The worldwide reactions to the filing of a lawsuit by U.S. authorities against Facebook on the 9th of December[1] as well as to the introduction of the Digital Services Act by the EU Commission on the 15th of December[2] exemplify a common understanding that there is a need for change in how we deal with digital conglomerates. With its recent advance German legislation is right on track.
On the 09th of September 2020 the official draft [Regierungsentwurf] for the 10th German Competition Law Novella (“Draft”) has been published[3] after an initial draft version [Referentenentwurf] had been made public on the 24th of January 2020.[4] The exceptionally long time between these two publications is only one indication as to the heavily contested content of this draft. Commentators question whether this constitutes national unilateralism or whether Germany hereby embraces the role as a European forerunner[5]. At the center of this draft stands the question what role competition policy should play in meeting the challenges of digitization and globalization.[6]
This contribution aims at providing a short overview of the relevant new regulatory approaches regarding the Federal Cartel Office´s[7] competences when dealing with possibly abusive market behavior by dominant online platforms. It will then reflect on some literature voices criticizing the draft for creating an environment of legal uncertainty. This criticism shall be opposed in favour of a different perspective: one that appreciates the authoritative flexibility granted by this draft, which is needed in an era of digitization.
The German draft
The focus will be on the areas of abuse control, fusion control and administrative procedures.
Abuse control[8]
- Concerning the evaluation of market dominance a future criteria will be an undertaking´s “access to data relevant for competition” (§ 18(3) Nr.3 GWB[9]-draft).[10]
- The same article introduces the concept of “intermediary power” [11] into German competition law (§ 18(3b) GWB-draft), taking account of the far-reaching mediation and control functions of platforms.[12]
- The change of wording in § 19(1) GWB from “The abuse of a dominant position […] is prohibited.” to “The abuse is […] prohibited” has the consequence that a causal link between the dominant position of an undertaking and disapproved conduct is not mandatory anymore. This aims at facilitating action taking by the FCO.[13]
- According to the draft, an abuse of a dominant position can consist of the refusal to provide access to data (§ 19(2) Nr.4 GWB-draft).[14] This norm implements the CJEU´s “essential facilities doctrine”[15], thus aligning German law with European practice but extending it to an obligation to provide access to data.[16]
- 20(1a) GWB-draft creates an obligation to provide access to data for undertakings with relative or superior market power. This legally constitutes a case group of data-related dependence.[17]
- 20(3a) GWB-draft introduces a for early intervention against so called “tipping”.[18] This aims at allowing injunctive action against targeted obstruction strategies in cases where undertakings are not yet market dominant.[19]
- Lastly in the realm of abuse control a new article § 19a GWB is created. It introduces a new classification of “undertakings with paramount significance for competition across markets”. This norm is intended to enable the FCO to more effectively control large (digital) corporations that are of outstanding importance for competition across markets.[20] Once an undertaking has been classified as such under paragraph 1[21], the FCO may issue far reaching injunctions, such as prohibiting the impediment of competition by making the interoperability of products or services or the portability of data more difficult (§ 19a(2) Nr.4 GWB-draft). This new article creates a rebuttable presumption in favour of the FCO and the burden of proof as to whether a certain conduct is “objectively justified”[22] lies with the undertaking. Regarding these prohibitions of market obstruction, it is not necessary for the undertaking to be market dominant on the relevant market.[23]
Fusion control
- The draft introduces the so called “Remondis-clause”, which grants the FCO the competence to obligate companies to always register transactions, if certain conditions are met (§ 39a GWB-draft). The competent authority is thus provided with an instrument to take action if the domestic turnover thresholds are not reached.[24]
Administrative procedure
- The Draft aims at speeding up and facilitating administrative procedures.[25] It acknowledges that the digital transformation of markets makes rapid and effective intervention by the authorities necessary in order to prevent irreversible harmful market outcomes. To this end, the possibility of interim measures will be facilitated[26] (§ 32a(1) GWB-draft), the possibility of oral hearings in case of the need for prompt decisions will be strengthened[27] (§ 56(1) GWB-draft) as well as companies possibilities to informally obtain assessments by the cartel authorities – for example on acquisition projects – with the aim of obtaining legal certainty[28] (§ 32c GWB-draft).
In a nutshell, the above hopes to provide a basic idea of the new instruments and methods that the Draft presents the German anti trust authorities with when facing a rapidly changing economic reality. As stated by Crémer/Montjoye/Schweitzer in their report on “Competition policy for the digital era” for the European Commission, many aspects about the functioning of platforms and their surrounding economy are not well understood yet[29] – a realization worth remembering.
While it has received a lot of praise during the last months, the Draft has also been reproached for creating an environment of legal uncertainty in the field of anti trust law. This contribution does not attempt to argue against the fact that by using indefinite legal terms, vague criteria and open provisions the Draft creates legal uncertainty. Rather, it acknowledges this fact and intends to shift the attention on a different perspective: one might look at these norms and see legal uncertainty, but one might also look at them and see necessary legal and authoritative flexibility. As we have entered an age of digitization with constant disruptive changes a growing need for such flexibility (not only in the field of competition law) is undisputed.[30]
So if the Draft is being criticized[31] for using the term “data” [32] without further elaboration this shows on the one hand the legislators´ insight to the impossibility of defining this term[33] and on the other hand it gives market players, authorities and courts a chance to shape it. The same goes for the Draft´s use of indefinite legal terms[34] such as “impediment on independent attainment of network effects”[35] and “imminent threat of serious harm”[36] or vague criteria such as in cases of the “Remondis-clause” or the classification of an undertaking “with paramount significance for competition across markets” [37]. As emphasized above, a lot about platform and internet economies we simply don´t know. But we experience that the status quo is not an option anymore. Thus the Draft aims at establishing an anti trust law that contains the means to cope with big platforms.[38] Most of the new approaches introduced will give the FCO (flexible) instruments to react earlier, faster and more effective against possible market abuse – the greater the undertaking the greater the possible intervention. Legal uncertainty will mainly be to the detriment of the biggest players.[39] They in turn have the funds and capacity to challenge these norms legally.[40] Throughout the Draft and against every measure legal protection is always guaranteed.[41]
Crémer/Montjoye/Schweitzer formulate it very aptly by stating that “in the context of highly concentrated markets characterized by strong network effects and high barriers to entry […], one may want to err on the side of disallowing potentially anti-competitive conducts, and impose on the incumbent the burden of proof for showing the pro-competitiveness of its conduct.”[42] In other words: It is time for the big platforms to show us that their actions benefit society.
Originally, the Draft was scheduled to be finally debated in Parliament [“Bundestag”] on the 17th of December 2020. However, the debate was removed from the agenda.[43] It is noteworthy that so far no major changes have been proposed and also the opposition has only tabled minor motions. As the 04th of February 2021 draws closer it remains to be seen how the German law mills will move.
[1] Kara Swisher, Facebook has become a menace, NY Times, International Edition, Dec. 12-13, 2020, P. 1, 9.
[2] Philippe Escande, Un consensus international inédit émerge pour coupe les ailes des GAFA, Le Monde, 16.12.2020: https://www.lemonde.fr/economie/article/2020/12/15/un-consensus-international-inedit-emerge-pour-couper-les-ailes-des-gafa_6063463_3234.html; EU needs new teeth as watchdog of Big Tech, Financial Times, 15.12.2020: https://www.ft.com/content/6d4b9dbc-c795-427d-b43e-741a26511abb.
[3] The initial trigger for this novella has been the Directive (EU) 2019/1 (its implementation deadline ends on the 04th of February 2021) which focuses on the empowerment of national competition authorities. Ironically, a goal for which the German draft is heavily criticized for not achieving, e.g. Ludwigs, NZKart 2020, 576.
[4] von Wallenberg, ZRP 2020, 238 (238); Also compare https://www.d-kart.de/blog/2019/10/14/der-referentenentwurf-zum-gwb/, a blog on anti trust topics by Heinrich Heine University Duesseldorf (Germany), that created a very helpful English translation of the initial draft.
[5] Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2691), Kredel/Kresken, NZKart 2020, 502 (502), von Wallenberg, ZRP 2020, 238 (238).
[6] Draft, P. 1, see for the full text https://dip21.bundestag.de/dip21/btd/19/234/1923492.pdf.
[7] The highest German anti trust authority, the “Bundeskartellamt” with seat in Bonn (hereinafter “FCO”).
[8] A strong influence on the development of this complex has had the study “Modernization of abuse control for dominant undertakings”, commissioned by the German ministry for trade and energy, whose author was, inter alia, Heike Schweitzer, a renowned German expert on competition law, who then would go on to become co-author of the European Commission´s report on “Competition policy for the digital era”.
[9] The German statutory competition law called “Gesetz gegen Wettbewerbsbeschränkungen“.
[10] This criterion had already been introduced by the 9th amendment of the GWB where it was restricted to multi-sided markets. This expansion to all markets underlines the acknowledgment that data is becoming a deciding factor in all markets, Draft P. 67; Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2691)
[11] “Typically multi-sided digital platforms”, Draft P. 67.
[12] Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691(2691).
[13] Draft P. 68 f.; This reflects the recent landmark decision by the German Federal Court in Facebook v. Bundeskartellamt, BGH, Judgement of 23. June 2020, KVR 69/19.
[14] Wording of § 19(2) Nr.4 GWB-draft: [An abuse exists in particular if a dominant undertaking as a supplier or purchaser of a certain type of goods or commercial services] “refuses to supply another undertaking with this product or commercial service against adequate remuneration, including access to data, networks or other infrastructure, the supply is objectively necessary in order to operate on an upstream or downstream market and the refusal to supply threatens to eliminate effective competition on that market, unless the refusal to supply is objectively justified”.
[15] Compare CJEU, C-7/97, Bronner; C-418/01, IMS Health; CEU, T-201/04, Microsoft v. Commission.
[16] Draft P. 70; Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2692).
[17] Draft P. 78 ff., von Wallenberg, ZRP 2020, 238 (239); Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2694).
[18] Draft P. 80: “Tipping” means the transformation of a market characterised by strong positive network effects with several suppliers into a monopolistic or highly concentrated market.
[19] von Wallenberg, ZRP 2020, 238 (239).
[20] Draft P. 73.
[21] This classification process is carried out through an independent injunction by the FCO, which itself is subject to legal protection measures, Kredel/Kresken, NZKart 2020, 502 (503); Draft P. 72.
[22] § 19a(2) S.2 GWB-draft.
[23] Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2692); Kredel/Kresken, NZKart 2020, 502 (503).
[24] Draft P. 93; von Wallenberg, ZRP 2020, 238 (240); Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2695).
[25] Draft P. 54.
[26] Draft P. 81 ff.
[27] Draft P. 108 ff.
[28] Draft P. 84 ff., von Wallenberg, ZRP 2020, 238 (240).
[29] Crémer/Montjoye/Schweitzer, EU Commission report on the „Competition policy for the digital era”, 2019, P. 71.
[30] See inter alia Minssen//Schovsbo, in: Intellectual Property and Digital Trade in the Age of Artificial Intelligence and Big Data, 2018, P. 125.
[31] Gerpott, Mit Wattebäuschen gegen Plattformriesen, Frankfurter Allgemeine Zeitung Einspruch, 20.11.2020; Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2692).
[32] Such as § 19(2) Nr.4 and § 20(1a) GWB-draft, see above (4.) and (5.).
[33] Crémer/Montjoye/Schweitzer, EU Commission report on the „Competition policy for the digital era”, 2019, P. 24 ff.
[34] von Wallenberg, ZRP 2020, 238 (239); Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2694).
[35] § 20(3a) GWB-draft.
[36] § 32a(1) GWB-draft.
[37] Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2693), Kredel/Kresken, NZKart 2020, 502 (503).
[38] Draft P. 2; Kahlenberg/Rahlmeyer/Giese, BB 2020, 2691 (2691).
[39] Noteworthy is of course § 19a GWB-draft, see above (7.).
[40] See Bundeskartellamt, Fallbericht (report) v. 15.2.2019 zur (regarding the) Facebook-Entscheidung (decision) v. 6.2.2019, Az. B6-22/16.
[41] Draft P. 84, Kredel/Kresken, NZKart 2020, 502 (503).
[42] Crémer/Montjoye/Schweitzer, EU Commission report on the „Competition policy for the digital era”, 2019, P. 4, 127.
[43] https://www.bundestag.de/dokumente/textarchiv/2020/kw44-de-digitales-wettbewerbsrecht-798194, accessed last on the 18th of December 2020.
