The European, Middle Eastern and African Antitrust Review 2017

Germany: Federal Cartel Office

20 July 2016

President

In recent years digitalisation and the internet economy have increasingly affected all sectors of the economy. The impact of the digital revolution is certainly a demanding development not only for the European business community but also for competition agencies in Europe and around the world.

The internet economy raises new questions on how competition law should be enforced. In this regard the Federal Cartel Office (Bundeskartellamt) set up a ‘Task Force for Internet Platforms' in early 2015. Its objective is to develop the right approach to dealing with online platforms under competition law. The Task Force has three main tasks: (i) to conduct in-depth research into existing literature and national and international case law, (ii) to do conceptual work on how to assess cases in the digital economy, and (iii) to investigate cases in order to find out if our concepts apply appropriately in practice.

Building on the knowledge gained by the Task Force, the Bundeskartellamt has cleared two mergers in the areas of real estate portals (Immonet.de and Immowelt.de) and dating platforms (Parship and Elitepartner). It has also initiated a proceeding against Facebook on suspicion of its having abused its market power by infringing data protection rules.

To date the Bundeskartellamt has already made several important decisions in online markets. It prohibited the hotel booking platforms HRS and Booking.com from using ‘best price' clauses because they impede competition between such platforms. The Düsseldorf Higher Regional Court has confirmed the prohibition decision against HRS and has - in a preliminary ruling - also followed the arguments of the Bundeskartellamt against the so-called ‘narrow' best price clause applied by Booking.com. It will also quickly pursue the current proceeding against Expedia's best price clauses. Due to the Bundeskartellamt's proceeding against Amazon, the online retailer already abandoned its price parity clause in 2013, by which sellers were prohibited from selling products they offer on Amazon cheaper through any other sales channel. The Bundeskartellamt is also very watchful where manufacturers try to restrict online sales, which could be seen in several cases related to companies such as Adidas, ASICS or Bosch Siemens Hausgeräte.

The institutional set-up of the Task Force and the examples from recent case practice illustrate that the Bundeskartellamt is fully aware of the special conditions in online markets and tries to develop reasonable standards for cases in the digital economy. Recent experience also shows that the classical tools of competition law are generally sufficient to deal with most of the new issues arising in the context of digitalisation. Competition law is a lively and fluid law, designed to cope with all kinds of economic developments and disruptions. The Bundeskartellamt is in regular contact with lawmakers to discuss how the legal framework could be adjusted and fine-tuned to tackle the issues in this area appropriately.

To give an example, we see that direct and indirect network effects and innovation are vital aspects of competition on digital markets. Network effects can be decisive for the market position of any company. Access to data, in any form, has also developed into a significant competition parameter and potential source of market power. A joint study on ‘Big Data' by the French Competition Authority and the Bundeskartellamt gives an excellent overview on how to include the use of data in our assessment of competition cases. Other competition parameters - such as price competition or market shares as an indicator of market power - tend to be less important for the internet economy than for more traditional markets. Therefore expanding the criteria for dominance which are defined in the current legislation should be considered in the upcoming amendment to the German Competition Act.

In addition to the internet economy, the Bundeskartellamt will be working on numerous proceedings and projects across all sectors in 2016. Sectoral priorities are mainly set by the Decision Divisions on the basis of the latest developments in the relevant markets.

The Bundeskartellamt gives high priority to the prosecution and punishment of cartels. In recent years the modernisation of its investigation methods and structural reforms have further improved the intensity and effectiveness of its prosecution of illegal agreements. In 2016 the authority will conclude some important cartel cases. At the same time it has already opened several new investigations.

Currently one of the Bundeskartellamt's most time-consuming fine proceedings is reaching its conclusion, namely the vertical price fixing case in the food retail sector. In this case, producers of branded goods and retailers selling confectionery, coffee, pet food, beer and body care products agreed on vertical price fixing. The series of proceedings began with dawn raids in January 2010. To date the Bundeskartellamt has imposed fines amounting to approximately €242 million on nine retailers and four brand manufacturers. The proceeding against three companies in the product categories confectionery and beer is still pending and is expected to be concluded within the next few months.

Vertical competition restraints will remain a significant issue in 2016. For example, the Bundeskartellamt is working on a paper that focuses on the food retail sector to clarify where the line is drawn between a recommended retail price and price maintenance.

The food retail sector is also an important sector for the Bundeskartellamt in the area of merger control. The food retail sector in Germany is highly concentrated. The four largest retailers EDEKA, REWE, ALDI and the Schwarz group (including Lidl) share between them more than 85 per cent of the total market. Therefore in merger control proceedings the Bundeskartellamt analyses the situation in the affected markets very carefully. In 2015 the Bundeskartellamt prohibited the planned acquisition of Kaiser's Tengelmann outlets by EDEKA. In the authority's opinion the takeover would have greatly limited choice for local consumers and the possibilities for them to switch to another retailer. It would have also led to further concentration on the demand side in the food procurement markets.

The companies then applied for a ministerial authorisation. Ultimately, the Federal Minister for Economic Affairs and Energy authorised the merger this year subject to the explicit condition that the staff currently employed by Kaiser's Tengelmann keep their jobs and the co-determination rights of employees are protected and strengthened. The case is still pending because of the conditions precedent imposed (ie, the merger cannot be implemented before these conditions have been fulfilled). In addition, other companies in the food retail sector (REWE and Markant) have appealed the ministerial approval before court.

The market structure in the food retail sector will remain an important topic for the Bundeskartellamt in the months to come, not only because of this case. Other companies in this sector are also thinking out loud about mergers and just recently Rewe and Coop have applied for the approval of a joint venture.

The Bundeskartellamt also continues to work on its ongoing cases of abuse of dominance. In the recent past we have seen several cases, especially in the provision of public services, energy and water.

In these areas too the Bundeskartellamt promotes the idea of competition in political discussions. Following a wave of privatisation in the nineties, it has become evident that many municipalities have again begun to carry out services of general public interest themselves, for example in the waste management sector. The Bundeskartellamt is committed to maintaining competitive structures and strives to prevent a monopolisation of waste management services by the municipalities. The authority is currently also preparing a sector inquiry into the waste management sector which will analyse, among other things, the intensity of competition in tenders for waste management services.

In general, sector inquiries have become an important tool for the Bundeskartellamt. They are conducted to gain better insight into the competition situation in certain sectors if there are indications that competition in these markets is restricted or distorted. Sector inquiries are a very useful basis for the case work in merger control and in the control of abusive practices. The Bundeskartellamt is also working on a sector inquiry into the submetering of heating and water costs, and has also recently initiated a sector inquiry into the hospital sector.

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