Updating the German competition rules for big players in the Digital Economy
The German Act against Restraints of Competition (GWB) Digitalisation Act is coming – slowly. The draft bill under the heading of Competition Law 4.0 was already published at the end of January. Now the Federal Government has forwarded it to the German Parliament and Council (Bundestag und Bundesrat) on 9 September 2020. It is to be expected that law proceedings will be finalized before the deadline for the transposition of Directive 2019/1/EU (so-called European Competition Network, 'ECN'+ Directive) expires on 4 February 2021. The future 10th Amendment to the GWB is intended to create a regulatory framework for the digital economy and at the same time transpose the ECN+ Directive to strengthen the competition authorities of the EU Member States into national law.
A full analysis of the 10th Amendment to the German Act Against Restraints of Competition would exceed the scope of this contribution which is thus limited to the changes in digital economy.
The objective of the 10th Amendment to the GWB is, as mentioned, to improve the regulatory framework for the digital economy. The draft law takes up in particular proposals of a study commissioned by the BMWi on the reform of abuse control as well as the work of the Commission on Competition Law 4.0. The Federal Government thus intends to regulate the rapidly developing and adapting market of the digital economy more effectively in terms of fair competition and consumer protection. But does the Amendment itself meet this requirement?
Modern digital economy is characterised by direct and indirect network effects, intermediary power, interoperability up to and including "tipping" and their interactions, which poses ever-increasing challenges for the competition authorities in their monitoring of abuse. It is clear that there is a need for regulation.
In future it should be easier for the German Federal Cartel Office (Bundeskartellamt, BKartA) to take action against companies in the digital economy, especially the large digital groups such as Google, Apple, Facebook, Amazon and Microsoft (also referred to as "GAFAM" as so-called "Géants du Web"), in cases of abuse of market power. To date, the BKartA has not been able to determine the market power in particular of digital platforms satisfactorily without taking into account the importance of information in this sector. How this is now to be achieved is presented for the first time in the proposed legislation.
2. Planned Amendments
The planned amendments to the provisions of the GWB concern abuse control of large digital groups, the powers of investigation and sanctions by the cartel authorities and merger control.
2.1 Supervision of Digital Groups of Outstanding Cross-Market Relevance
Probably the most significant proposed innovation for the digital economy is the insertion of section 19a GWB. In section 19a para. 1) sentence 2 GWB, non-exhaustive criteria for the determination of a company's outstanding cross-market importance in competition are mentioned.
Access to information relevant for competition is now also taken into account in addition to the dominant position of a company. Thus, the specific role of data and information is to be intentionally emphasized. In addition, the number of users and a possible power of intermediation, i.e. the possibility of controlling search queries and directing them to specific offers by means of one's own intermediary position, must also be taken into account. This should enable effective action to be taken against digital groups which have an advantage over their competitors, in particular due to network effects and large data resources.
In the event that a company is found to be of overriding market-wide relevance, the BKartA can prohibit such companies ex-nunc according to para. 2.:
- to treat the offers of competitors differently from its own offers when providing access to procurement and sales markets (so-called self-preference);
- to hinder competitors in a market where the company can quickly expand its position - even without a dominant position - for instance on the basis of data/information relevant for competition;
- to transfer its market power from one market to another market not (yet) dominant by using existing information, thereby establishing or strengthening barriers to market entry;
- to impede data portability;
- to provide other companies with insufficient information about services rendered or requested, or to make it difficult for them to assess the value of such services.
A particular gain in effectiveness resulting from section 19a GWB as compared with sections 19 and 20 GWB derives from the reversal of the burden of proof. Once the BKartA has established that a company has an outstanding cross-market position, a disputable presumption of abusive conduct is to be made. Thus, it is up to the company concerned and not to the BKartA, as in the cases of sections 19 and 20 GWB, to positively establish misconduct. This consideration results from the fact that the reasons for justification regularly come from the sphere of the company, for example from internal strategy papers.
2.2 Importance of Data Access
Of particular relevance to digital companies is the question of how data and information relevant for competition can be obtained. Under the new version of section 1
para. 2 no. 4 GWB, a refusal of access to data, interfaces or networks can constitute a reason for the abuse of market power. A lack of interoperability of products is often the cause of increased network effects (so-called lock-in effects), which can ultimately represent a high switching hurdle at the expense of competitors.
The new provision takes effect if it is impossible for the party seeking access to data, interfaces or networks to collect or acquire certain data that is essential for it. This way the Essential Facilities regime is extended to access to data and as a result only represents a clarifying adaptation to Union law.
In the area of companies with relative or superior market power, the modification of section 20 GWB, in the form of a new sub-section 1a, sentence 1 to be inserted, now puts into concrete terms dependency within the meaning of section 20
para. 1 GWB by including data access. This makes it clear that even dependence on a database available to a company below market dominance can constitute an unfair impediment.
Furthermore, up to now it has been questionable whether a company can demand data access if relatively strong data owners in the market have not yet shared the data, which is essential for the company concerned, with anyone, i.e. if there is no business transaction with this data. Such a right to data access is now introduced by the proposed section 20 para. 1a) sentence 2 GWB.
2.3 Simplified Conditions for Interim Measures
The extended powers of the BKartA are to be flanked by the facilitated possibility to order interim measures under section 32a. This takes account of the fast-moving nature of the digital economy due to self-reinforcing effects and the easy scalability of the offer.
The previous regulations were considered unsuitable for practice due to the conditions for their application. For instance, it was difficult to prove the necessary jeopardizing situation in the form of irreparable damage to competition at the time when the adoption of a provisional measure was considered. It is now provided that the emergency measure must be necessary either to protect competition or to prevent imminent serious harm to another undertaking. It is assumed that actual serious harm to an individual market participant will be easier to prove than harm to competition.
The draft contains interesting approaches and ambitious proposals for solutions for all parties concerned - businesses, BKartA and consumers. However, it remains to be seen whether they will be adopted in this form by the German Parliament and Council and will lead to changes in practice.
Hence, it first has to be ascertained to what extent the regulations on data portability and data use will help both competitors and consumers to exchange more data.
In addition, particular attention must be paid to the question of whether the BKartA will really take action against large digital groups - including through interim measures - and whether this action will strengthen competition in digital economy. In any case, it should be noted that with the proposed innovations Germany is presenting a blueprint for dealing with the challenges of digital markets for other countries as well. It may already become apparent during Germany's current EU Council Presidency whether these impulses will also lead to a coordinated strategy of the Member States at European level in dealing with digital companies. In its main report, the Monopolies Commission made proposals for the regulatory framework at European level. 
However, the United Kingdom will soon pursue its own path in competition law and will also break new ground here.
 Additional changes: Higher thresholds for merger control, modernisation of the calculation of sales, breach of the principle of self-assessment, simplification of the calculation of fines, legal embedding of the leniency programme, codification of a disputable presumption of antitrust damages. See the German Federal Cartel Office's statement on the amendment to the GWB (25 February 2020) at LINK
Dr Rainer Bierwagen