Amendment of German Competition Law: Stronger regulation of digital groups and consideration of compliance measures
In January 2021, the 10th amendment to the German Act against Restraints of Competition (hereinafter “ARC”) has entered into force. On one hand, the new law is intended to adapt German competition law to the realities of digitalisation and on the other hand, it shall take into account the emergence of large international companies in the digital sector in recent years, which have considerable market power.
Thus, the focus of the amendment is the modernisation of the ARC in times of the rapidly increasing digitalisation of the economy. However, there are also significant amendments in the area of merger control, cartel damages, cartel proceedings as well as cartel fines. The latter largely in implementation of the so-called ECN+ Directive (Directive (EU) 2019/1 of 11 December 2018).
Modernisation of the abuse control: Competition protection in the digital economy
The central aim of the changes to the abuse control was a better control of market-dominant digital groups. For this purpose, the so-called “intermediation power”, which is independent of the market share, was introduced as an additional criterion for the market power analysis. The aim was to better consider the role of market power of platforms with intermediation or control power in two-sided markets (§ 18 (3b) ARC and § 20 (1) ARC).
Probably the most significant change is the newly introduced § 19a ARC. For the first time, it enables the German Federal Cartel Office (hereinafter “FCO”) to intervene at an early stage when competition is only threatened by certain large digital groups. Based on the new amended law, the FCO can preventively prohibit certain conduct by companies which, due to their strategic position and resources, are of particular importance for the competition across markets. Examples of such conduct are the self-preferential treatment of the group’s own services or the obstruction of third parties’ market access by withholding certain data.
This new law also includes special provisions for legal actions. Appeals against decisions of the FCO on the basis of the new paragraph 19a ARC are strongly shortened since the German Federal Court of Justice shall directly decide on the case. By skipping the Düsseldorf Higher Regional Court that usually is the first instance in all cartel law proceedings, the new regulation intends to save a considerable amount of time in the proceedings.
Another important amendment is the new claim to obtain access to certain data also in the area of relative market power if a refusal of such access is to be regarded as an unreasonable impediment (§ 20 (1a) ARC). Under certain conditions, the FCO may order that data access must be granted for a reasonable fee in favour of dependent companies.
Furthermore, the new § 20 (3a) ARC creates a new element of intervention in order to be able to prevent the so-called “tipping” of markets into monopoly or highly concentrated markets at an early stage. Behaviour that could potentially lead to tipping includes, for example, the prohibition or hindrance of a change of platform or the parallel use of several platforms, so-called “multi-homing”.
Changes in the Merger Control
In order to reduce the expenditure in M&A transactions, the turnover thresholds in merger control were readjusted. At the centre of the amendments, there are significant increases in the domestic turnover thresholds for a notification obligation under merger control law in Germany: In future, mergers will only be subject to control if a participating company achieves an annual turnover of at least EUR 50 million in Germany (instead of the previous EUR 25 million.) and in addition, another participating company achieves an annual turnover in Germany of at least EUR 17.5 million. (instead of the previous EUR 5 million).
It is assumed that the changes in the area of merger control will lead to a relief of the FCO. Moreover, the abolition of the notification requirement for many unproblematic smaller transactions should also lead to a noticeable relief for medium-sized companies. However, the FCO may in future oblige companies in certain economic sectors to notify mergers even below the turnover thresholds. To do so, certain conditions, including thresholds, must be met and the FCO must first have carried out a sector enquiry in one of the industries concerned.
Changes on the provisions on fines: Consideration of compliance efforts
The new law also contains various revisions in the area of fines. The amendment focuses on the differentiation of the offences subject to fines. The previously central regulations in § 81 ARC are now reorganised in § 81-81g ARC and have been considerably supplemented. For example, new rules are provided with regard to fines against associations of undertakings.
The FCO and the German doctrine have long argued about the question whether compliance measures taken by a company in the run-up and/or in the aftermath to a competition infringement are to be taken into account in the assessment of fines. The amendment now explicitly lists the two forms of compliance measures in a new § 81d ARC as assessment factors. In addition, the leniency programme has now been enshrined in law (§ 81h-81n ARC).
Find the new law here.