German Law Aims To Tackle Market Power Of Digital Giants

By Philipp Grüll

(EurActiv) — Germany is modernising its competition law to stand up to digital corporations. In the future, the Cartel Office will be able to act faster and tougher when companies dominate the market. Europe can learn from this. EURACTIV Germany reports.

The dominant market position of a few digital companies, such as Facebook and Amazon, has long been a thorn in the side of European competition watchdogs.

While they discuss EU-wide regulation in Brussels, Germany is moving ahead. On Thursday (14 January), the Bundestag will pass an amendment to the “Act against Restraints of Competition,” or “GWB” for short.

The core objective of the reform is to make competition in the digital space fairer – or, in some sectors, to ensure that there is real competition again.

“The amendment therefore contains a moderate modernisation to the oversight of unfair competition to better record and effectively put an end to the abuse of market power, especially by digital platforms,” states the final draft of the law, which was made available to EURACTIV Germany.

New market power needs new methods

In the future, antitrust authorities will be able to determine whether a digital company is of “overriding importance across markets.” Criteria for this include access to competitively relevant data, vertical integration on several markets or its financial strength.

As soon as the Cartel Office determines such “cross-market significance,” it can impose restrictions on the company. For example, an e-commerce platform would then no longer be allowed to preferentially offer products that it manufactures itself.

That could become a problem for Amazon, which is suspected of adjusting its algorithms to make its own brands look better. According to a report in the Wall Street Journal, this is happening, although the company denies it.

Furthermore, such dominant companies will in the future be prohibited from denying interoperability of their products or making it artificially difficult for users to transfer their data from one service to another.

This is intended to ensure that customers can choose more flexibly between providers. The exclusive pre-installation of proprietary apps on end devices of a dominant company can also be prohibited.

In general, the Cartel Office can react as soon as it determines that a dominant company is “directly or indirectly” hindering competitors.

This also applies to markets in which the company does not yet meet the criteria for market power, but “can rapidly expand its position, even without being dominant.” This is intended to ensure that the authorities can intervene in good time in the event of imminent market dominance, rather than ex-post when the damage to competition has already been done.

Verzögerung wegen Beschleunigung

The grand coalition is enthusiastic. “Germany is becoming a pioneer in the regulation of digitally powerful companies,” tweeted MP Falko Mohrs (SPD), rapporteur and member of the Competition Law 4.0 Commission.

The CDU/CSU is also satisfied. “After years of intense debate, we have now reached our goal: We will be the first parliament in the world to adapt competition law to the challenges of the digital world,” Hansjörg Durz (CSU), vice-chair of the Bundestag’s Digital Committee, told EURACTIV.

However, it was a long road before the governing parties reached agreement.

The amendment was supposed to have passed the Bundestag in mid-December, but the preliminary agreement fell apart at the last minute. The sticking point was the shortening of the legal process, which was finally approved by the committee on Wednesday (13 January).

It is intended to speed up antitrust proceedings so that lawsuits do not drag on for years – like the current disputes with Facebook.

Complaints are to go directly to the Federal Court of Justice, and no longer be heard first at the Düsseldorf Higher Regional Court. Speed is essential, especially if the antitrust authority wants to intervene preventively before a company becomes dominant and the market threatens to “topple.”

The SPD-led Ministry of Justice put on the emergency brakes in December, because Minister Christine Lambrecht still wanted to carry out a final check to see whether this intervention in the legal process was constitutional.

Now, however, the way is clear. “This is the only way that jurisdiction can keep pace with the dynamic development of digital markets,” said Durz.

Lessons for Europe

He expects the GWB amendment to advance Europe as a whole.

“Germany can now gain experience with the implementation of this standard and bring it to bear at the European level in the course of the Digital Markets Act negotiations,” Durz said.

For example, the Commission could formulate abstract legal standards in the DMA, as the GWB does, instead of just listing specific examples of market power abuse. This would make regulation “open to the future and technology.”