61. Summarise the main abuse cases of the past year in your jurisdiction.
The main abuse cases in the past year include the following:
Facebook/FCO: On 6 February 2019, after almost three years of investigation, the FCO issued its landmark decision on Facebook's data collection practices. The FCO found that Facebook had a dominant position on the German market for social networks for private users and abused this position by making the use of the Facebook social network conditional upon the user consenting to an extensive collection of user data from third party websites and apps (including services owned by Facebook such as WhatsApp and Instagram) and linking that data to the users' Facebook accounts. Already in its background paper on the case published at the end of 2017, the FCO gave an insight into its theory of harm in this case, which can be summarised as being twofold: (i) harm for consumers in users' loss of control over how their personal data is used and (ii) harm for competition (a) for the user side of the market, as the combination of data allows Facebook to optimise its own service and bind additional customers to its service and (b) on the advertising side of the market as Facebook can use the data to improve its targeted advertising, making its social network indispensable for an increasing number of advertising customers. The FCO assessed Facebook's conduct under the framework of an "exploitative abuse" in the form of the imposition of exploitative business terms pursuant to section 19, paragraph 1 ARC. When assessing whether Facebook's terms and conditions were abusive, the FCO heavily relied on data protection principles under the General Data Protection Regulation (GDPR) and concluded that Facebook's behaviour violated such principles. The FCO based this approach on three precedents by the German Federal Supreme Court (VBL Gegenwert I, VBL Gegenwert II and Pechstein) from which the FCO inferred that non-competition law principles that are concerned with the appropriateness of conditions in unbalanced negotiating situations can be taken into account as a benchmark when assessing whether terms and conditions are abusive. With regard to the question whether and to what extent a causal link between the market-dominant position and the abuse is required, the FCO took the view that it is not necessary to establish "strict causality" between the abuse and market power. Rather the FCO considered "normative causality" or "result causality" to be sufficient, meaning that, in the FCO's view, is sufficient that the behaviour turns out to be detrimental for competition as a result of the market dominance.
The FCO's decision prohibited the use of the terms of services under scrutiny as well as the underlying data collection practices (Facebook had to comply with this order within 12 months). Facebook lodged an appeal against the decision as well as a request for interim relief at the Higher Regional Court of Düsseldorf, seeking the suspension of the implementation of the FCO decision pending the outcome of the main appeal.
Facebook/Higher Regional Court of Düsseldorf (VI-Kart 1/19 (V)): On 26 August 2019, the Düsseldorf Higher Regional Court granted a temporary injunction, suspending the FCO's decision pending the outcome of Facebook's appeal. The court found that there were serious doubts as to the lawfulness of the FCO's decision as required under the test for ordering the suspension of the FCO’s decision. The court considered that terms and conditions set by a dominant company will only amount to an abuse of that dominance in breach of competition law if they cause competitive harm. The court rejected the FCO's assertion that Facebook’s terms and conditions caused competitive harm either by way of exclusion of competitors or by way of exploitation of dominance to the detriment of consumers.
In particular, the Düsseldorf Higher Regional Court emphasised that an infringement of data protection law by a dominant company does not automatically amount to an abuse of that dominance for the purposes of competition law. Rather, it must be shown that the relevant conduct/infringement of data protection law (or any other consumer protection law) would not have been possible under competitive conditions i.e. there is a causal link between the conduct and the company's market power (which the court held had not been sufficiently demonstrated by the FCO in this case). In assessing whether terms and conditions set by a dominant company are abusive, it is necessary to consider what terms and conditions would have been likely to emerge in a more competitive market. The court considered that the FCO had failed to properly consider this in the present case.
Furthermore, the court considered that it has not been demonstrated that the provision of data to Facebook restricted the ability of other companies to compete. In particular, it would have been necessary to substantiate whether, in the individual case, the processing of the data leads to the establishment or reinforcement of market entry barriers.
The court also rejected the FCO's assertion that Facebook users are harmed by a loss of control over their data, with no option to "opt-out" of Facebook's practices in relation to data collection and processing if they wish to use the Facebook social media platform. The court considered that each user can decide whether or not to accept Facebook’s terms and conditions, weighing up the pros and cons of using an advertising-funded social media network that is reliant on user data.
Facebook/German Federal Supreme Court (FSC) (KVR 69/19): On 23 June 2020, the FSC overturned the temporary injunction granted to Facebook by the Düsseldorf Higher Regional Court in August 2019. It considered that there are neither serious doubts as to the dominant position of Facebook on the German market for social networks, nor that Facebook abused this dominant position through the terms of service prohibited by the FCO. The FSC considered that Facebook's terms of service do not leave users a choice as to whether they (i) want to use the network on the basis of a more intense personalisation of the user experience including potentially unlimited access to elements of their off-Facebook internet use, or (ii) only agree to a level of personalisation that is based on data that the users themselves release on Facebook. This approach seems slightly different from the approach taken by the FCO who was focussing on data-protection aspects. The main appeal before the Düsseldorf Higher Regional Court is still pending.
CTS Eventim/FCO: In December 2017, the FCO issued a prohibition decision against CTS Eventim (CTS), a company active in the areas of live entertainment and ticketing. The FCO found that CTS abused its dominant position in the multi-sided German market for ticketing system services by concluding exclusivity agreements with organisers of live entertainment events and advance booking offices whereby they could only sell tickets exclusively or to a considerable extent via CTS' "eventim-net" ticket sales system. When assessing CTS' market position, the FCO, inter alia, took into account the criteria laid down in section 18(3a) ARC such as indirect network effects, multi-homing, economies of scale due to network effects and access to competitively relevant data. The FCO considered the exclusivity agreements to be a per se infringement – referring to the jurisprudence by the CJEU – but also established actual foreclosure effects. The FCO also established an infringement against article 101 TFEU and section 1 ARC in form of a restriction of competition by object and by effect. In the decision, the FCO imposed an obligation on CTS to include, in future contracts with a duration of more than two years or contracts that are concluded indefinitely, the possibility for the contracting party to sell or source, at its discretion, at least 20 per cent of its annual ticket volume with a provider other than CTS.
CTS appeal of the FCO decision was rejected by the Higher Regional Court of Düsseldorf in April 2019 (OLG Düsseldorf 3.4.2019, VI-Kart 2/18 (V)) and did not allow an appeal of its decision to the German Federal Supreme Court (FSC). On 3 June 2020, the FSC dismissed CTS' appeal of the Düsseldorf court's refusal to allow an appeal (FSC, 3.6.2020, KVZ 44/19).
IOC and DOSB/FCO: In February 2019, the FCO issued a commitment decision against the German Olympic Sports Confederation (Deutscher Olympischer Sportbund, DOSB) and the International Olympic Committee (IOC) in which DOSB and IOC committed to soften the advertising restrictions towards German athletes pursuant to By-law 3 to Rule 40 of the Olympic Charter. According to this provision by which all athletes are bound, athletes attending the Olympic Games are prohibited to allow individual sponsors to carry out advertising activities in a "frozen" period before, during and after the Olympic Games without obtaining a special permission upfront by the IOC or the National Olympic Committees such as the DOSB. A violation of the Olympic Charter can be sanctioned with the exclusion of the relevant athlete from the Olympic team. In the DOSB-Guidelines 2016, the DOSB published conditions under which the aforementioned special permission can be granted. Applying the Meca-Medina criteria (see CJEU, C-514/04 P), the FCO held that the Olympic Charter and the DOSB-Guidelines are subject to a competition law assessment. The FCO found in its preliminary assessment that applying By-law 3 to Rule 40 of the Olympic Charter in connection with the DOSB-Guideline 2016 to the German Olympic team, violates article 102 TFEU, sections 19(1) and (2) No. 1 ARC. IOC, DOSB and other organisations of the Olympic movement were considered dominant on the market for organisation and marketing of the Olympic Games as one collective and competitive entity. The FCO found in its preliminary assessment that the restriction of the athletes' advertising activities constitutes an unfair impediment of the German athletes and their potential sponsors on the market for sports sponsoring and therefore constitutes an abuse of dominance. Besides, the FCO considered the respective provisions to constitute a violation of the cartel prohibition under article 101 TFEU but left this point ultimately open as it would have required substantial additional investigations.
While the FCO decision is "enforceable only as regards individual advertising and marketing activities of German Olympic athletes on the German market", the position taken by the FCO is likely to influence any future intervention of the European Commission on this issue. According to Commissioner Verstager, the case is "an example of the way the network operates, with the Commission and the German competition authority working closely together". She further underlined that the FCO’s decision could "create incentives for a change of the relevant rules at national and international level, with the Commission following closely any developments in this direction". While such changes have not yet been enacted, British athletes – in November 2019 – have threatened legal action on the basis of EU competition law against the British Olympic Association over its implementation of Rule 40. Hence, the saga continues.
Börsenverein des Deutschen Buchhandels/FCO: In June 2019, the German book association (Börsenverein des Deutschen Buchhandels) lodged a complaint with the FCO against the German Post (Deutsche Post AG) claiming that the German Post, by significantly increasing its prices as of July 2019 (up to 60 per cent), is abusing an alleged dominant position in the area of the delivery of books. In addition, the German Post allegedly discriminates against bookshops and publishers that ship books online by granting big customers such as Amazon considerably better conditions for the delivery of books. According to the association, this behaviour threatens small and medium-sized bookshops and publishers and thereby the diversity of the book market. In March 2020, it was reported that the FCO decided not to pursue the claim further as it did not find sufficient indications that the price increases were abusive under competition law or that small and medium-sized bookshops and publishers were discriminated against.
Federal Supreme Court, 8 October 2019 (KZR 73/17) – Werbeblocker III: The case concerned a provider of software (the defendant) that was made available free of charge to internet users and which enabled the display of advertising to be suppressed when accessing advertising financed internet offers (ad-blocker). It also offered the operators of the internet pages the re-activation of blocked advertising by inclusion in a white list for a fee. The claimant – an operator of internet pages – argued that the defendant’s business model was an abuse of a market-dominant position.
The court found the defendant was abusing its dominant position. The decision is, in particular, noteworthy in relation to the court’s reasoning as regards the abuse: According to the court, users of internet sites are, in principle, not prevented from suppressing emerging advertising. Therefore, offering a technical possibility to do so is, in principle, also legally permissible. However, the court held that this legitimate interest must not be allowed to be taken as an instrument for the final aim of generating profits. The legitimate interest in suppressing advertising must remain the primary objective in order to be taken into account when weighing up the interests in favour of the "ad-blocker". However, as the "ad-blocker" used its acquired market power to demand payment from the website operators so that they could show advertising again in return and in turn generate profits from advertising revenues, it constitutes – in the court's view – a violation of section 19(2) No.1 ARC.
The court also found in a subsequent decision (Federal Supreme Court, 10 December 2019 (KZR 57/19) – Whitelisting/Werbeblocker) that it could still constitute an abuse of a dominant position if the provision of the advertising blocker was financed by a share of the sales revenues generated by the activation ordered by the defendant with advertising that was no longer blocked.
Federal Chamber of Tax Consultants/FCO: On 3 December 2019, the FCO issued a commitment decision in proceedings it had opened against the Federal Chamber of Tax Consultants (BStBK) and DATEV in January 2017 on suspicion of abuse of a dominant market position. The subject of the proceedings was the issuing – coordinated by BStBK – of exclusive concessions by all German tax consultant chambers to DATEV for the operation of an electronic proxy database for tax consultants.
According to the FCO's preliminary view, the chambers had acted abusively by granting DATEV an exclusive concession to operate the proxy database. To remedy the FCO’s concerns, the German tax consultant chambers as well as the BStBK have undertaken towards the FCO to facilitate the electronic legitimation of tax consultants via different databases. Once the tax authorities have adjusted their IT systems, the chambers will support a parallel operation of legitimation solutions for tax advisers to choose from. The FCO made the commitments offered by the tax advisory chambers and the BStBK binding in its decision.
XXXLutz KG/FCO: In autumn 2019, the FCO started to review the demands made by XXXLutz KG for an "anniversary rebate" from its suppliers and held that the demand was likely to constitute a violation of section 20(2) ARC together with section 19 (1) and (2) No. 5 ARC. According to this provisions, a company’s conduct is deemed abusive in relation to the undertakings that depend on it, if the advantages are requested without any objective justification (see question 25). At the FCO’s request, XXXLutz offered consideration to all suppliers that were originally denied a service in return for the rebate. In light of XXXLutz KG’s concession, the FCO closed the proceedings in February 2020. Since rebate demands such as those made in the present case occur frequently in the furniture sector ("anniversary rebates", "wedding rebates", etc), the FCO stated that it will keep an eye on this matter and take action again in the event of indications suggesting abusive practices.
Federal Supreme Court, 29 October 2019 (KZR 39/19): The dispute essentially concerns the fee the claimant – Die Länderbahn, a private railway company – has to pay to Deutsche Bahn for using its railway infrastructure. The question was not only about payment, but more importantly about (i) who is actually responsible – civil or administrative courts or the German Federal Network Agency and (ii) whether the claimant can base its claim on German civil as well as antitrust laws.
The lower instance court ruled that the claimant cannot invoke civil or competition law, the main reasoning being that the competent regulatory body (ie the German Federal Network Agency) found in a decision that the fees charged by Deutsche Bahn from Die Länderbahn are appropriate. In such a case – the lower instance court found – there is no room for an additional assessment under general civil or competition law rules.
The Federal Supreme Court did not agree with this decision: Civil or competition law, as well as the regulatory framework, apply in parallel since there is no provision according to which the regulatory framework would supersede the general civil or competition law rules. Hence, the decision of the German Federal Network Agency does not prevent an assessment under civil law. Given that the lower instance court had not assessed the case from a civil or competition law perspective, the Federal Supreme Court referred the case back to the lower instance court.
Federal Supreme Court, 3 December 2019 (KZR 29/17): Since 2013, ZDF (a public TV-broadcasting company) and Netcologne (a cable network operator) have been disputing whether ZDF needs to pay Netcologne a consideration for feeding signals into broadband cable networks operated by Netcologne. The lower instance courts had ruled that ZDF did not abuse its market-dominant position.
The Federal Supreme Court now held that ZDF – as a market-dominant undertaking – in principle, needs to pay feed-in fees to Netcologne (or any other broadband cable network operator) if the services provided to ZDF constitute an economic "value". To that end, the services offered by ZDF (providing the programme signal free of charge to Netcologne) and by Netcologne (allowing ZDF to feed in its signal) need to be comprehensively weighed against each other. In the court's view, the lower instance courts had not properly balanced the parties’ interest, in particular further fact-finding is required in this respect. In light of this, the Federal Supreme Court has lifted the previous judgment and referred the case back to the Higher Regional Court of Düsseldorf.
Answer contributed by
Dr Marcel Nuys,
Juliana Penz-Evren and
64. What future developments can we expect?
Dominance cases have steadily moved up on the enforcement agenda of the FCO over the past few years. The FCO has initiated a number of new proceedings in important industrial areas (eg, digital and online markets, platforms and online market places – see question 61). In addition, the Working Group on Competition Law met at the invitation of the FCO in October 2015 to discuss "Internet platforms in the digital economy: competition law, privacy and consumer protection". The working group not only addressed merger control aspects but also dominance issues. In June 2016, the FCO published its "Working Paper on Market Power of Platforms and Networks" and, in May 2016, – together with the French Competition Authority – its working paper "Competition Law and Data". In March 2017, Germany's Economic Ministry published a White Paper on "Digital Platforms", which, inter alia, addresses the impact of the increasing digitalisation of the economy and the potential need for an intervention on the basis of market characteristics indicating dominance by a new market authority. In October 2017, the FCO published a paper on "Big Data and competition". In addition, in February 2018 the FCO launched a sector inquiry into the online advertising sector, which is still ongoing. Furthermore, in November 2019, the FCO and the French competition authority published a joint study “Algorithms and Competition”, which analyses algorithms and their effect on competition.
The abuse of dominance rules are also in the focus of the German legislator. The German Ministry of Economy and Energy (BMWi) commissioned a report on modernising the law on abuse of market power, which was published in September 2018. The report includes a list of recommendations for amendments to the current legal framework, in particular in view of the digital economy. The report, inter alia, includes a recommendation to establish a concept of "intermediation power" to better capture the market power of mediation platforms, expanding the scope of section 20(1) ARC to also protect large companies from the market power of even larger companies such as digital platforms and rules on access to data. Following the publication of the report, the BMWi established a commission (Kommission Wettbewerbsrecht 4.0), which was tasked with developing proposals for the modernisation of competition law. The commission’s focus was on competition law policy questions that arise in the context of the continuous development of data economy, the spreading of platform markets and the "industry 4.0". Its final report "A New Competition Framework for the Digital Economy" was published in September 2019 and sets out 22 recommendations primarily relating to access to data, regulation of digital platforms, cooperation between companies in the digital economy and institutional links between competition law and other areas of law.
Modernising the law on abuse of market power in light of digital markets is also the subject of the upcoming tenth amendment of the ARC. A draft law was published by the BMWi in January 2020. The draft law builds on recommendations and findings from the 2018 report on modernising the law on abuse of market power, the work of the Kommission Wettbewerbsrecht 4.0. as well as the broader discussion on the EU level.
One of the areas of focus of the upcoming ARC amendment is to strengthen the abuse control in particular in relation to digital companies.
Relevant changes in the field of unilateral conduct provided for in the draft law include in particular:
1. Introduction of the concept of "intermediation power" as a new criteria for dominance in multi-sided markets. According to the legislative materials, background to the amendment is in particular to capture the importance of intermediaries – typically multi-sided digital platforms whose business model it is to collect, aggregate and evaluate data in order to reconcile supply and demand between user groups – for companies that offer products and services via such intermediaries. The amendment also seeks to better capture hybrid business models with intermediation services that include both elements of supply as well as demand (eg, situations where platforms act both as an intermediary and a supplier on their own platform).
2. Revision of the "essential facilities doctrine" to bring it closer to the European Commission’s practice and the jurisprudence of the EU courts. The amendment widens the scope of the essential facilities doctrine in section 19(2) No 4 ARC which has so far been limited to access to infrastructure. In particular, the amendment clarifies that also a refusal of access to a platform or an interface as well as the refusal to license an intellectual property right can be abusive. Furthermore, the planned amendment clarifies that also the refusal of access to competitively relevant data can amount to an abuse of a dominant position.
3. Establishment of new powers for the FCO to prohibit certain behaviours of companies that are active to a significant extent on multi-sided markets. The FCO can establish that such companies have a paramount significance for competition across markets and prohibit certain behaviours of such companies. The draft law provides that when establishing whether a company has a paramount significance for competition across markets, the FCO in particular has to take into account: (i) its dominant position on one or more markets, (ii) its financial strength or its access to other resources, (iii) its vertical integration and its activities on otherwise related markets, (iv) its access to data relevant for competition, (v) the importance of its activities for third parties' access to supply and sales markets and its related influence on third parties' business activities.
Pursuant to the draft law, the FCO can prohibit undertakings whose paramount significance for competition across markets it has established from:
- treating the offers of competitors differently from its own offers when providing access to supply and sales markets;
- directly or indirectly impeding competitors on a market in which the respective undertaking can rapidly expand its position even without being dominant, provided that the impediment is capable of significantly impeding the competitive process;
- creating or raising barriers to market entry or impede other undertakings with other means by using data relevant for competition which has been obtained from the opposite market side on a dominated market, also in combination with other data relevant for competition from sources beyond the dominated market, or demand terms and conditions that permit such use;
- making the interoperability of products or services or the portability of data more difficult and thereby impede competition;
- informing other companies insufficiently about the scope, the quality or the success of the performance they provide or commission, or make it difficult in other ways for them to assess the value of this performance;
unless such behaviour is objectively justified.
4. Expansion of the scope of section 20 (1) ARC by deleting the limitation to small and medium enterprises. According to the legislative material, the amendment shall taket into account that also large undertakings can be in a position of dependence, in particular where a platform has a "gatekeeper" position. Following this amendment, also large undertakings may be dependent for the purpose of section 20 (1) ARC provided that the dependence – due to a significant imbalance – cannot be offset by relevant countervailing power of the suppliers or customers.
5. Introduction of a right of access to data under certain circumstances (new section 20 (1a) ARC) where access to data has particular relevance for competition. The draft provision clarifies that dependence can also occur where an undertaking, in order to exert is activity, is dependent on access to data that is controlled by another undertaking. Under the draft provision, the refusal to give access to such data may constitute an undue hindrance.
6. Introduction of a right of intervention to prevent the "tipping" of a market (new section 20 (3a) ARC). Pursuant to the draft provision, an undue hindrance may also occur where an undertaking with relative market power on a multi-sided or network market prevents competitors from autonomously achieving positive network effects thereby leading to a serious threat of limiting competition on the merits to a non-negligible extent.
7. A lower threshold for interim measures in order to enable the FCO to intervene more quickly. In particular, the establishment of a risk of serious irreparable damage to competition under the current provision has proven difficult in practice. Under the new draft provision, it would be sufficient if an infringement appears predominantly probable and interim measures are necessary for the protection of competition or because of an imminent threat of serious harm to another undertaking.
It can thus be expected that dominance in the digital industry in general (including markets with network effects – see questions 8 and 11) and Big Data related conduct in particular will remain subject to close scrutiny in the future.
Answer contributed by
Dr Marcel Nuys,
Juliana Penz-Evren and