On 7 October 2019, the German Ministry of Economics and Energy published the draft Act on Digitalisation of German Competition Law (the “Draft Act”). The Draft Act proposes several key changes to the current competition rules in Germany, with an emphasis on what the proponents present as novel challenges that arise in digital markets and in connection with data. Subject to further revisions by the Federal Government, the Draft Act would enter into force during the second half of 2020.
Dominance / Market Power
The Draft Act proposes significant changes to the rules on abuse of dominance, specifically with regard to conduct in the digital economy and by intermediaries. It introduces into German competition law the concept of what it calls “intermediary power” in multi-sided markets and confers on the German Federal Cartel Office (the “FCO”) the power to take action in relation to certain actions by intermediaries and companies with “paramount significance across markets” (“überragende marktübergreifende Bedeutung”).
The Draft Act would give the FCO the power to designate certain companies to be of paramount significance across markets. In making such a determination, the FCO can take into account companies’ access to and/or ownership of valuable data and their intermediation power. This provides the FCO with powers, for example, to prohibit such designated companies from preferencing their own services over third-party services where both are offered on the companies’ own platform (so called ‘self-preferencing’) and from unduly restricting third-party access to their platform. The Draft Act would also enable the FCO to require such designated companies to provide access to certain data and/or related infrastructure, where such access can be considered objectively necessary for others to remain active on an upstream or downstream market. The power can also be used to rein in restrictions on data portability, such that users of data-related services would be able to migrate their data to a different platform.
The Draft Act also proposes removing the reference to SMEs in the context of abuses of relative market position, such that the provision could apply regardless of the size of the disadvantaged company. As a result, abuses of relative market position could occur in relation to a large company vis-à-vis other companies that are larger than SMEs.
The Draft Act further enhances the FCO’s power to impose interim measures. This amendment is intended to enable the FCO to act pre-emptively where it forms the preliminary view that there is an imminent threat to competition. In such cases, the FCO may act absent clear evidence of anticompetitive harm at the time that it decides to adopt interim measures. This aims to address situations where companies might attempt to leverage market power in one market into another market and where the current proceedings arguably take too long to address potential competition concerns. These new powers would also enable the FCO to impose interim measures in relation to exclusivity and MFN clauses.
These changes are accompanied by rules to expedite FCO proceedings, including rules that increase the use – at the FCOs discretion – of oral hearings.
The Draft Act proposes increasing the domestic turnover threshold from €5 million to €10 million, and increasing the de minimis threshold from €15 million to €20 million. It envisages that the increase in the domestic turnover threshold will reduce the number of merger notifications by approx. 20%.
Further, under the new rules, the Phase 2 merger review period would be extended from four to five months. This is meant to enable the FCO to conduct a more sophisticated review of complicated mergers, including the use of more (sophisticated) economic evidence than is currently the case.
Agreements / Cooperation Between Competitors
To enhance legal certainty, especially in the relatively novel territory surrounding data, the Draft Act proposes that companies will be able to proactively approach the FCO for informal consultation before implementing joint projects with competitors. If there is a significant legal and economic interest in the review, the FCO would decide within six months whether to permit the project or to advise companies to refrain from such cooperation. Such reviews would be expected to occur in the context of cooperative arrangements that give rise to complex and novel legal questions and/or are associated with significant investments.
Implementation of ECN+ Directive
Finally, the Draft Act implements the provisions of the ECN+ Directive, which sets out rules for enhanced cooperation and mutual assistance between the national competition authorities within the European Competition Network.