“Digitalisation Act” approved – Germany pioneering antitrust regulation of digital markets

By Marcio Da Silva Lima, Maren Steiert

01-2021

On 14 January 2021, the German parliament approved the so long discussed reform of German competition law which was now also confirmed by the second parliamentary chamber - the “Bundesrat”. The innovations to be implemented in the German Act against Restraints of Competition (“ARC“), will in particular provide the Federal Cartel Office (“FCO”) with regulatory tools to impede market dominant companies active in the digital (platform) markets from possible abuses of their competitive dominance. The German approach assigns a significant pioneer role to Germany in the more and more dynamic combat against anti-competitive practices characterizing the digital economies.

“Social Digital Economy”

Emphasising Germany’s pioneer role, Andreas Mundt, President of the FCO, welcomed the parliamentary decision. And in fact, with the revised antitrust regime, Germany will be the first country in the world to introduce antitrust measures aimed at the potential abusive conduct of digital platform operators which, as stated by Christian Democrat Members of the Parliament, shall initiate the new area of “Social Digital Economy”.

“Paramount significance for competition across markets”

In this respect, the core provision of the German antitrust law reform will be the new Section 19a ARC. Accordingly, the FCO will be entitled to determine by way of order which must be time limited of five years, that an undertaking active on the digital markets has a paramount cross-market significance for competition (“PCMSC”). In this respect, the FCO’s decisions shall, in particular, consider the undertakings:

  • dominant position on one or more digital market(s);
  • financial resources;
  • vertical integration;
  • access to competition-relevant data; and
  • activities and their importance for the access of third parties to procurement and sales markets and its thereto connected influence on the third parties’ respective business activities.

In the cases, where such a PCMSC is officially found, the FCO may, for example, prohibit a search engine operator from treating own and competing offers unequally – e.g. by way of favouriting its own offers in the generated search engine results, therefore making competing offers less visible to potential customers.

One other important objective of the new antitrust rules addressing the digital industry is to impede the misusage of data collection and process. In particular, discussions and antitrust proceedings around Facebook incentivized the German lawmakers to implement a provision within the ARC which aims to prevent market dominant companies to foreclose markets by collecting and processing huge amounts of internet user data. In this respect, it will be now easier for the FCO, for example to prohibit dominant data collecting companies to make the usage of a certain internet service depended from the users permission to collect his data out of other used services. Furthermore, dominant platform companies can be also prohibited to deny access to collected data if it is necessary for a third company to offer a competing service. In particular, it shall be easier for internet users in the future to switch to other platforms and services which can only effectively compete with the dominant ones if the necessary data is accessible.

Implementation of a “high speed process”

The new antitrust tools to be granted to the FCO will, furthermore, be accompanied with provisions implementing a “high speed” proceeding related to Section 19a ARC decisions. This means, that disputes connected to the new Section 19a ARC will be decided by the German Federal Court of Justice as first and last instance in relation to all procedural acts which can potentially be contested by the parties involved. The idea behind is to prevent structural damages to the digital markets which often cannot be reversed after the usually long-lasting antitrust proceedings.

Merger Control

Nevertheless, the digital economies and their problematic antitrust implications where not the only object of the complex law renewal process which will come to an end now with the approval of the German legislation bodies. Another important key point was also the German merger control regime. In particular, small and medium-sized undertakings as well as the German cartel authority shall be relieved in view of 1,200 merger control proceedings in 2020, which only seven of ended in the phase II-proceeding and a corresponding in-depth investigation by the FCO. To allow the FCO to focus on competition-relevant merger projects a big amount of transactions will, from now on, fall out of the German merger control regime by raising up the German domestic turnover thresholds, i.e. the first threshold from 25 million euros to 50 million euros and the second threshold from 5 million to 17.5 million euros. The adjustment is expected to reduce the number of notifiable mergers by approx. 25% and increase the efficiency of the FCO.

Parliamentary remarks

Speakers from the governing parties emphasised that the amendment should not slow down the digital economy by targeting companies only because of their mere size. Rather, the aim was to hold companies accountable where they abuse their market position to the detriment of competitors, consumers and businesses. The Federal Ministry for Economic Affairs and Energy stresses that the aim is to make the rules of the game stricter for dominant platforms and, at the same time, to increase the opportunities for innovation and market and data access for competitors. The law came into force on 19 January 2021.

For more information please contact Marcio da Silva Lima and Maren Steiert.

 
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