New German competition law gives regulator new digital platform investigation powers

Out-Law News | 25 Jan 2021 | 9:44 am | 2 min. read

A new competition law entered into force in Germany, giving the Federal Cartel Office (FCO) extra powers to conduct investigations into powerful digital platforms.

The German parliament has passed the 10th amendment to the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen/GWB). It entered into force on January 19, 2021. The German parliament had adopted the government's draft of the so-called GWB Digitisation Act as amended by the parliament's Economic Committee. In addition to clarifications in the digital area, this overhauled draft also contains significant amendments to merger control review, which only found their way into the law at the last minute.  

 

"The most important and innovative cornerstone of the amendment is the FCO's new power considering abusive behaviour in digital markets, which in future will enable the FCO to intervene more quickly and effectively in certain anti-competitive practices in the digital economy and to ban them," said Dr Laura Stammwitz, an antitrust expert at Pinsent Masons, the law firm behind Out-Law.  Platform companies could be prohibited from treating competitors' offers differently to their own, for example in the presentation of search results.

Section 19a of the new law addresses companies that have 'paramount significance for competition across markets'. "The revised draft law now contains a more precise catalogue of abusive practices and examples where the authority can intervene," Dr Stammwitz said. In order to speed up proceedings in this area, the German Federal Court of Justice will also be assigned as first instance jurisdiction for disputes against orders issued by the FCO under Section 19a.

Andreas Mundt, president of the FCO, said he sees the German legislature as a pioneer internationally, given the discussion on similar instruments at European level. According to Zeit Online he said: "In future, we will be able to prohibit certain forms of behaviour by big tech companies at an earlier stage, which means before the damage occurs."

Companies should also expect more legal clarity in the future when cooperating in Germany, for example when jointly building a platform. Although it was previously possible to ask the FCO for "comfort letters" to help design projects, as happened last summer in the case of the German automotive industry, the amendment creates a legal basis for this. "Especially in times of the Covid-19 crisis, but also in the joint pursuit of sustainability goals by competitors, there is an increased need for exchanging views with the authority," Dr Stammwitz said.

In the field of merger control, the domestic turnover thresholds which trigger the obligation to notify a transaction to the FCO have been raised significantly. The FCO must now only be notified of a merger if the domestic turnover of one company is €50 million (previously €25m) and the turnover of another company is €17.5m (previously €5m).

The third threshold, which refers to the worldwide turnover of all parties involved, remains unchanged at €500 million. 

"The increase should lead to a significant reduction of at least 20% in the workload of the FCO, which had to examine about 1,200 merger proposals last year. In future, the available resources could be used in a more targeted way for more complex cases," said Dr Stammwitz.

With the tenth amendment the German government is also complying with the implementation of the so-called ECN+ Directive of the EU and thereby expands the FCO's investigative powers.