bundeskartellamt, ‘the number of fines imposed in 2022 was lower than in previous years. This was mostly due to the pandemic, but we are now back to prosecuting cartels at full steam. In 2022, we carried out 18 dawn raids – the highest number in years. The first half of 2023 has been promising too.’

However, it has also been confirmed by the Bundeskartellamt that the number of leniency applications declined. It is assumed that this is at least also due to the exposure to cartel damages claims against cartelists.

As far as cartel damages claims are concerned, the Bundeskartellamt reports a decline in civil cartel actions and actions for damages. This is attributed in particular to the reduced number of new actions relating to the Truck cartel. Nevertheless, private lawsuits have made a significant contribution to the enforcement and further development of cartel law and jurisprudence on that matter in Germany.

Market investigations

The digital economy remains a top priority for the Bundeskartellamt. As described above, the focus in numerous proceedings already conducted in this area was in particular on the GAFA companies.

However, the Bundeskartellamt is also conducting a sector inquiry in the area of online advertising. While the authority intends to examine the technical background and foreseeable developments of online advertising on the market structure and the market opportunities of the various players, the investigation will also address whether closed systems of a few large providers exist (gatekeeper positions or ‘walled gardens’) and what significance these systems may have.

Other sector inquiries of the Bundeskartellamt concern messenger and video services, scoring in the online retail sector,[10] household waste collection, the hospital sector and public charging infrastructure.

Facilitation of disgorgement of benefits

Disgorging benefits of competition law infringements is not new to the GWB but the Bundeskartellamt had so far refrained from applying these provisions due to practical difficulties in estimating the size of an economic advantage gained by a competition law infringement. To address these (mainly evidentiary) issues, the 11th amendment introduces two legal presumptions: not only does the law now presume that a violation of competition law results in an economic benefit for the infringing company – but it further presumes that this benefit for the infringing company amounts to at least 1 per cent of the revenues generated with the affected products or services. The affected company bears the burden of proof, if it wants to rebut these legal presumptions. The only way to refute the presumption is to prove a lack of involvement and the violation or a lack of profits during the relevant time period.

Procedure

The GWB Digitalisation Act has also been significantly influenced by developments at the European level. With the Digital Markets Act (DMA) entered into force in December 2022 aiming at contestable and fair markets in the digital sector, the European Commission presented a tool which is closely related to the objective of competition law. The target group of the regulation is large online platforms, which are to be classified under the guiding term ‘gatekeeper’ on the basis of certain criteria. These criteria include a strong economic position with a significant impact on the internal market, a strong position as an intermediary (between many users and companies), as well as an established and lasting market position, possibly also in the future.

The heads of the national competition authorities organised in the European Competition Network, among them the President of the Bundeskartellamt, have agreed in a joint paper on the role of national competition authorities in the enforcement of the DMA. The paper advocates for a complementary enforcement of the rules at national level, which should supplement the established (national) competition law. The aim is to address ex-ante some of the most harmful and prevalent gatekeeper behaviours, thereby enhancing the preventive effect of existing (national) rules and jurisprudence.[11]

The 11th amendment also addresses the DMA enforcement. The Bundeskartellamt is enabled to investigate violations of the DMA Regulation (EU) 2022/1925, utilising its ordinary investigative powers and is obliged to report its finding to the European Commission as the ultimate and only enforcement authority for DMA matters.

Beyond that, the reform opens up DMA violations to private enforcement by declaring several provisions on private enforcement in cartel matters applicable to DMA matters. These adjustments include, for example, the inclusion of DMA infringement decisions as binding for national courts and the suspension of limitation periods for private damage claims during the DMA infringement proceedings.

The year ahead

Apart from the Bundeskartellamt’s intent to strengthen the enforcement regarding cartels, the coming into effect of the 11th amendment will set the programme for the Bundeskartellamt. The novel sector enquiry provisions in particular appear not to fit easily into the GWB by introducing an entirely new mechanism – more similar to ex-ante regulation than classical competition law enforcement – where the Bundeskartellamt might impose potentially very severe measures on companies that did not as such infringe competition law. The practical relevance of divestiture measures following sector inquiries will remain to be seen, as particularly high procedural standards need to be met. Tricky and lengthy court challenges seem guaranteed. Overall, the new ex-ante powers are designed as a last resort for isolated cases that the Bundeskartellamt cannot resolve with its ordinary competition law toolbox.

In any case, the 11th amendment introduces new uncertainties, requiring interpretation and possible addressees to wait on how the Bundeskartellamt (and at some point the courts) will interpret and handle them. Terms such as ‘significant and ongoing market disturbances’ or the provisions on refuting the 1 per cent disgorgement presumption will have to be interpreted by the courts.


Notes

[1] For the Google proceeding see Bundeskartellamt’s press release of 25 May 2021, for the Amazon proceeding Bundeskartellamt’s press release of 18 May 2021, for the Facebook proceeding see Bundeskartellamt’s press release of 28 January 2021, and for the Apple proceeding see Bundeskartellamt’s press release of 21 June 2021.

[2] See Bundeskartellamt’s press release of 11 January 2023.

[3] See Bundeskartellamt’s press release of 21 June 2022.

[4] See Bundeskartellamt’s press release of 21 December 2022.

[5] See Bundeskartellamt’s press release of 14 November 2022.

[6] See Bundeskartellamt’s press release of 14 June 2022.

[7] Available on the Bundeskartellamt’s website at: https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Pressemitteilungen/2023/11_07_2023_Jahresbericht.pdf?__blob=publicationFile&v=3.

[8] See Bundeskartellamt’s press release of 21 March 2022.

[9] Available on the Bundeskartellamt’s website at https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Jahresbericht/Jahresbericht_2022_23.pdf;jsessionid=B6FC2391268C9ECBE154CC5301FC739F.2_cid362?__blob=publicationFile&v=5.

[10] See Bundeskartellamt’s press release of 31 March 2022.

[11] The joint paper of the heads of the national competition authorities of the European Union is available on the Bundeskartellamt’s website at https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Others/DMA_ECN_Paper.html?nn=3591568.

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