I INTRODUCTION

Under German competition law, unilateral conduct by an enterprise with market power is governed by Sections 18, 19 and 20 of the German Act against Restraints of Competition (ARC),2 which prohibit the abuse of a (single or collective) dominant position, and specific types of abusive behaviour by enterprises that have 'relative' market power in relation to small or medium-sized enterprises (as trading partners or competitors). Germany has thus used the possibility provided for under EU Regulation 1/2003 to enact national legislation on unilateral conduct that goes beyond the substance of the prohibition on the abuse of a dominant position laid down in Article 102 of the Treaty on the Functioning of the European Union (TFEU). Another distinct characteristic of German competition law on dominance is that there are (rebuttable) statutory market share-based presumptions of dominance.

Guidance on the application of the rules can mainly be gathered from the case law of the German courts, notably the Federal Court of Justice (FCJ), and to a lesser degree the German Federal Cartel Office (FCO). Abuse of dominance enforcement is largely private enforcement in Germany, and there are few FCO cases. There is currently no formal general guidance paper on unilateral conduct available, so one has to look into the case law.

Guidance on the amount of fines for restrictive unilateral conduct can be gathered from the FCO's guidelines on the setting of fines, which apply to all areas of German competition law.3 However, abuse of dominance cases in Germany are normally handled in administrative proceedings in which no fines are imposed.

No special rules apply in Germany to the public sector or state-owned enterprises. Section 185(1) ARC stipulates that the ARC will also apply to enterprises that are entirely or partially publicly owned or are managed or operated by public authorities.

Special rules apply to certain regulated industries, such as electricity, gas, telecommunications, post and railway. The Federal Network Agency (FNA) monitors compliance with certain of these regulations in cooperation with the FCO.

The German government and legislator are concerned that the current German legal framework does not allow effective enforcement against dominant companies' abusive practices in light of the increasing importance of globally active digital platforms benefiting from network effects. The current draft proposal for the 10th amendment of the ARC (to be adopted by the German legislature in 2020 or early 2021) envisages a fundamental reform of the abuse of dominance legal framework with a view to digital markets, and to extend the FCO's enforcement powers against digital platforms significantly. However, there is currently only a draft proposal from the German Federal Ministry for Economic Affairs and Energy (FME).4

II YEAR IN REVIEW

The FCO's enforcement activity in the abuse of dominance area over the past couple of years has continued to be quite limited in terms of actual decisions. It has only issued one single formal prohibition decision in 2019 and none so far in 2020. However, despite the limited number of actual decisions, the FCO closely monitors the digital economy and, in particular, the online platforms in multi-sided markets. The FCO's prohibition decision against Facebook marks another milestone in this regard. For the first time, the FCO based its finding of abusive exploitative practices by Facebook on non-compliance with the EU General Data Protection Regulation (GDPR) and imposed limitations on Facebook's current practice of collecting and processing user data, and prohibited using the related terms of service.5 The Facebook decision further complements the FCO's previous notable 'online' dominance cases, including its decision against CTS Eventim6 (recently confirmed by the Düsseldorf Court of Appeal (DCA)),7 Google,8 and hotel booking platforms Booking.com9 and HRS.10 Upon Facebook's appeal, the DCA suspended the FCO's Facebook decision in interim proceedings, expressing 'serious doubts' about its legality.11 The FCO has appealed the interim order to the FCJ. A decision is expected for mid-2020. In July 2019, the FCO closed its investigation against Amazon's terms and conditions and its behaviour with regard to the retailers on its German marketplace platform, amazon.de, without a formal decision after Amazon had committed to change its terms and conditions.12

In 2019, the FCO also rendered a commitment decision to complete its proceedings against the German Olympic Sports Confederation (DOSB) and the International Olympic Committee (IOC) regarding certain advertising restrictions that they imposed on athletes (prohibiting athletes participating in the Olympic Games from using their person, name, picture or information on their performance during the Olympic Games – and some days before and after – for advertising purposes). According to the FCO's preliminary view, these restrictions constituted an abuse of the DOSB's and the IOC's dominant positions (as the athletes – who are performers at the games – do not profit directly from the very high advertising revenues generated by the official Olympic sponsors). After evaluating, and market testing, proposals by the DOSB and the IOC to reduce the scope of the restrictions, the FCO and the two sports federations reached an agreement to amicably resolve the case by commitments.13 Under the sports federations' new rules, athletes now have more freedom to engage in advertisement activities with their own sponsors during the duration of Olympic Games insofar as these constitute generic advertising.

In recent years, the FCO has carried out several sectoral investigations in industries with arguably oligopolistic structures in which it suspected structural problems. These sector inquiries were often followed by individual investigations against specific companies with respect to specific conduct.14 Since May 2011, the FCO has published a total of nine reports on investigations into different sectors,15 of which seven specifically deal with (possible) abuses of market power (district heating, milk, fuel retail, wholesale fuel, food retail, the sub-metering and billing of heating and water consumption, and cement and ready-mixed concrete). In addition, the FCO is currently conducting further investigations, for example, regarding the household waste disposal and hospital sectors. With respect to the digital economy and online platforms, the FCO has launched a sector inquiry into online advertising with a focus on technological developments and their impact on the market structure and market opportunities of the various players concerned, in particular the impact of walled gardens set up by incumbent operators on the ability of other companies to compete.16

Very recently, the FCO also paid increased attention to the energy sector. In September 2019, the FCO and the FNA published joint guidelines on the control of abusive behaviour in the electricity generation and wholesale trade sector emphasising that price peaks caused by an artificial limitation of supply (either caused by physical or financial capacity restraints) may qualify as an exploitative abuse.17 In December 2019, the FCO published its first report on the competitive situation in the energy production sector and found that energy producer RWE was very close to being dominant and that even a relatively small reduction of capacities in the course of the nuclear and coal phase-out in Germany could change this into a dominant position.18

In November 2019, the FCO has initiated abuse proceedings against Deutsche Bahn concerning the sale of Deutsche Bahn tickets via mobility platforms which aggregate information on multiple traffic operators and travel options.19 The FCO is investigating contractual restrictions imposed on mobility platforms regarding advertising in app stores, search engines and social networks, and looks into conditions imposed by Deutsche Bahn according to which platforms cannot grant discounts on Deutsche Bahn tickets. Another focus areas is whether and to what extent mobility platform operators must have access to real-time information about departures and delays in order to be able to offer new mobility concepts.

The following tables list the significant cases and decisions dealing with abuse of a dominant position adopted by the FCO in 2019 and 2020, and important ongoing proceedings.20

i 2019/2020 FCO decisions

Sector Company Conduct Fine
Lease and operation of basalt quarries Constantia Forst GmbH Repeated threats of termination and ultimately termination of lease agreement €80,000; case closed
Software for tax advisers Bundessteuerberaterkammer (German Tax Advisers Chambers); DATEV Exclusive award of the operation of an electronic database for the administration of mandates to DATEV No fine; case closed with commitments
Online sales platforms Amazon Potentially exploitative abusive conduct towards retailers using Amazon's marketplace No fine, case closed with commitments
Social networks Facebook Exploitative abuse by inappropriate collection and processing of Facebook users' personal data, in particular from third-party sources No fine; prohibition decision. Appeal pending
Sports federations IOC, DOSB Exploitation of athletes (advertising restrictions) No fine; case closed with commitments

In addition to the listed cases, the FCO intervened in 2020 against furniture retailer XXXLutz for requesting unjustified 'anniversary rebates', albeit without launching a formal investigation. The FCO dropped its proceedings after XXXLutz committed to stop demanding these rebates and to negotiate the rebate with each of its suppliers on an individual basis.21

ii Ongoing cases

Sector Company Conduct Case opened
Online sales platforms Deutsche Bahn AG Potentially abusive conduct by Deutsche Bahn AG concerning the sale of tickets via third-party mobility platforms 28 November 2019

III MARKET DEFINITION AND MARKET POWER

There are two different concepts of market power in German competition law. The assessment of 'absolute' single or collective dominance requires a definition of the relevant market as well as the assessment of market power on the relevant market based on the prevailing market structure and market conditions. In the assessment of dominance, the FCO and the German courts continue to place considerable importance on market shares and have only slowly started to adopt the more sophisticated economic analyses used by the EU Commission. In contrast, the assessment of 'relative' market power focuses more on the distribution of bargaining power between potential addressees of the provisions on relative market power and small and medium-sized companies as their trading partners or competitors.

i Market definition

In defining relevant product markets, the German courts and the FCO primarily analyse the substitutability of goods and services from a demand-side perspective based on the intended use, characteristics and price of the relevant products. In some cases, the FCO also refers to the 'small but significant and non-transitory increase in price' test as an additional, but not the only or the principal, criterion for market definition.22 The concept of supply-side substitution (i.e., other manufacturers being able and willing to adjust their production within a short time and without significant cost) is also taken into account if the demand-side perspective leads to overly narrow markets.23

As under EU law, the relevant geographic market comprises the area in which the enterprises concerned compete, in which the conditions of competition are sufficiently homogeneous, and that can be distinguished from neighbouring areas because of appreciably different competitive conditions.24

In practice, ex post behavioural enforcement tends to take a somewhat narrower view on market definition than merger control, given that the perspective of specific customers or competitors potentially harmed by the conduct at issue that cannot switch to alternative suppliers, can sometimes influence the assessment.

The German legislator has also clarified that a relevant market may be found even if the relevant services are rendered free of charge.25

ii Dominance

As previously noted, German competition rules on unilateral conduct apply to companies in a position of single or collective dominance, and to companies enjoying 'relative' market power over small and medium-sized companies. Section 18 ARC defines single and collective dominance.

Single dominance

According to Section 18(1) ARC, single dominance exists if a company is either without competitors, or not exposed to significant competition or in a 'superior market position' as compared with its competitors (which can exist even if there is significant competition in the market). Single dominance exists where the market power of an enterprise enables it to act without sufficient constraints from the marketplace (i.e., a situation in which an enterprise is able to act to an appreciable extent independently of its competitors, customers, suppliers and, ultimately, consumers).

Section 18(3) ARC lists the following criteria that may in particular be taken into account for the assessment of whether a company is in a 'superior market position':

  1. the enterprise's market share;
  2. its financial resources;
  3. its access to input supplies or downstream markets;
  4. its affiliations with or links to other enterprises;
  5. legal or factual barriers to market entry;
  6. actual or potential competition by domestic or foreign enterprises;
  7. its ability to shift its supply or demand to other products; and
  8. the ability of the enterprise's customers or suppliers to switch to other enterprises.

In practice, the FCO and the German courts tend to focus on whether an enterprise has sufficient market power to determine the most important business parameters. An appraisal of market shares (both in absolute and relative – compared with competitors – terms) is still the most important factor. The rebuttable market share-based presumption pursuant to Section 18(4) ARC provides an important first indication of possible dominance where the market share of a company exceeds 40 per cent.26 While not impossible, it is often difficult in practice to rebut the presumption with economic arguments, especially in the case of high market shares substantially above the presumption threshold. The underlying reason is that German law expressly stipulates that a dominant position can be based on a 'superior' market position, even if the company concerned faces significant competition from its rivals.

In line with the FCO's recent focus on digital markets, the German legislator has introduced additional criteria for the assessment of market power in multi-sided markets and networks. 27 According to Section 18(3a) ARC, in particular, the following criteria must be taken into account when assessing a company's market position on multi-sided and network markets:

  1. direct and indirect network effects;
  2. the parallel use of more than one service (multi-homing) and the difficulties faced by users in switching services;
  3. economies of scale in connection with network effects;
  4. the company's access to data relevant for competition; and
  5. competitive pressure driven by innovation.

The FCO applied these additional criteria in its decisions against German ticketing system operator, CTS Eventim, and Facebook. In CTS Eventim, the FCO found that the ticket platform enjoyed a dominant position with regard to event organisers and ticket offices in the two-sided platform market for ticketing services in Germany. In Facebook, the FCO based its dominance analysis of the German market for social media networks, in particular, on three factors:

  1. direct network effects resulting from Facebook's large number of users (creating a 'lock-in effect' for its users, as they would lose all their existing contacts if they switched to another social network – creating high entry barriers);
  2. indirect network effects that Facebook enjoys in relation to its advertisement customers (given the large number of Facebook users, advertisers cannot easily switch to another social network to reach as many users); and
  3. Facebook's access to users' personal data.

While the DCA has suspended the FCO's Facebook decision, it did not challenge the FCO's finding of market power in the interim proceedings (see Section IV.ii.).

In its recent proceedings regarding Amazon's terms and conditions and its behaviour towards retailers on its German marketplace platform amazon.de, the FCO focused on Amazon Marketplace's role as an intermediary between resellers and consumers and gatekeeper to consumers who purchase their products online, in its assessment of market power on the two-sided market for the provision of online marketplace services.

Collective dominance

According to Section 18(5) ARC, collective dominance exists where there is no significant competition between the two or more largest companies in a market and where they jointly are not constrained sufficiently by competition from third parties. Collective dominance is defined as a few companies in an oligopolistic setting engaging in tacit coordination or collusion with the result that they effectively do not compete with each other.

Section 18(6) ARC also provides for market share-based legal presumptions for collective dominance. Thus, three or fewer companies are presumed to be collectively dominant if they have a market share of at least 50 per cent; and five or fewer companies are presumed to be collectively dominant if they have a market share of at least two-thirds of the market. These presumptions are rebuttable, and the companies can show that substantial competition exists between them individually or that they are jointly sufficiently constrained by outsiders or customers. For a non liquet, the presumption stands.

German courts have so far rarely addressed collective dominance issues outside of merger cases. The FCO and the German courts generally employ the criteria established by the EU General Court in Airtours v. Commission in determining collective dominance (albeit in a somewhat modified form).

'Relative' dominance and 'superior market power'

As noted above, going beyond the scope of Article 102 TFEU, Section 20 ARC prohibits exclusionary (and discriminatory) conduct not only by companies that are dominant in 'absolute' terms, but also (1) the abuse of 'relative dominance' in vertical relations by companies on which 'small or medium-sized companies depend' as suppliers or purchasers of certain kinds of goods or commercial services (Section 20(1) ARC), and (2) the abuse of 'superior market power' at horizontal level by companies enjoying 'stronger market power in comparison to their small and medium-sized competitors' (Section 20(3) ARC). These provisions aim at protecting small and medium-sized companies against anticompetitive conduct by their larger competitors.

Relative market power in vertical relationships pursuant to Section 20(1) ARC requires that the small or medium-sized enterprise is dependent upon another company as supplier or customer without adequate alternatives. Section 20(1) ARC considers the following forms of dependency: the small or medium-sized company (1) is dependent on the other company's 'must have' brands or 'must have' products; (2) is in a position of 'company-specific dependency' (e.g., because it has specialised and designed its product or service to the needs of an particular purchase ('lock-in' after transaction-specific investments); or (3) is dependent due to scarcity of the product.

Section 20(1) second sentence of the ARC establishes a presumption of dependency if a purchaser of goods frequently receives rebates or similar bonuses from its suppliers that go beyond customary rebates granted to other purchasers. Further, the ARC does not precisely define the concept of small and medium-sized companies that enjoy protection under these rules. The concept is generally understood to be turnover-related, but there are no specific turnover 'thresholds', and the amounts can differ from industry to industry. The FCJ recently confirmed that in the case of dependency because of 'must have' products, retailers are qualified as small or medium-sized companies in relation to their competitors. In particular, with respect to a leather goods retailer being dependent on suitcase manufacturer Rimowa's 'must have' products, the FCJ found a leather goods retailer with six retail stores still a small or medium-sized company because its competitors are not only other leather goods retail shops, but also large department stores also selling leather goods and suitcases.28

Section 20(3) ARC further enlarges the scope of the abuse of dominance legal framework to companies that do not even qualify for relative market power in vertical relations, but that have particular power, (i.e., 'superior market power' at horizontal level over certain smaller but not all rivals) and prohibits exclusionary conduct like tying/bundling, predatory pricing and margin squeeze. Its main application area is retail food trade. An example of prohibited exclusionary conduct is frequent pricing below cost.29

IV ABUSE

i Overview

Section 19(1) ARC contains a general prohibition of the abuse of a dominant position similar to Article 102 TFEU which addresses exclusionary conduct, exploitative abuse as well as discrimination. Section 19(2) ARC lists non-exhaustive examples of specific types of abusive conduct. Prohibited are, inter alia, the following types of conduct:

  1. unfair hindrance of competitors (exclusionary conduct) and discrimination (Section 19(2) No. 1 ARC). Typical types of exclusionary conduct under this provision are refusal to deal scenarios, lack of admission into the distribution system or termination of distribution agreements, exclusivity provisions or loyalty rebates, bundling/tying and predatory pricing. Section 19(2) No. 1 ARC also captures discrimination of trading partners (i.e., treating an undertaking, directly or indirectly, differently from other similar undertakings without objective justification);
  2. excessive prices or terms and conditions, notably 'imposing prices or other trading conditions that differ from those likely to exist on a market with effective competition' (exploitative abuse, Section 19(2) No. 2 ARC). To determine which prices or business terms would have applied hypothetically on a competitive market, the situation on other comparable markets with effective competition is taken into account. In particular, an extreme difference between production costs and revenue, but also a price that exceeds the average prices of other comparable enterprises for similar products or services,30 can be regarded as an indication of this prohibited exploitative conduct. Exploitative abuses may further arise under the more general provision of Section 19(1) ARC. The FCO's Facebook decision shows that inappropriate contractual terms and conditions may also constitute an exploitative abuse under the general provision of Section 19(1) ARC (see further Section IV.ii);
  3. price or margin squeezes, if a vertically integrated dominant company sells products to its downstream competitors at a (wholesale) price that is either higher than the price that it charges itself on the downstream market, or so high that its downstream competitors are left with a profit or margin that is too small to effectively compete with the dominant company's product on the downstream market. Price or margin squeezes are considered an abuse under Section 19(2) No. 1 ARC. Under Section 20(3) No. 3 ARC, such behaviour is also expressly prohibited for vertically integrated undertakings with relative market power with respect to small or medium-sized undertakings;
  4. access to essential facilities (Section 19(2) No. 4 ARC), if a dominant company refuses to grant another company access to its network or other infrastructure entirely, or only in exchange for unreasonably high fees, if the facility constitutes an essential facility. A facility is essential if without access it is impossible for the other enterprise, for legal or practical reasons, to be active on the upstream or downstream market as a competitor of the dominant enterprise. Access to an essential facility may, however, be refused if the joint use is impossible for practical reasons due to limited capacity or for legal reasons –for example, a necessary public authorisation is not granted. Where the possibility of joint use of an essential facility by both parties is unclear, the dominant enterprise bears the burden of proof.31 Section 19(2) No. 4 ARC, however, does so far not apply to access to intellectual property; and
  5. abuse of buyer power by asking for unjustified commercial conditions (Section 19(2) No. 5 ARC), notably by 'inviting or causing other undertakings to grant it advantages without objective justification'. German courts have, historically, been very reluctant to find that a dominant purchaser abused its market position by asking suppliers for advantages, such as special rebates. The FCO, however, intervened against food retail chain Edeka based on Article 19(2), No. 5 ARC, because Edeka had, inter alia, insisted on suppliers retroactively granting it the same preferential conditions and benefits that they had previously granted to another retail chain that Edeka had acquired ('wedding rebates').32 While the DCA overturned the FCO's decision,33 the FCJ reinstated it in key points, agreeing in particular that Edeka's retroactive demand for more favourable price components of certain products without regard to the price structures otherwise in use ('cherry picking' of rebates that had previously been granted) was abusive.34 In the same vein, the FCO intervened against furniture retailer XXXLutz for requesting unjustified wedding rebates in 2018 and anniversary rebates in 2020. In both cases, the FCO dropped its proceedings after XXXLutz had committed to abandon its demands for such rebates and to negotiate the rebate with each of its suppliers on an individual basis.35

As noted above, Section 20(1) ARC extends the prohibition of exclusionary and discriminatory conduct of Section 19 (2) No. 1 ARC to companies with 'relative' dominance. Section 20(3) ARC further enlarges the scope of the abuse of dominance legal framework to companies that do not even qualify for relative market power, but that have particular power over certain smaller but not all rivals and prohibits exclusionary conduct like tying/bundling, predatory pricing and margin squeeze.36

As a general rule, the FCO or plaintiff have to prove the market power and the abuse and the company accused has to advance possible justifications for its conduct. However, in administrative proceedings, the ex officio investigation rule applies which means that the FCO still has to investigate possible justifications for the relevant conduct, but the company has a duty to cooperate and in the event of a non liquet on the justification, the conduct is found to be abusive.

ii Illustrative cases

Since the lists of abusive conduct in Sections 19, 20 ARC are not exhaustive, there are also other kinds of abuses. For example, German courts have found that the intentional and deceptive failure to disclose intellectual property rights (essential patents) during a standard-setting procedure might lead to an abuse (patent ambush). An abuse, however, occurs only if an undertaking actually claims royalties for the use of the intellectual property after the intellectual property is incorporated in the standard. This is because the undertaking does not hold a dominant position at the time of its failure to disclose, but only achieves dominance once its intellectual property is (deceptively) incorporated into the standard.37 Upon referral from the Düsseldorf District Court, the European Court of Justice has specified certain perceived discrepancies between German case law and the position that the European Commission took on the conditions under which the holders of standard essential patents may seek an injunction against users of their standard essential patents without committing an abuse.38

Discrimination

Section 19(2) No. 1 of the ARC prohibits discrimination (i.e., treating an undertaking, directly or indirectly, differently from other similar undertakings without objective justification).

An illustrative example of a discrimination case is the FCO investigation into Google's refusal to pay for news snippets in its search engine. After the German legislator introduced an ancillary copyright for news publishers in 2013, the collecting society VG Media (representing several German news publishers) adopted a new tariff for the use of news publishers' online content and raised monetary claims against Google for the display by Google of small text excerpts (i.e., 'snippets') from their websites. Google refused to pay, and announced it would discontinue the display of snippets from VG Media members unless they agreed to the display of their snippets without payment. VG Media filed a complaint with the FCO, arguing that Google abused its allegedly dominant position by refusing to pay for the display of snippets. The FCO informally rejected the complaint in August 2014,39 and issued a formal rejection decision in September 201540 holding that Google did not engage in discriminatory conduct. In particular, the FCO considered Google's conduct justified by its interest to preserve its business model and to reduce the risk of liability for damages. These interests would outweigh those of VG Media.

Exploitative abuses

An illustrative example of an exploitative abuse is the recent FCO's Facebook case even though it did not concern pricing, but the use of certain contractual terms and conditions.41 Specifically, the FCO found Facebook's terms and conditions exploitative because they violated European and German data protection rules.42 In the FCO's view, a key objective of European data protection law is to protect the fundamental right of informational self-determination and, hence, users' control over how and for what purposes private networks, such as Facebook, use their personal data. The FCO found that Facebook's terms and conditions provided it with access to vast amounts of personal user data, as users were practically unable to reject Facebook's data collection if they wanted to join and access its network (under Facebook's terms of service, users could only join the social network if they also agreed to Facebook collecting and matching user data obtained from sources other than their core platform, including not only other Facebook-owned platforms, but also third-party websites). In addition, users lacked viable alternatives to Facebook's private network because of Facebook's dominant market position. In the FCO's view, users' consent to Facebook's data collection could not be considered as freely given – which is the key requirement for the consent's validity under the GDPR. The FCO therefore imposed limitations on Facebook's current practice of collecting and processing user data, and prohibited the use of the relevant terms of service. Upon Facebook's appeal, the DCA suspended the FCO's decision in interim proceedings, expressing 'serious doubts' about the prohibition decision's legality. In particular, it disagreed with the FCO's finding of a competitive harm caused by Facebook's conduct and criticised the normative causality standard applied by the FCO under which any infringement of provisions other than competition law by a dominant company would constitute an abuse.43 The court held that for an exploitative abuse, there must be a strict causal link between dominance and the conduct and found that the FCO had failed to establish the existence of such a causal link between Facebook's dominance and its far-reaching data collection practices (and thus the alleged infringement of the European data protection rules). The FCO has appealed the interim order to the FCJ. A decision is expected for mid-2020.

The FCO also opened an investigation into Amazon's terms and conditions with retailers on its German marketplace platform amazon.de and the case was closed with commitments, because Amazon undertook to change its contractual framework.44 As with Facebook, the FCO considered that inappropriate business terms imposed by a dominant company can constitute an exploitative abuse. Even though not every single clause of the terms and conditions that is potentially disadvantageous to or burdensome for the retailers raised competition concerns,45 the FCO took the view, that, on the basis of an overall assessment, Amazon's application of possibly inadequate contractual terms and conditions could hinder retailers on Amazon's marketplace or even make their activity on the marketplace impossible, particularly due to a lack of means to enforce Amazon's compliance with main contractual obligations. In instances where Amazon's imposition of these business terms could be considered as a request for benefits for no objective reason, the FCO considered also an abuse by demanding unjustified benefits or commercial conditions from the retailers. In addition, the FCO assessed whether certain terms and conditions (in particular the cancellation and blocking of seller accounts, rights of use and parity requirements, product reviews and seller ratings or European delivery schemes) also constituted an exclusionary abuse. The FCO took into account that Amazon as the operator of the marketplace could use its business terms to improve the position of Amazon Retail on the corresponding retail markets. The FCO also took the preliminary position that some terms led to a pull effect towards Amazon marketplace to the detriment of other sales channels (e.g., due to uniform product descriptions across sales channels as stipulated in the parity requirement).

V REMEDIES AND SANCTIONS

i Sanctions

In Germany, abuse of dominance infringements are normally pursued by the FCO in administrative procedures, which end in a finding of an infringement and cease-and-desist decision (Section 32 ARC) or a commitment decision (Section 32b ARC). Alternatively, the FCO can decide that there is no reason to intervene (Section 32a ARC) or close the proceedings. In an administrative procedure no fines can be imposed.

The legal framework also allows for a fine procedure, but in practice abuse of dominance cases in Germany are run under the administrative procedure without imposition of fines. Fines can at least in theory be imposed against the company and individuals involved for infringements of Section 19, 20 ARC, the German abuse of dominance provisions (Section 81(2) No. 1, (4) ARC), as well as Article 102 TFEU (Section 81(1) No. 1 ARC). In that case, the duration and gravity of the infringement is taken into account and the FCO's 2013 Fining Guidelines apply. The statutory maximum fines amount to €1 million for individuals and 10 per cent of the consolidated group turnover for an undertaking.46

ii Remedies

As stated above, the FCO either issues a finding of an infringement and cease-and-desist decision (Section 32 ARC) or accepts commitments in a commitment decision (Section 32b ARC) or closes the proceedings, for example, for lack of evidence or making use of its discretion whether to take up a case. Section 32a ARC allows the FCO to impose interim measures in cases of urgency if there is a risk of serious and irreparable damage to competition. However, this power has so far not been used.

Sections 32(2) ARC allows for behavioural remedies. Thus, the FCO may impose all measures necessary to bring an infringement effectively to an end and that are proportionate to the infringement. This includes the right to impose measures that require action by the infringer. For instance, the FCO has ordered hotel online booking platforms HRS47 and Booking.com48 to delete best-price clauses from their contracts with hotel partners.

Section 32(2) ARC also provides for the possibility of ordering structural remedies, including divestitures (unbundling) of companies. However, structural remedies are subject to a strict proportionality test and may only be applied where behavioural remedies would be insufficient to remedy the infringement. To date, the FCO has not imposed any structural remedies in abuse cases.

Section 32b ARC provides the possibility for companies to voluntarily offer commitments that are intended to address the preliminary competition concerns raised by the FCO during the proceedings. The parties can offer commitments of a behavioural or structural nature provided that they address adequately and effectively the competition concerns identified. Commitments which do not adequately remedy these concerns will not be accepted by the FCO. The FCO then adopts a decision which makes the commitments binding on the party under investigation. The main difference between a decision pursuant to Section 32 ARC and a commitment decision pursuant to Section 32b ARC is that the former contains a finding of an infringement while the latter makes the commitments binding without finally concluding whether there was an infringement. A commitment decision also concludes that there are no longer grounds for action by the FCO (in particular not for imposing a decision pursuant to Sections 32 or 32a ARC).

VI PROCEDURE

In administrative proceedings, the FCO carries out investigations to decide whether to issue a cease-and-desist decision, accept commitments, adopt preliminary measures or close the case. Its decisions are subject to full judicial review of the facts and the law by the DCA. The Court's decisions can be further appealed – on points of law only – to the FCJ. In practice, the courts indeed carry out an independent review of the cases brought before them. While they often side with the FCO, it is by no means rare that FCO decisions are overturned based on factual or legal errors of the FCO. A recent example is the DCA's suspension of the FCO's Facebook decision in interim proceedings (see further Section IV.ii).

i Commencement of investigations and investigative powers

The FCO may commence investigations ex officio or, and in practice more frequently, following complaints of third parties (e.g., competitors, customers or suppliers).49 The FCO may carry out informal discussions or send informal questionnaires. It can also take formal measures, such as sending mandatory information requests or, subject to a prior court order, conducting surprise inspections (dawn raids), in the course of which it can seize documents and electronic files.

ii Right to be heard

During all stages of an investigation, the enterprises investigated have the right to be heard. The FCO will usually serve a statement of objections before it issues a decision to which the company concerned may respond. The party concerned also has the right of access to the file, including digitally stored data and media.

iii Guidance

There is no formal procedure for obtaining guidance on conduct that might constitute an infringement, but the FCO is open to informal contacts and is more likely to provide informal guidance in this context than the Commission.

iv Cooperation with other authorities

Cooperation between the FCO, the other national competition authorities and the European Commission takes place via the European Competition Network (ECN). This cooperation may involve exchanging information about cases and decisions, exchanging evidence and mutually assisting each other with investigations. The FCO has set up an internal coordination unit to represent the authority within the ECN. The FCO is also an active member of the International Competition Network (ICN), and the FCO's president has chaired the ICN's Steering Group since 2013.

VII PRIVATE ENFORCEMENT

Unlike in cartel damage cases, abuse of dominance actions often do not follow an investigation and decision by the FCO (or other competition authorities), but are brought on a stand-alone basis. They normally do not just aim for damages, but for a specific action by the potential addressee of the abuse of dominance provisions. Typical scenarios pursued in court are refusal to supply actions, discrimination claims and requests for access to a distribution system or complaints about termination of an agreement. There is also the possibility to claim damages. Section 33 ARC provides an express legal basis for damage claims based on infringements of competition law. Following a significant increase in cartel-related follow-on damage litigation over recent years, damage actions or other types of litigation (e.g., requesting the termination of discriminatory conduct, access to a network or infrastructure) based on alleged restrictive unilateral conduct have also become fairly frequent. A recent example is Idealo's complaint against Google for damages as a result of the Commission's 'Google Shopping' case.50

In the context of follow-on suits, German courts are legally bound by any (final) decision of the European Commission, the FCO or any other national competition authority in an EU Member State finding an infringement of EU competition law.51 The binding effect is, however, limited to the determination of the competition law infringement, so causation and the amount of damages need to be established subject to the normal rules on the burden of proof in German court proceedings.52

VIII FUTURE DEVELOPMENTS

Both the FCO and the German legislator have focused on digital markets in recent years, and this trend is set to continue.

According to the FCO president, Andreas Mundt, the FCO intends to preserve a leading role among competition authorities with respect to the internet economy and e-commerce sector. Having identified 'big data' as an important source of market power, the FCO's recent proceedings against Google, Facebook and Amazon will likely not be the end of this trend. As also evidenced by the sector inquiry on the conduct of price comparison websites, the FCO is particularly intrigued by the market power of (online) platforms in multi-sided markets. As the FCO is taking great interest in the combination of (direct or indirect) network effects, large amounts of personal data, and the gatekeeper function of online platforms for evolving markets, several additional dominance proceedings can be expected in the future. Another indicator of the FCO's continued interest in this regard is the project on algorithms and their implications for competition, including interdependencies between algorithms and market power, that the FCO launched in June 2018 in cooperation with the French Competition Authority. They published a joint working paper in November 2019.53

The German government and legislator are currently reviewing the ARC, in particular, assessing whether it still allows effective enforcement against abuse of market power in light of the increasing digitalisation and importance of globally active digital players. Thus, in September 2018, the FME issued an expert report that outlined several potential amendments to the ARC's rules on the abuse of dominance.54 The FME had also appointed an expert commission called 'Commission Competition Law 4.0' to draw up policy recommendations for the further development of European competition law in light of the digital economy. In September 2019, the expert commission published its final report which focuses on market power and abusive behaviours of digital platforms and contains a number of proposals for European and also for German competition policy.55

Based on these reports, the FME published a draft proposal for the 10th amendment to the ARC in January 2020. Its main objectives are, inter alia, a reform of the abuse of dominance provisions with a view to more effective enforcement and changes to the procedural framework to speed up proceedings. Most notably, the draft proposal introduces an entirely new concept of abuse, targeting companies with 'paramount cross-market significance', a novel concept that does not require a dominant position in a specific market and thus aims to enable the FCO to better monitor and control large digital players' activities at an early stage and even when they are not (yet) dominant in that specific market. These powers are meant to keep markets open by allowing the FCO to prohibit certain practices based on a rebuttable presumption of harm to competition. These practices include self-preferencing, hindering competitors in markets in which the company could quickly expand its position if this is likely to significantly impede the competitive process, using data collected in a dominated market to make market entry to other markets more difficult for other companies, hampering interoperability or data portability, and making the assessment of service value difficult for commercial customers, for example, by giving insufficient information. Under the draft proposal, the company would then bear the burden of proof that the behaviour in question, which may have both anticompetitive and pro-competitive effects, is objectively justified.

The draft proposal also targets the platform economy more generally. It suggests adding the new concept of 'intermediation power' to the catalogue of criteria for assessing market power in digital markets. Additionally, the concept of relative dominance shall be extended to all companies, irrespective of their size, which means that also large companies will be able to claim that they are dependent on another supplier. The draft proposal assumes that digital platforms with gatekeeper functions will be a likely area of application, since even large companies may depend on them. The draft proposal also aims at a competition law-based right of access to data by (1) extending the access to essential facilities provision in Section 19(2) No.4 ARC to expressly include data, and (2) in cases of relative market power, requiring non-dominant companies to grant access to data if a supplier's or customer's business model depends on access to this data.

Finally, while recently the DCA suspended the FCO's Facebook decision in interim proceedings because the FCO did not establish a strict causal link between dominance and the abusive conduct, the draft proposal aims to remove this causal link between market power and abuse in the new Section 19(1) ARC. While the 10th Amendment is planned for late 2020 or early 2021, there may still be changes to the FME's draft proposal.


Footnotes

1 Romina Polley is a partner and Katharina Apel is a counsel at Cleary Gottlieb Steen & Hamilton LLP.

2 An English version of the ARC is available at www.gesetze-im-internet.de/englisch_gwb/index.html.

5 FCO decision of 7 February 2019; the case report and press release are available on the FCO's website.

6 CTS Eventim – the operator of Germany's largest ticketing system (acting as the intermediary between event organisers and ticket offices) – had required organisers of live events to distribute the tickets for their events exclusively via CTS Eventim's ticketing system, while at the same time requiring ticket offices to source tickets only from the same system. In its decision, the FCO took account of CTS Eventim's significant market share, but also applied the newly introduced criteria for the assessment of a company's dominance on multi-sided platform markets under Section 18(3a) ARC (see FCO decision of 4 December 2017, available at www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2017/ 04_12_2017_CTS_Exklusivit%C3%A4t.html?nn=3591568).

7 DCA decision of 5 December 2018, case VI-Kart 3/18 (V).

8 FCO decision of 9 September 2015, case B6-126/14. A press release is available at www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/09_09_ 2015_VG_Media_Google.html?nn=3591568.

10 Most online cases were dealt with under Article 101 of the TFEU and its German equivalent, Section 1 ARC (prohibiting anticompetitive agreements). However, in the HRS hotel portal case, the FCO held that a best-price clause requested by HRS from hotels listed on its platform also violated Sections 19 and 20 ARC (abuse of dominance). Given the violation of Article 101 TFEU and Section 1 ARC, the DCA ultimately left open whether the best-price clause also infringed Sections 19 and 20 ARC (judgment of 9 January 2015, case VI-Kart 1/14 (V)).

11 DCA order of 26 August 2019, case VI-Kart 1/19 (V).

14 Arguably, this process limits the defence rights of companies subject to the subsequent competition proceedings, as they are obliged to respond to the sector inquiry without knowing the specific allegations that will be brought against them later on.

15 English summaries of some of the FCO's sector inquiry reports are available at www.bundeskartellamt.de/EN/AboutUs/Publications/Sectorinquiries/sectorinquiries_node.html.

22 For example, FCO decision of 12 December 2003, case B9-60211-Fa-91/03, ÖPNV-Hannover; decision of 2 July 2008, case B2-359/07, Loose/Poelmeyer; FCJ judgment of 4 March 2008, case KVR 21/07, Soda-Club II.

23 For example, FCJ judgment of 16 January 2007, case KVR 12/06, National Geographic II. Specifically with respect to retail markets, the usual product range of a retailer may constitute a single market (portfolio market).

24 FCJ judgment of 5 October 2004, case KVR 14/03, Melitta/Schultink.

25 See recently introduced Section 18(2a) ARC.

26 Dominance may also (exceptionally) be found to exist if the market share remains below the presumption threshold.

27 See also the FCO's working paper of 9 June 2016 regarding market power of platforms and networks, available in German at https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Berichte/Think-Tank-Bericht-Zusammenfassung.pdf?__blob=publicationFile&v=2.

28 See FCJ judgment of 12 December 2017, case KZR 50/15.

29 Section 20(3) ARC.

30 FCJ judgment of 15 May 2012, case KVR 51/11, Wasserpreise Calw,

31 See, in particular, FCJ judgment of 11 December 2012, case KVR 7/12, Puttgarten/German ferry terminal, for further details.

32 FCO decision of 3 July 2014, case B2-58/09.

33 DCA decision of 18 November 2015, case VI – Kart 6/14 (V).

34 FCJ judgment of 23 January 2018, case KVR 3/17, Hochzeitsrabatte.

36 In addition to the rules laid out in Sections 18 to 20 ARC, which apply only to enterprises with dominant market positions or enterprises that are dominant at least in relative terms by enjoying relative market power with respect to small or medium-sized undertakings, Section 21 ARC stipulates a number of prohibited forms of unilateral behaviour by individual enterprises or groups of enterprises that do not require any from dominance (e.g., no enterprise may request that other enterprises boycott a third enterprise).

37 See, for instance, the judgment of the Düsseldorf District Court in MPEG 2-Standard, case 4b O 346/05, 30 November 2006, where the court, however, ultimately did not find an abuse.

38 ECJ, judgment of 16 July 2015, case C-170/13 – Huawei.

40 FCO decision of 9 September 2015, case B6-126/14. A press release is available at www.bundeskartellamt.de/SharedDocs/Meldung/EN/ Pressemitteilungen/2015/09_09_2015_VG_Media_Google.html?nn=3591568.

41 The FCJ considered it abusive under Section 19(1) ARC if a dominant enterprise invoked terms and conditions that are invalid under civil law. Such conduct is, in particular, abusive if the clause in question had only been accepted because of the company's dominance; see FCJ judgment of 24 January 2017, case KZR 47/14, VBL Gegenwert II, Paragraph 35.

42 FCO decision of 6 February 2019; a non-confidential version is available in German only at www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/ Entscheidungen/Missbrauchsaufsicht/2019/B6-22-16.html. The case report and press release are available on the FCO's website at www.bundeskartellamt.de/SharedDocs/Meldung/EN/ Pressemitteilungen/2019/07_02_2019_Facebook.html?nn=3591286.

43 DCA order of 26 August 2019, case VI-Kart 1/19 (V).

45 For example, under the previous terms and conditions, Amazon had an unlimited right to immediately terminate and block retailers' accounts without justification, was practically exempted from any liability towards retailers, and retailers had to grant Amazon very extensive rights to use their own product material such as information, descriptions and images, and had to provide Amazon Marketplace with product material of the same high quality as the one that they use in other sales channels.

46 Section 81(4) ARC.

47 FCO decision of 20 December 2013, case B9-66/10. A press release is available at www.bundeskartellamt.de/SharedDocs/Meldung/EN/ Pressemitteilungen/2013/20_12_2013_HRS.html?nn=3591568.

49 There is no formal complaint procedure, however, which means, notably, that complainants do not have a legal remedy against a rejection of their complaint.

51 Section 33b ARC (formerly, Section 33(4) ARC, changed by the recent amendment to the ARC).

52 Munich Court of Appeals judgment of 21 February 2013, case U 5006/11 Kart; and Berlin District Court judgment of 6 August 2013, case 16 O 193/11 Kart.

53 FCO press release of 19 June 2018. A joint working paper on algorithms and their implications for competition, including interdependencies between algorithms and market power (Algorithms and Competition, 6 November 2019) is available on the FCO's website https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Berichte/ Algorithms_and_Competition_Working-Paper.pdf?__blob=publicationFile&v=5).

55 See report of the Commission Competition Law 4.0, Ein neuer Wettbewerbsrahmen für die Digitalwirtschaft, 9 September 2019, for an English summary see https://www.bmwi.de/Redaktion/EN/Downloads/a/a-new-competition-framework.pdf?__blob=publicationFile&v=2).