Antimonopoly & Unilateral Conduct

Last verified on Sunday 2nd August 2020

Antimonopoly & Unilateral Conduct: Germany

Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

Herbert Smith Freehills

Overview

1. What is the legal framework governing unilateral conduct by companies with market power?

Germany

The abuse of a dominant position is prohibited by sections 19 and 20 of the German Act against Restraints of Competition (ARC). These provisions apply to all "undertakings" (for more details as to the addressees, see question 19) with "market power". As explained in question 5, distinct levels of market power exist under the German dominance regime:

  • single dominance (see questions 6 and 18);
  • collective dominance, where two or more companies have joint market power; and
  • a "superior" market position in relation to other competitors, customers or suppliers (relative dominance) (see question 6).

In addition, article 102 of the Treaty on the Functioning of the European Union (TFEU) is directly applicable in Germany according to article 3(1) of EC Regulation 1/2003 and section 22(3) ARC, though important differences between article 102 TFEU and the German dominance regime remain, in particular, regarding the addressees of the prohibition of abusive unilateral conduct.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

2. What body or bodies have the power to investigate and sanction abuses of market power?

Germany

The prohibitions of sections 19 and 20 ARC are enforced by the Bundeskartellamt (German Federal Cartel Office (FCO)) and the state cartel offices in each of the federal states in Germany. The FCO is a higher federal authority, which is assigned to the area of responsibility of the Federal Ministry for Economic Affairs and Energy, and which is independent in its decision-making role. The FCO has twelve decision divisions that are mainly organised according to certain industry sectors (with three divisions exclusively dealing with cross-sector cartel prosecution) and is primarily responsible for the enforcement of the ARC in Germany. Only if the effect of an abuse is limited to one federal state (typically in the supply of gas or energy) the respective state cartel office will be responsible for intervention. However, since almost all dominance cases have an effect in more than one federal state, most investigations are dealt with by the FCO (including fines, if any).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

Monopoly power

3. What role does market definition play in market power assessment?

Germany

Market definition plays a key role in the assessment of market power. For establishing a dominant market position – as a first step – the relevant product and geographic market has to be defined. Then, as a second step, the undertaking's market position on the relevant market needs to be determined.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

4. What is the approach to market definition?

Germany

On the supply side, the relevant product market includes all products or services that are substitutable from a demand-side perspective. The relevant geographic market covers the area where the undertaking concerned is active and to which consumers can practically turn for alternative sources of the product or service concerned.

For determining market power on the demand side, markets need to be determined from a supplier's perspective.

In light of the increasing importance of platform markets and the digitalisation of the economy, the ARC has been amended on 9 June 2017 to clarify that a market exists even where the sale of products or services does not generate any revenues (see section 18(2a) ARC). The FCO applied this provision in the Facebook case (see below question 61). Similarly, the non-exhaustive list of factors that come into play for an assessment of dominance (see question 6) has been adjusted in 2017 to respond to the need to protect competition on digital markets (often two or multi-sided markets driven by innovation, Big Data and network effects).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

5. How is market power or monopoly power defined?

Germany

Generally, in line with widely accepted legal and economic principles, market power is defined as the ability to raise prices profitably above the competitive level. As mentioned in question 1, the dominance regime not only addresses cases of single or collective dominance, but – under certain circumstances – also scenarios where a company holds a superior market position vis-à-vis certain competitors, customers or suppliers, referred to as "relative dominance".

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

6. What is the test for finding of monopoly power?

Germany

There is no pre-defined test for finding monopoly power. However, section 18(3) ARC sets out the criteria to be considered for the assessment of dominance. The list is non-exhaustive and includes:

  • market share;
  • financial strength;
  • access to purchasing or sales markets;
  • links with other undertakings;
  • legal or factual barriers to market entry;
  • actual or potential competition;
  • the ability to shift its supply or demand to other goods or commercial services; and
  • the ability of the demand or supply side to switch to other suppliers or purchasers.

As explained in detail under question 8, in particular the size of the individual market share typically has great practical importance as a starting position for a finding of dominance.

Specifically for the assessment of digital markets, the 2017 revision of the ARC has seen the adoption of the following additional non-exhaustive criteria for a finding of monopoly power (see section 18(3a) ARC):

  • direct and indirect network effects;
  • multi-homing practices by users and users' switching costs;
  • economies of scale arising in connection with network effects;
  • access to competitively relevant data; and
  • innovation driven competitive pressure.

The FCO has considered these criteria in detail in the Facebook case (see question 61).

Furthermore, section 20(1) ARC prevents undertakings with relative market power from wielding their position against small or medium-sized customers or suppliers. According to section 20(1) ARC, relative market power is assumed if such suppliers or purchasers of certain products or services depend on an undertaking in such a way that sufficient and reasonable possibilities of turning to alternative customers or suppliers do not exist. The relative market power test thus requires an assessment of market power in a bilateral relationship (ie, an assessment of outside options for the potentially dependent party). In carrying out this assessment the criteria that are laid down in section 18(3) and (3a) ARC (set out above) should be consulted for guidance.

Section 20(3) ARC also prevents undertakings with relative market power from wielding their position against small and medium-sized competitors. To demonstrate the existence of that type of market power it is sufficient to show that the dominant undertaking has a "superior" market position in relation to its competitors based on the criteria that are laid down in section 18(3) and (3a) ARC except that the degree of market power is lower than in market dominance cases.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

7. Is this test set out in statute or case law?

Germany

The test is set out in statutory law (see answers to questions 5 and 6).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

8. What role do market shares play in the assessment of monopoly power?

Germany

Market shares play – besides other factors listed in response to question 6 – the most important role in determining whether an undertaking holds a dominant position. They often are the starting point for an assessment of market power. However, while market shares are a (strong) factor to determine dominance, they are not self-sufficient as conclusive evidence of dominance. Even if the market share threshold for a presumption of dominance (see question 9) is fulfilled, the FCO needs to carry out a fully fledged legal and economic analysis (question 10).

In this context and in light of recent case practice of the FCO, it is important to note that the relevance of market shares as an indication for dominance needs to be very carefully considered when it comes to platform or network markets (eg, social networks, hotel booking platforms, food delivery or price comparison websites) in particular. High market shares on two or multi-sided markets have much less importance compared to traditional markets without network effects. However, markets with network effects are "tipping markets" if and when a product or a service has reached a critical mass, but this does not mean that these markets are non-contestable despite high market shares. On the other hand, on two or multi-sided network markets the position and actual strength of a party with high market shares depends on the reaction of the other side. To adapt the ARC to the characteristics of platform and network markets, the 2017 amendment of the ARC explicitly introduced additional factors to assess whether a platform or network operator is dominant (see question 6). The FCO applied these criteria, for instance, in the case CTS Eventim and the Facebook case (see question 61) when assessing whether CTS or Facebook are dominant. In the Facebook case, the FCO took the view that in the context of internet services and platforms, the market share can only be considered as a first indication but cannot be the sole basis to establish market power. Rather it is required to carry out an overall assessment of all circumstances of the case. That being said, the FCO considered that looking at the market shares, nevertheless, plays an important role in the competition law assessment, enabling the authority to describe the market structure and the competitors' market position in relation to each other (for instance looking at development of market shares over time, distance to competitors' market shares).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

9. Are there defined market share thresholds for a presumption of monopoly power?

Germany

The following thresholds indicate that a rebuttable presumption of single or collective dominance exists under the ARC:

  • according to section 18(4) ARC, a single undertaking is presumed to be dominant if it has a market share of at least 40 per cent; and
  • according to section 18(6) ARC, several companies are deemed to be dominant (i) if three or fewer undertakings have a combined market share of at least 50 per cent, or, alternatively, (ii) if five or fewer undertakings have a combined market share of at least two-thirds of the relevant market.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

10. How easily are presumptions rebutted?

Germany

In practice, the presumption of dominance plays a significant role in dominance cases and is often difficult for the alleged dominant undertaking to rebut (that is to convince the FCO that the requirements for the existence of a dominant position are nonetheless not fulfilled). As noted above (question 8), however, technically the FCO has to fully investigate all circumstances in dominance cases for the benefit of the defendant notwithstanding a presumption of dominance. Only if the FCO does not find – after making full use of its investigative powers – conclusive evidence either way as to the existence of dominance, it may rely on the presumption.

With respect to collective dominance, the criteria for a rebuttal of collective dominance are explicitly laid down in section 18(7) ARC. A rebuttal either requires demonstrating that effective competition between the suspected oligopolists exists, or proving that the members of the suspected oligopoly are not immune against action from fringe competition in the market.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

11. Are there cases where companies with high shares have been found not to exercise monopoly power?

Germany

Yes. For example, a high market share held by a highly specialised small or medium-sized undertaking (eg, suppliers in the automotive industry) does not necessarily indicate a dominant position if barriers to entry are low or where the demand side of the market has the ability to exercise a certain level of countervailing buying power. Also, on bidding markets (ie, markets where assignments for products or services are awarded for a certain period of time) high market shares may have limited importance only. In addition, highly volatile as well as network markets (see question 8) are also indications for a lack of market power despite high market shares.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

12. What are the lowest shares with which companies have been found to exercise monopoly power?

Germany

The lowest market share based on which a company was found to be dominant to our knowledge was 12 per cent. That case, which was determined in 1982, concerned regional markets for flowers that were highly fragmented on the supply side, and, in addition, the dominant undertaking was found to have superior financial strength as well as access to upstream markets for the supply of these products.

Normally, however, allegations of dominance have involved a market share threshold of at least 20 per cent.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

13. How important are barriers to entry and expansion for the assessment of monopoly power?

Germany

Barriers to market entry and expansion are of significant importance for the assessment of dominance.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

14. Can the lack of entry barriers negate a finding of monopoly power?

Germany

In some cases, low market entry barriers were – among other criteria – considered as an important factor to rebut a dominant position despite market shares of 35–40 per cent.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

15. What kind of barriers to entry are typically considered in the analysis?

Germany

German courts and the FCO have considered a wide range of legal or de facto (economic) market entry barriers ranging from languages and technical specifications, intellectual property rights, licences and permissions from authorities, vertical integration or long-lasting agreements with customers. Furthermore, there is a lively debate as to how (exclusive) access to data can be regarded as a market entry barrier (see question 18).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

16. Can countervailing buyer power negate a finding of monopoly power?

Germany

Although countervailing buyer power is not explicitly listed in section 18(3) or 18(3a) ARC, it is clearly a significant argument to rebut an allegation of dominance and has been raised successfully in a number of cases.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

17. What if consumers can easily switch between suppliers?

Germany

As mentioned in question 6, the absence of lock-in effects on the demand or supply side can be decisive for the degree of market power.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

18. Are there any other factors that the regulator considers in its assessment of monopoly power?

Germany

Sections 18(3) and 18(3a) ARC set out a non-exhaustive list of criteria for the assessment of dominance (see question 6). Other factors may be, inter alia, the existence of a technological edge over competitors, R&D resources, pipeline products or the strength of a brand. In addition, the role of Big Data as a factor of dominance is under discussion and "access to competitively relevant data" has been introduced as an additional factor for the assessment of market power (see question 6). In the Facebook case, the FCO considered this criterion in detail. The FCO found that Facebook has superior access to competitively relevant data, in particular the personal data of its users. The FCO considered both the size of the database as well as the level of detail of the data to be very high in Facebook's case. According to the FCO, Facebook's superior access to user data created an additional barrier to entry that, in connection with the direct and indirect network effects, contributed to a further reinforcement of the tipping-process. In its Facebook decision, the FCO also noted that it considers access to competitively relevant data as an important criterion when assessing the market power of social networks given that social networks are highly data-driven products whose characteristics and financial viability depend to a significant degree on the personal user data available. The FCO added in this context that a big database of a market participant in itself is not an indication for market power. However, it can play an important role in the overall assessment of all circumstances. The FCO noted however, that the high competitive relevance of the database for a provider of social networks leads to an additional barrier to entry as most competitors cannot collect comparable amounts of data or of the same level of detail as Facebook. According to the FCO, the resulting barriers to market entry further enhance the lock-in effect of the direct network effects.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

19. Are any entities or sectors exempt from the antimonopoly regime?

Germany

Sections 19 and 20 ARC apply to all "undertakings". The definition of an "undertaking" is construed broadly in accordance with the functional approach, which includes all natural persons and legal entities, provided that they are involved in the performance of commercial activities (including state authorities and state-owned companies as far as they perform a commercial activity in a market).

There are no exemptions for particular sectors from competition law or the dominance regime in particular, except for certain agreements between producers of agricultural products (section 28 ARC). In addition, sector-specific provisions apply to certain regulated industry sectors including the energy, railway, water and telecommunication sectors (see section 29 ARC).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

20. Can companies be deemed to hold collective monopoly power?

Germany

Yes, see question 9.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

21. Can the exercise of joint monopoly power or tacit oligopolistic collusion be treated as an infringement?

Germany

The abuse of collective dominance constitutes an infringement by those companies involved in the abuse (notably, an infringement does not require that all of the collectively dominant undertakings are involved). Tacit collusion among members of a dominant oligopoly mainly falls into the scope of the cartel prohibition (section 1 ARC or article 101 TFEU).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

22. Has the competition authority published guidance on how it defines markets and assesses market power?

Germany

The FCO has not published any guidance specifically dealing with the definition of markets and has published very limited guidance on the assessment of market power (only in relation to the procurement procedures for gas and electricity). However, the FCO has published a "Guidance on substantive merger control", which may be useful also in a dominance context as the same market share presumptions apply in merger control cases with regard to the creation or strengthening of a dominant position. In the energy sector, the FCO – together with the German energy regulator – published guidelines for the control of abusive practices in the electricity generation and wholesale trade sector. The guidelines concern the assessment of price peaks under competition law.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

Abuse of monopoly power

23. Is there a general definition for what constitutes abusive conduct? What does it entail?

Germany

Section 19(1) ARC constitutes a general prohibition of an abuse of a dominant market position. Similar to the position under article 102 TFEU, "abuse" is understood as (i) any practice of a dominant undertaking that relates to a market (not necessarily the market where the dominance exists) on which competition is already weakened owing to the presence of the dominant undertaking, and (ii) that is capable – through recourse to methods different from those typically applied in an environment with functioning competition – of restricting the functioning of the remaining (already weakened) competition.

In addition, there is a lively debate if and to what extent there needs to be an interplay between an undertaking's dominant position and either (i) the (potential) anticompetitive effects of its behaviour or (ii) its ability to act in an (allegedly) abusive way.

According to some views in legal literature, it is sufficient for finding an abuse that the dominant position is causal for (potential) anticompetitive effects of a company's behaviour ("effects based" approach). Supporters of such "normative" view basically argue that market dominant undertakings have a market structure responsibility and are, therefore, prohibited from any behaviour that might result in (potential) anticompetitive effects.

The aforementioned position could have far reaching practical consequences since it would make it much easier to conclude that a dominant undertaking abused its dominant position. Accordingly, a mere breach of rules by a dominant undertaking – for example, data protection laws – could be regarded as an abusive conduct (provided that negative effects on competition cannot be excluded) without having to establish that the breach of data protection law is linked to market dominance (ie, even in cases where a non-dominant undertaking would also be able to breach the rules). This seems to be the position that the FCO has taken in its Facebook decision (see below question 61). In the Facebook case, the FCO took the view that it is not necessary to establish "strict causality" between the abuse and market power (in a sense that the data processing conditions could be formulated in such a way precisely and solely because of Facebook's market power). Rather, the FCO considered "normative causality" or "result causality" to be sufficient, meaning that, in the FCO's view, it is sufficient that the behaviour turns out to be detrimental for competition as a result of the market dominance. While the Higher Regional Court of Düsseldorf disagreed with the FCO on this point in the interim relief proceedings in the Facebook case, the view that "normative causality" is sufficient seems to be shared by the German Ministry of Economy and Energy and a corresponding clarification is planned under the current draft for the 10th amendment of the ARC. However, pursuant to the explanatory memorandum to the current draft amendment, it is not intended to open section 19 ARC to any type of unlawful behaviour by a market-dominant company (for instance, infringements of tax, employment or environmental law by market-dominant companies would not be sufficient to establish an abuse of a dominant position). It remains to be seen how – if this "normative causality" concept enters into force – this plays out in practice.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

24. What are the general conditions for finding an abuse?

Germany

See question 23.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

25. Is there a list of categories of abusive or anticompetitive conduct in the applicable legislation?

Germany

Section 19(1) ARC serves as a catch-all clause and is complemented by section 19(2) ARC, which provides five types of specific abuses that apply – despite their non-exhaustive character – in almost all dominance cases:

  • according to section 19(2) No. 1 ARC, dominant companies may not directly or indirectly exclude other undertakings in an unfair manner from legitimate business activities, which are usually open to similar undertakings ("unfair hindrance"), nor treat them differently from similar undertakings without any objective justification ("discrimination"). While the prohibition of unfair hindrance mainly protects competitors of dominant undertakings, the prohibition of discrimination ensures that buyers and suppliers are protected compared to their peer groups (see also question 44);
  • pursuant to section 19(2) No. 2 ARC, dominant companies may not charge excessive prices or demand unreasonable terms and conditions. The benchmark for an abuse applied by the FCO is the "comparable (hypothetical) market concept". Accordingly, prices of the dominant undertaking in the market concerned have to be compared with prices that would prevail in markets with effective competition (see also question 43);
  • according to section 19(2) No. 3 ARC, a dominant undertaking abuses its dominant position if it demands less favourable payment or business terms in one market in comparison to those that are applied by the dominant undertaking on other comparable markets from similar customers;
  • pursuant to section 19(2) No. 4 ARC, a dominant undertaking may not refuse access to its own networks and other infrastructure facilities (eg, harbours, cables or other networks constituting natural monopolies), thereby excluding third parties from competition on related up- or downstream markets. The "essential facility" doctrine is described in more detail in question 38; and
  • according to section 19(2) No. 5 ARC, a dominant undertaking must not demand commercial advantages (eg, better purchase prices from its suppliers) by wielding its dominant position without an objective justification. This provision has been amended with the 2017 revision of the ARC seeking to clarify the scope of the prohibition and parameters that need to be taken into account when assessing the legality of a specific conduct.

While the aforementioned examples require a dominant position, section 20 ARC prohibits certain types of abusive behaviour even below the level of dominance:

  • according to section 20(1) ARC, unfair hindrance or discrimination practices of relatively dominant undertakings (see questions 1, 5 and 6) against small or medium-sized undertakings that are dependent on the supply of products or services from the dominant undertaking are also prohibited;
  • a relatively dominant undertaking is prohibited from demanding advantages by wielding its position as regards a dependent supplier undertaking (see section 20(2) ARC). This provision plays an important role in the German food retail sector where the FCO is attempting to reactivate the provision in light of an increased level of concentration mainly on the demand side; and
  • section 20(3) ARC particularly prevents undertakings with relative market power from wielding their position against small and medium-sized competitors.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

26. Is this list open or closed?

Germany

The list described in question 25 is open. For example, there is no statutory provision that explicitly addresses margin-squeeze practices (see further question 41). However, it is accepted that these practices are principally dealt with under section 19(2) No. 1 ARC.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

27. Has the competition authority published any guidance on what constitutes abusive conduct?

Germany

No. 

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

28. Is certain conduct per se abusive (without the need to prove effects) and under what conditions?

Germany

The FCO takes the position that with regard to certain categories of conduct, in line with the practice of the EU Courts, a proof of anti-competitive effects is not required. Such concept is applied in the case of conduct that reveals in itself a sufficient degree of harm to competition, such as to render an examination of its actual effects on the market redundant (eg, exclusivity arrangements, behaviour of pricing below average variable costs). For example, in a decision issued in 2015 the FCO found that Deutsche Post AG had abused its position in the market for the provision of postal services. In this case, the FCO referred to the 2014 Intel decision of the EU General Court and took the position that loyalty rebates are a per se abuse where proof of concrete foreclosure effects is not required. The FCO justified the approach on the basis of:

  • the special responsibility of a dominant undertaking not to impair the level of competition in the market (which is already restricted due to the existence of a dominant undertaking); and
  • the loyalty-enhancing effect of exclusive supply conditions in respect of the remaining contestable portion of demand that produces an unacceptable obstacle to access to the market (for potential competitors).

Outside the aforementioned categories, the FCO has to show that the conduct in question is capable of having restrictive effects on competition. However, it is, in principle, not necessary to demonstrate that the abuse actually had a concrete effect on the markets concerned.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

29. To the extent that anticompetitive effects need to be shown, what is the standard to demonstrate these effects?

Germany

The FCO needs to run a fully fledged analysis in order to demonstrate "beyond reasonable doubt" that the conduct is capable of having or likely to have restrictive effects on competition.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

30. Does the abusive conduct need to harm consumers?

Germany

No. Sections 19 and 20 ARC primarily intend to protect the competitive process in the market and not specific competitors, customers or suppliers. Therefore, evidence that consumers have been harmed by the conduct in question is not required. However, harm to consumers may be a factor taken into account by the FCO when determining the level of fine.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

31. What defences are there to allegations of abuses of monopoly power?

Germany

There are different defences against allegations of an abuse of a dominant position. The undertaking may provide evidence to rebut the suggested abuse or claim that the alleged abuse is objectively justified (see question 32).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

32. Can abusive conduct be objectively justified?

Germany

An objective justification of an alleged abuse requires a balancing test that weighs the interests of the dominant undertaking against (potential) negative effects inflicted on competitors and suppliers or customers. The balancing test has to be aligned with the aim of the ARC to ensure effective competition and open markets (see question 30). In sum, interests invoked by the dominant company need to outweigh the (potential) anticompetitive effect caused by the potentially abusive conduct.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

33. What objective justifications have been successful?

Germany

It is established case practice that the protection of "legitimate commercial interests" might be an objective justification for an abuse. For example, it was found that a dominant undertaking legitimately protected its commercial interests when it refused to supply third parties to meet its own captive demand owing to existing capacity restraints.

For the sake of completeness, it should be mentioned that the decisional practice in Germany demonstrates that it is difficult to justify abusive conduct on the basis of the more economic approach in general or the efficiency defence in particular. It is still unclear whether, in light of the judgment by the European Court of Justice in Intel (2017), the "as efficient competitor test" will gain more relevance again in the context of abusive rebate practices. It also remains to be seen if and to what extent the as efficient competitor test might be of greater relevance with respect to other exclusionary practices, such as predatory pricing (question 40) or margin squeeze (question 41).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

34. How is the burden of proof distributed in an abuse analysis?

Germany

There is no established case law as to how the burden of proof is distributed in abuse of dominance proceedings. However, as a general rule, the FCO has to prove that the conditions for an abuse of market dominance are fulfilled. Further, the FCO needs to demonstrate that the conduct is not objectively justified. With regard to specific types of abuses (eg, discriminatory practices or essential facility cases), the burden of proof is partially shifted to the company, which needs to demonstrate an objective justification for its conduct (see question 36).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

35. What are the legal conditions to establish an abusive tie?

Germany

An abusive tie cumulatively requires that:

  • an undertaking is dominant with respect to one product;
  • the supply of this product is subject to the condition that this customer also agrees to buy another (separate) product;
  • foreclosure effects are likely; and
  • there is no objective justification for such behaviour.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

36. What are the legal conditions to establish a refusal to supply or refusal to license?

Germany

In principle, dominant undertakings are free to decide if and under what conditions they are willing to supply products or grant licences to third parties. To establish an obligation to supply or to grant a licence, the claimant needs to provide cumulative evidence that:

  • the refusal would significantly harm competition on the downstream market;
  • no viable substitute is available; and
  • the refusal is discriminatory.

Where this has been established, the dominant undertaking has to substantiate that there are legitimate and objective reasons for its refusal to deal. This may be possible if the refusal is based on insufficient capacity or is reasonable and proportionate for protecting commercial interests of the dominant undertaking.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

37. Do these abuses require an essential facility?

Germany

The abuse described under question 36 does not necessarily require an essential facility.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

38. What is the test for an essential facility?

Germany

A dominant undertaking might be required to grant access to its "essential facility" (eg, infrastructure facilities such as airports, harbours, railway stations or other networks such as electricity, gas, or telecommunication networks).

Pursuant to section 19(2) No. 4 ARC, the relevant test is whether:

  • a refusal to grant access to its "own infrastructure facility" would make it for legal or factual reasons impossible for third parties to compete on related up- or downstream markets (eg, telecommunications, energy or gas supply, rail or ferry transport); and
  • there is any objective justification for a refusal.

In the case that access has to be granted, the dominant undertaking is allowed to request an adequate fee for the shared use or access.

Note that intellectual property rights are not considered infrastructure in the sense of section 19(2) No. 4 ARC. Therefore, the basis for a claim to grant compulsory licences would be section 19(1) or section 19(2) No. 1 ARC.

It is planned that under the upcoming 10th amendment of the ARC the scope of the essential facilities doctrine will be extended (see question 64).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

39. What is the test for exclusivity arrangements?

Germany

An exclusivity arrangement is considered as abusive where a dominant undertaking – without having an objective justification – either contractually obliges a customer to obtain all or most of its demand of products or services exclusively from that undertaking or induces the customer to do so by economic incentives (eg, by way of loyalty rebates – see question 42).

As mentioned (question 28), abusive conduct qualified as an exclusivity arrangement is per se abusive without the need to prove anticompetitive effects.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

40. What is the test for predatory pricing?

Germany

Undercutting competitors' prices in principle is not prohibited (even if applied by a dominant market participant).

However, a pricing strategy that a dominant undertaking pursues to force a competitor out of the market and to that end is willing to accept short-term losses is prohibited. In such cases, the following rules apply: First, pricing below average variable cost is presumptively abusive given that it is deemed to have no economic rationale other than the elimination of competitors. Second, pricing below average total cost but above average variable cost is abusive if it is shown that this is part of a plan to eliminate a competitor. As predation is not the sole economic rationale for this pricing policy, the FCO is required to produce additional evidence to prove an abuse of dominance. In 2012, the European Court of Justice held in the Post Danmark I case that such prices may constitute an abuse only if they result in having an exclusionary effect on an as efficient competitor. Third, prices above average total cost are – in principle – not abusive.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

41. What is the test for a margin squeeze?

Germany

Like under EU law, a margin squeeze involves consideration of the margin between the price charged on the downstream market by a vertically integrated and – at least on the upstream level – dominant undertaking and the price charged on the upstream market. Such conduct is found abusive if the margin is either negative or not sufficient for the dominant company to cover its product-specific costs in the downstream market. In exceptional cases, the competitor's costs might also be considered to reflect, for example, economies of scale or network effects.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

42. What is the test for exclusionary discounts?

Germany

The test for prohibited exclusionary rebates is whether a financial advantage is granted for the purpose of inducing a customer to obtain also the contestable share of demand from the dominant undertaking. That means that competitors are unable to compete as they normally have to offer extremely low prices to compensate a customer for the loss of additional rebates in the case of switching the contestable share of demand to a competing supplier.

In accordance with the EU practice, loyalty rebates are per se abusive. The same holds true for retroactive rebates. With respect to other kinds of rebates (for a precedent see question 49) it needs to be assessed on a case-by-case basis whether they have a loyalty enhancing effect.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

43. Are exploitative abuses also considered and what is the test for these abuses?

Germany

Exploitative abuses by charging excessive prices or demanding unreasonable terms and conditions are prohibited (see section 19(2) No. 2 ARC). The benchmark for an abuse applied by the FCO is the "comparable market concept". Accordingly, prices charged by the dominant undertaking in the market concerned have to be compared with prices that would prevail in structurally comparable markets with effective competition. An abuse can be assumed if the prices charged by the dominant undertaking in the relevant market significantly exceed the prices in comparable markets.

Before the prices are compared, a three-step procedure applies: First, in order to better reflect the characteristics of the market where the undertaking is dominant, the prices charged on the comparable market need to be adjusted by premiums and discounts. Second, as such adjustments naturally bear a certain amount of inaccuracy, a "safety margin" must be applied which varies from case to case to prevent over-enforcement. Finally, the prices charged by the dominant company in the relevant market need to significantly exceed the prices in the comparable markets (insofar that an additional premium applies to establish an abuse).

Section 19(2) No. 2 ARC also prohibits that a dominant undertaking charges "unreasonable terms and conditions". For determining whether a company demands excessive terms and conditions in principle the same rules apply as regards excessive pricing. This alternative is highly topical as it has been applied by the FCO in the Facebook case as well as in the Amazon case (see question 61).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

44. Is there a concept of abusive discrimination and under what conditions does it raise concerns?

Germany

In principle, unlawful discrimination may arise if (i) a dominant undertaking applies different conditions to similar customers for equivalent transactions, provided that (ii) there is no objective justification for such dissimilar treatment, and (iii) some customers are placed at a competitive disadvantage relative to other customers to such a degree that it creates a risk of foreclosing equally efficient competitors.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

45. Are only companies with monopoly power subject to special obligations under unilateral conduct rules?

Germany

Companies with relative market power may also fall within the scope of certain unilateral conduct rules as described in questions 5 and 25.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

46. Must the monopoly power exist in the same market where the effects of the anticompetitive conduct are felt?

Germany

No. For example in relation to margin squeeze (see question 41), competition is restricted on a downstream market where the dominant undertaking does not need to have any market power.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

Sanctions and remedies

47. What sanctions can the competition authority impose or recommend?

Germany

If the FCO determines that an abuse of a dominant position has occurred, it issues a cease-and-desist order or determines that a certain conduct constituted an abuse if the abusive conduct has been terminated before (the end of) the investigation but where the risk of repetition remains in the future. Companies also have the option to offer commitments to end the conduct under investigation. In clear-cut cases, in particular with regard to per se abusive conduct (see question 28), the FCO may also impose an administrative (criminal) fine.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

48. How are fines calculated for abuses of monopoly power?

Germany

The level of the fine that can be imposed is up to €1 million for private individuals.

In the case of undertakings, in relation to intentional infringements fines may amount up to a maximum of 10 per cent of the worldwide group turnover in the last financial year prior to the decision (the "statutory maximum fine").

For purposes of calculating corporate fines, the FCO has published revised fining guidelines in 2013. According to these guidelines, the authority determines the individual framework marking the upper limit of the payable fine. The upper limit may be the statutory maximum fine or 10 per cent of the turnover generated through the abusive conduct during the infringement period and multiplied by a factor reflecting the companies' total group turnover (the "affected turnover"), as long as the affected turnover does not exceed the statutory maximum fine. If the individual framework for fines exceeds the statutory maximum fine, the latter prevails and constitutes the absolute limit. Once the framework for fines has been determined, the FCO identifies the individual mitigating and aggravating factors and infringement-related criteria (eg, type and effect of the infringement) to set the concrete fine within the individual 10 per cent statutory maximum framework for fines.

The guidelines have been adopted, inter alia, to put greater emphasis on the principle of proportionality since in previous cases higher fines have been imposed on one-product companies in comparison to multi-product companies. The reason is that in case of a one-product company, the affected turnover represents the entire turnover whereas in a multi-product company the affected turnover may be only a small share of the overall turnover.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

49. What is the highest fine imposed for an abuse of monopoly power?

Germany

In 2007, the FCO imposed the highest ever fine in an abuse case totalling to €216 million in a case concerning the abuse of market dominance on the markets for television advertising. Two German private television groups held a combined market share of approximately 80 per cent and offered specific and retroactive rebates to media agencies if they spent a minimum proportion of their advertising budget for commercial air time on these channels. This practice had the effect that the contestable share of advertising budgets of media agencies were enticed away from smaller television companies because they could not afford to compensate losses incurred if media agencies decided to switch. Hence, the high market shares in combination with the rebates effectively foreclosed the television advertising market for smaller competitors.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

50. What is the average fine imposed over the past five years?

Germany

Over the past five years, the FCO – based on publicly available information – has imposed a fine for abuse of dominance in only one case (in 2015), namely against SodaStream GmbH (€225,000). In an investigation against EDEKA that started as an administrative (criminal) fine proceeding, the FCO decided to switch to a pure administrative proceeding and drop any fines due to the novelty and complexity of the legal issues involved. Also, the Facebook case (see question 61) was conducted as an administrative proceeding (ie, no fines were imposed).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

51. Can the competition authority impose behavioural remedies?

Germany

The FCO may impose all measures that are necessary and appropriate to effectively bring the infringement to an end (ie, structural or behavioural remedies, or both). However, contrary to merger control proceedings, structural measures may only be imposed if there are no behavioural measures sufficiently addressing the abusive conduct or the behavioural remedy already constitutes a heavier burden for the undertaking concerned.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

52. Can it impose both negative and positive behavioural obligations?

Germany

Yes.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

53. Can the competition authority impose structural remedies?

Germany

Yes, see question 51.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

54. Can companies offer commitments or informal undertakings to settle concerns?

Germany

Offering commitments may be a successful way to deal with competition concerns. If the FCO finds that the commitment offered would sufficiently remedy the abusive behaviour, it may declare such commitments to be binding for the addressee of the decision.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

55. What proportion of cases have been settled in the past five years?

Germany

There is no public data for a reliable assessment. Often, cases are not made public, in particular when the case has been settled.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

56. Have there been any successful actions by private claimants?

Germany

Section 33(a) ARC allows follow-on actions to seek compensation for damages inflicted by an abuse of dominance (or a violation of the cartel prohibition). Moreover, companies can require dominant undertakings to provide products or services if the legal requirements are fulfilled (see question 38). Also, interim measures are available to an affected party. The respective court may issue a preliminary injunction to protect the claimant in the case of an urgency that requires immediate relief to avoid irreparable damage.

Although the ARC is enforced primarily by the FCO, the number of damage claims following infringement decisions in investigations has increased in the last couple of years. In the past, these cases predominantly dealt with refusals to supply, challenges to the validity of agreements and discrimination by dominant undertakings. Following significant changes in the ARC triggered by the EU Directive on Antitrust Damages, the already considerable number of follow-on damages claims before German courts will further increase. All in all, private enforcement has become a significant factor in competition law enforcement in Germany and will, in our view, continue to grow in importance.

In some instances, the FCO actively participates in private claims. For example: Nokia filed a lawsuit against Daimler before the Mannheim Regional Court for patent infringement. The FCO sent an amicus curiae letter to the court recommending that the court sends four questions to the Court of Justice of the European Union, one of which relates to the question whether Nokia abuses its market position. The decision of the court is pending.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

Appeals

57. Can a company appeal a finding of abuse?

Germany

Yes.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

58. Which fora have jurisdiction to hear challenges?

Germany

Decisions of the FCO can be appealed to the Higher Regional Court of Düsseldorf. In civil litigation against a dominant undertaking, the usual rules of civil procedures apply.

A further appeal against a decision of the Higher Regional Court of Düsseldorf to the German Federal Supreme Court is only permitted on important or novel questions of law or a successful non-admission complaint to the Federal Supreme Court.

Furthermore, addressees of a FCO's decision may seek interim relief before the Higher Regional Court of Düsseldorf with the aim to suspend implementation of the FCO's decision pending the outcome of the appeal in the main proceedings (see, for instance, the Facebook case).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

59. What are the grounds for challenge?

Germany

A decision by the FCO is subject to full review by the Higher Regional Court in Düsseldorf in fact, in law, or both.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

60. How likely are appeals to succeed?

Germany

Only a few dominance cases have been appealed to the Higher Regional Court of Düsseldorf (or the former Court of Appeals in Berlin), and only a small percentage has been successful. There is no general rule of thumb. All cases need to be assessed on a case-by-case basis.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

Topical issues

61. Summarise the main abuse cases of the past year in your jurisdiction.

Germany

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 Juliana Penz

62. What is the hot topic in unilateral conduct cases that antitrust lawyers are excited about in your jurisdiction?

Germany

Highly topical remains the FCO's Facebook decision. The decision has received much attention spanning beyond German borders and it is expected that this case will be followed closely by the legal community going forward. In particular, the outcome of Facebook's appeal before the Higher Regional Court of Düsseldorf will be awaited with suspense following the decision by the German Federal Supreme Court in the interim proceedings.

Another development to look out for is certainly the proposed tenth amendment of the ARC. The proposed "digital antitrust law" (GWB-Digitalisierungsgesetz) will equip the FCO with new tools in the area of abuse of market power and will be particularly relevant for companies active in the digital sector (see question 64).

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

63. Are there any sectors that the competition authority is keeping a close eye on?

Germany

For a few years, the FCO has been showing particular interest in digital and online markets (see question 64) and continues to do so. The FCO also continues to show increased interest in online platforms and platform markets.

In September 2019, the FCO and the German energy regulator (Bundesnetzagentur) published guidelines for the control of abusive practices in the electricity generation and wholesale trade sector.

Answer contributed by Dr Marcel Nuys, Juliana Penz-Evren and Juliana Penz

64. What future developments can we expect?

Germany

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 Juliana Penz

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