The Dominance and Monopolies Review: Germany
Under German competition law, unilateral conduct by an enterprise with market power is governed by Sections 18, 19, 19a and 20 of the German Act against Restraints of Competition (ARC),2 which prohibit (1) the abuse of a (single or collective) dominant position, (2) specific types of abusive behaviour by enterprises that have 'relative' market power in relation to dependent trading partners, and – since January 2021 – (3) certain types of conduct by enterprises with 'paramount cross-market significance', which does not require dominance in any market. 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).
The modernisation of the legal framework for unilateral conduct has focused on digital markets. The 10th Amendment to the ARC (the ARC Digitisation Act), which entered into force in January 2021, is a major overhaul of German competition law, with substantial modifications to the provisions on the abuse of dominance, enabling the German Federal Cartel Office (FCO) to intervene more swiftly and with a reduced burden of proof in digital markets. In particular, the 10th Amendment introduced the new concept of 'paramount cross-market significance', which releases the FCO from proving dominance in a defined market, and extended the concept of 'relative' market power to large companies claiming dependence, whereas previously, only small and medium-sized enterprises could invoke the provision, thereby extending the FCO's enforcement powers against digital platforms, in particular the GAFA companies3 that are explicitly targeted by the German legislator, significantly.
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 FCO. Abuse of dominance enforcement is largely private enforcement in Germany, and there are, therefore, few FCO cases. There is currently no formal general guidance on unilateral conduct available, so one has to look at 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.4 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) of the 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.
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. Its last formal prohibition decision dates back to 2019 (Facebook). 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. Recently opened new proceedings against Facebook and http://www.amazon.demonstrate the interventionist stance adopted by the FCO in the digital sector.
The FCO's 2019 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 the use of the related terms of service.5 Upon Facebook's appeal, the Düsseldorf Court of Appeal (DCA) suspended the FCO's Facebook decision in interim proceedings, expressing 'serious doubts' about its legality.6 Upon the FCO's appeal, the FCJ quashed the DCA's decision concluding that there was 'no doubt' that Facebook had a dominant position in the German market for social media networks and abused it through the relevant user conditions.7 In the hearing in the main proceedings on 24 March 2021, the DCA referred several questions about the GDPR and the relationship between competition authorities and data protection authorities to the Court of Justice of the European Union.8
In December 2020, the FCO initiated a new investigation against Facebook for requiring users of its Oculus virtual reality glasses to also have a Facebook account. In January 2021, the FCO expanded this proceeding against Facebook to cover not only a possible abuse of dominance, but also to investigate its conduct under the new provision of Section 19a of the ARC, focusing on the behavioural control of companies with paramount cross-market significance (in particular, Section 19a(2), No. 3, pursuant to which the FCO can prohibit companies from hindering competitors in adjacent markets where a company with cross-market power can rapidly expand its position because of competitive advantages (e.g., through bundling/tying)).9
In July 2019, the FCO closed its investigation into Amazon's terms and conditions and its behaviour with regard to the retailers on its German marketplace platform, http://www.amazon.de, without a formal decision after Amazon committed to change its terms and conditions.10 Some of the commitments (in particular, that (1) Amazon will make applicable terms more transparent and will give prior notice to sellers on changes; and (2) Amazon will give 30 days' notice for ordinary termination and is obliged to state reasons for extraordinary termination of accounts) mirror those of the Platform to Business (P2B) Regulation,11 the new regulatory framework for digital platforms. It has therefore become clear in this context that the FCO would include considerations of the P2B Regulation in its assessment of whether a company abuses its market power. In late 2020, the FCO opened a new abuse of dominance proceeding against Amazon because of Amazon's alleged interference with price setting by sellers on its marketplace and alleged unfair hindrance of these sellers against the background of an alleged anticompetitive cooperation between Amazon and brand manufacturers.12
The pending proceedings against Facebook and Amazon further complement the FCO's previous notable 'online' dominance cases, including its decisions against CTS Eventim13 (recently confirmed by the DCA),14 Google15 and hotel booking platforms http://www.Booking.com16 and HRS.17
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.18 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.19 The FCO's second report published in December 2020 found this finding still valid.
In November 2019, the FCO initiated abuse proceedings against Deutsche Bahn concerning the sale of Deutsche Bahn tickets via mobility platforms that aggregate information on multiple traffic operators and travel options.20 The FCO is investigating contractual restrictions imposed on mobility platforms regarding advertising in app stores, search engines and social networks, and is looking into conditions imposed by Deutsche Bahn according to which platforms cannot grant discounts on Deutsche Bahn tickets. Another focus area is whether and to what extent mobility platform operators must have access to real-time information about departures and delays, 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 2020 and 2021, and important ongoing proceedings.21
i 2020 and 2021 FCO decisions
|Newspaper and magazine delivery||Deutsche Post AG||Loyalty and exclusivity-based rebate system||No fine, case closed with commitments|
|Lease and operation of basalt quarries||Constantia Forst GmbH||Repeated threats of termination and ultimately termination of lease agreement||€80,000; case closed |
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.22
ii Ongoing cases
|Social networks||Potentially abusive conduct by tying Oculus' virtual reality glasses to Facebook's social network||December 2020 (dominance) / January 2021 (paramount cross-market significance)|
|Online sales platforms||Amazon||Potentially abusive conduct by influencing pricing on the Amazon marketplace||Late 2020|
|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|
Market definition and market power
Since the major overhaul of German competition law by the 10th Amendment to the ARC in 2021, there are now three 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 in vertical relationships or 'superior market power' in relation to small or medium-sized competitors of the potential addressee.
- The new concept of 'paramount cross-market significance' is designed to enable the FCO to pre-emptively intervene against activities of large platforms even in markets where they are not yet dominant, but could become dominant quickly due to their resources, strategic positioning and the 'specificities of markets of the digital economy', namely network effects, data advantages and self-reinforcing effects (tipping) in digital ecosystems. As opposed to traditional market power analysis, cross-market significance is not tied to a clear market definition and does not require dominance in at least one market. The definition of cross-market power does not differ significantly from the definition of dominance on multi-sided markets.
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.23 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.24
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.25
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 (and consequently also market power on it) may be found even if the relevant services are rendered free of charge.26
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 in vertical relationships or over small and medium-sized competitors. Section 18 of the ARC defines single and collective dominance.
According to Section 18(1) of the 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) of the 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':
- the enterprise's market share;
- its financial resources;
- its access to competitively relevant data;
- its access to input supplies or downstream markets;
- its affiliations with or links to other enterprises;
- legal or factual barriers to market entry;
- actual or potential competition by domestic or foreign enterprises;
- its ability to shift its supply or demand to other products; and
- the ability of the enterprise's customers or suppliers to switch to other enterprises.
The 10th Amendment clarified that the extent of an undertaking's access to competitively relevant data is also a factor in assessing market power in traditional markets that are not multi-sided.
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) of the ARC provides an important first indication of possible dominance where the market share of a company exceeds 40 per cent.27 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.
Additional criteria for the assessment of market power in multi-sided markets and networks28 are provided in Section 18(3a) of the ARC. In particular, the following criteria must be taken into account when assessing a company's market position on multi-sided and network markets:
- direct and indirect network effects;
- the parallel use of more than one service (multi-homing) and the difficulties faced by users in switching services;
- economies of scale in connection with network effects;
- the company's access to data relevant for competition; and
- competitive pressure driven by innovation.
Market shares typically play less of a role for the determination of dominance on digital markets with free (e.g., paid by advertisement) online services and multi-homing, whereas other criteria, such as user numbers, are typically taken into account on these markets.
In the new Section 18(3b) of the ARC, the German legislator recently introduced the concept of 'intermediation power' to the list of criteria for assessing market power in digital markets. Intermediation power describes the importance of a company that is active as an intermediary between different market sides (e.g., suppliers and customers without direct contact with each other) for the access to upstream or downstream markets. The explanatory notes to the 10th Amendment underline in particular the importance of rankings for companies in this context.
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:
- 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);
- 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
- 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. Upon the FCO's appeal, the FCJ quashed the DCA's decision concluding that there was 'no doubt' that Facebook had a dominant position in the German market for social media networks and abused it through the relevant user conditions (see Section IV.ii).
In its recent proceedings regarding Amazon's terms and conditions and its behaviour towards retailers on its German marketplace platform http://www.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.
According to Section 18(5) of the 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) of the 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. Commission29 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 of the TFEU, Section 20 of the 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 'other 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 trading partners or larger competitors.
Relative market power in vertical relationships pursuant to Section 20(1) of the ARC requires that an enterprise is dependent upon another company as supplier or customer without adequate alternatives and the dependency is not offset by corresponding countervailing market or negotiation power. Section 20(1) of the ARC considers the following forms of dependency: the trading partner (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 a particular purchase ('lock-in') after transaction-specific investments); or (3) is dependent due to scarcity of the product. Section 20(1), third 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.
The 10th Amendment to the ARC extended the application of the concept of relative market power significantly. Relative market power no longer only exists in relation to small and medium-sized companies, but is now also possible in relation to all companies that are dependent on their trading partner. Hence, large companies can also invoke this provision if there is a significant asymmetry in the relationship with the relatively dominant company. Such dependency may also be based on the fact that a company is dependent on platforms with intermediary power for access to upstream and downstream markets if they cannot switch to other platforms (Section 20(1), sentence two). Pursuant to Section 20(1a), such dependency also exists if a company is reliant on access to data controlled by another company, even if the data has not been shared with any third parties.
Section 20(3) of the 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 such as 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.30 The 10th Amendment to the ARC also prohibits the abuse of superior market power by gatekeepers and digital intermediaries by hampering the realisation of network effects by competitors. This marks a significant departure from the general principle that internal growth of companies is not sanctioned.
Paramount cross-market significance
As its centrepiece, the 10th Amendment to the ARC introduced the entirely new regulatory approach of paramount cross-market significance, which is designed to enable the FCO – as a preventive measure – to intervene against activities of large platforms even in markets where they are not yet dominant, but could become dominant quickly due to their resources, strategic positioning and the 'specificities of markets of the digital economy', namely network effects, data advantages and self-reinforcing effects (tipping) in digital ecosystems. The new concept of paramount cross-market significance applies to companies with significant activities in multi-sided, though not necessarily digital, markets or networks. As opposed to traditional market power analysis, cross-market significance is not tied to a clear market definition or dominance in at least one market. Rather, paramount cross-market significance is based on the following non-exhaustive, non-cumulative list of criteria to determine this position on a case-by-case basis: (1) dominance in one or several markets (though there is no need for the FCO to establish dominance in any relevant market); (2) financial resources and access to inputs; (3) vertical integration and activities in otherwise interrelated markets; (4) access to competitively relevant data; and (5) relevance of the company for the market access of third parties. However, there are no quantitative criteria such as turnover thresholds, meaning that the FCO will have significant discretion in its finding of paramount cross-market significance. While the law is specifically aimed at large gatekeepers and intermediaries in digital markets (in particular, the GAFA companies), it is also possible for other, smaller companies to be caught by it.
Unlike the traditional concept of market dominance, which is assessed ex post based on market shares and other relevant factors on a clearly defined market (see above), the new concept of paramount cross-market significance requires a declaratory order (which is valid for five years) formally establishing a company's paramount cross-market significance (Section 19a(1) ARC), which helps to deal with the legal uncertainty raised by the very abstract definition of 'paramount cross-market power'. This first order provides the FCO with the legal basis for a subsequent second order, prohibiting certain types of specifically listed practices, even in markets where the company is not (yet) dominant (Section 19a(2) ARC). The FCO can also join the declaratory order and the prohibition order in one decision. There is no need for the FCO to prove competitive harm of the conduct. In contrast, the company concerned bears the burden of proof to show that its conduct is objectively justified. The application of Section 19a of the ARC does not exclude the parallel application and issuance of fines under the traditional abuse of dominance rules. Section 19a(2) provides for an exclusive list of prohibited conduct, which includes self-preferencing, hindering other companies, tying and bundling, certain strategies with respect to data processing, interoperability, non-transparency and requests for unfair advantages.
Concerning the special regime for large digital companies with paramount cross-market significance, the German legislator has clearly taken inspiration from the European Commission's proposal for the Digital Markets Act (DMA). The new Section 19a of the ARC and the European Commission's draft DMA overlap in their scope of application but are not congruent. It is as yet unclear whether the DMA, once enacted, will prevail over Section 19a of the ARC, or whether the FCO will still be free to prohibit behaviours that would be allowed under the DMA (see further Section VIII).
Abuse of a dominant position
Section 19(1) of the ARC contains a general prohibition of the abuse of a dominant position similar to Article 102 of the TFEU, which addresses exclusionary conduct, exploitative abuse as well as discrimination. Section 19(2) of the ARC lists non-exhaustive examples of specific types of abusive conduct. Prohibited are, inter alia, the following types of conduct:
- 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 of the ARC also captures discrimination of trading partners (i.e., treating an undertaking, directly or indirectly, differently from other similar undertakings without objective justification);
- exploitative abuses such as 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' are also captured (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,31 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) of the 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) of the ARC. In Facebook, the FCJ also held that a strict causal link between dominance and the abusive conduct is not required to establish an exploitative abuse – which has now also been clarified in the 10th Amendment to the ARC.32 An exploitative abuse thus no longer requires a finding that the conduct was only possible as a result of dominance (see further Section IV.ii);
- 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 of the ARC. Under Section 20(3), No. 3 of the ARC, such behaviour is also expressly prohibited for vertically integrated undertakings with relative market power with respect to small or medium-sized undertakings;
- access to essential facilities (Section 19(2), No. 4 ARC), if a dominant company refuses to grant another company access to its data, 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 and there is a risk of elimination of upstream or downstream competition. 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.33 The 10th Amendment to the ARC clarified that refusal to grant access to data, platforms and interfaces could constitute an abuse of dominance under the 'essential facilities' doctrine; and
- 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 of the 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').34 While the DCA overturned the FCO's decision,35 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.36 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.37
Abuse of 'relative' dominance and 'superior market power'
As noted above, Section 20(1) of the ARC extends the prohibition of exclusionary and discriminatory conduct of Section 19 (2), No. 1 of the ARC to companies with 'relative' dominance. Section 20(3) of the 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 such as tying/bundling, predatory pricing and margin squeeze.38
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.
Conduct by companies with paramount cross-market significance that the FCO can prohibit
As noted above, the 10th Amendment to the ARC has introduced an entirely new regulatory approach, thereby extending the prohibition of certain conduct, in particular for large gatekeepers and intermediaries in digital markets, significantly, and providing the FCO with a tool to pre-emptively intervene against large platforms even in markets where they are not yet dominant, but could become dominant quickly.
The FCO needs to formally establish a company's paramount cross-market significance (Section 19a(1) ARC) to have a legal basis for a prohibition decision with respect to certain types of specifically listed practices. The FCO can join the declaratory order and the prohibition order in one decision. There is no need for the FCO to prove competitive harm of the conduct, but it can prohibit the conduct ex ante. The company concerned bears the burden of proof to show that its conduct is objectively justified. The application of Section 19a of the ARC does not exclude the parallel application and issuance of fines under the traditional abuse of dominance rules, and non-compliance of an order under Section 19a is also subject to fines.
Section 19a(2) provides for an exclusive list of prohibited conduct, which includes:
- self-preferencing when providing access to procurement and sales markets, in particular the preferential display of proprietary offers (Section 19a(2), No. 1, letter a, ARC) or the exclusive pre-installation on own devices, as well as other integrations into own products or services (Section 19a(2), No. 1, letter b, ARC); examples are the European Commission's investigation against Google Shopping and Google Android, to which – despite still being under appeal – the explanatory notes to the 10th Amendment explicitly refer;
- hindering other companies (which do not need to be competitors) in their access to procurement or sales markets, in particular by taking measures that lead to an exclusive pre-installation or integration of the undertaking's own products (Section 19a(2), No. 2, letter a, ARC) or by hindering other companies from advertising their offers or reaching customers through channels not operated by the company concerned (Section 19a(2), No. 2, letter b, ARC); the latter is inspired by the lawsuit in the United States between Apple and Epic Games;39
- hindering competitors in adjacent markets in which the undertaking could rapidly expand its position because of competitive advantages (even without being dominant), in particular by automatic bundling of a product with another product without offering sufficient choice to the user (Section 19a(2), No. 32, letter a, ARC) or by making the use of one offer conditional on the use of another offer (Section 19a(2), No. 3, letter b, ARC);
- impeding competitors or raising barriers to market entry for other companies by using certain data processing strategies, in particular by conditioning the use of one service upon the user's consent to the processing of data from another service of the company or a third-party provider (Section 19a(2), No. 4, letter a, ARC) or by processing competitively relevant data received from other companies for purposes not necessary for the provision of its own services (Section 19a(2), No. 4, letter b, ARC); this provision is based on the FCO's Facebook decision (see Section IV.ii.);
- refusing or impeding the interoperability of products or services or the portability of data, thereby hindering competition (Section 19a(2), No. 5 ARC);
- providing other companies with insufficient information about the scope, quality or success of services provided or commissioned or making the assessment of the value of the service more difficult by other means (Section 19a(2), No. 6 ARC); and
- demanding unreasonable or disproportionate benefits for the treatment of another company's offer, in particular by demanding the transfer of data or rights that are not strictly necessary for this purpose (Section 19a(2), No. 7, letter a, ARC) or by making the quality of the presentation of the offer conditional upon the transfer of data or rights that are disproportionate to the service provided (Section 19a(2), No. 7, letter b, ARC).
Immediately after the new Section 19a of the ARC entered into force, the FCO opened its first proceedings under the new provision. In January 2021, the FCO expanded its abuse of dominance proceedings against Facebook (for requiring users of its Oculus virtual reality glasses to have a Facebook account) to proceedings under Section 19a of the ARC where the burden of proof would be lower. As there is not yet guidance on the application of the new provision, it is unclear whether it will really lead to faster proceedings and more effective enforcement. Nonetheless, as noted above, German, European and US case law (even cases that are still under appeal) under traditional dominance rules have obviously inspired the types of conduct prohibited pursuant to Section 19a(2) of the ARC and can therefore provide guidance on the legislator's intent. In any case, it can be expected that the FCO will swiftly make use of its significantly extended enforcement powers against digital companies (for the – unclear – relationship between Section 19a of the ARC and the DMA, see Section VIII).
ii Illustrative cases
Because the lists of abusive conduct in Sections 19 and 20 of the ARC (abuse of 'absolute' and 'relative' dominance) 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.40 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.41 In its first application of the European Court of Justice's Huawei judgment, the FCJ recently clarified the requirement of the patent user's willingness to license. According to the FCJ, a potential licensee has to clearly and unambiguously declare his or her unconditional willingness to conclude a licence agreement on fair, reasonable and non-discriminatory terms and contribute to the negotiation process. The FCJ held that the intention to negotiate and counter-offer being dependent on the patent being found valid and infringed in a court decision would not suffice in this respect.42
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 2014,43 and issued a formal rejection decision in September 201544 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.
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.45 Specifically, the FCO found Facebook's terms and conditions exploitative because they violated European and German data protection rules.46 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.47 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). Upon the FCO's appeal, the FCJ overturned the DCA's interim decision and reinstated (the enforceability of) the FCO's decision. While the FCJ found that there was 'no serious doubt' that Facebook had a dominant position and abused it through the relevant user conditions, the FCJ expressly deviated from the FCO's conclusion of an abuse based on a data protection law infringement, but instead examined Facebook's data usage exclusively under competition law. The FCJ thus found Facebook's data collection practices to be an abusive exploitation of consumers in terms of abusive conditions because Facebook did not offer users any choice regarding access to the platform, namely between a more personalised user experience based on the combination of data from different sources or an experience based solely on the data disclosed on facebook.com. The FCJ also held that a strict causal link between dominance and the abusive conduct is not required to establish an exploitative abuse (now also clarified in the 10th Amendment to the ARC).48 In the hearing in the main proceedings on 24 March 2021, the DCA referred several questions about the GDPR and the relationship between competition authorities and data protection authorities to the Court of Justice of the European Union.49
The FCO had also opened an investigation into Amazon's terms and conditions with retailers on its German marketplace platform http://www.amazon.de and the case was closed with commitments, because Amazon undertook to change its contractual framework.50 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,51 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).
A different example of an exploitative abuse is the FCO's 2019 commitment decision 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.52 Under the sports federations' new rules, athletes now have more freedom to engage in advertising activities with their own sponsors during the duration of Olympic Games insofar as these constitute generic advertising.
Remedies and 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 Sections 19 and 20 of the ARC and the German abuse of dominance provisions (Section 81(2), No. 1 ARC), as well as Article 102 of the TFEU (Section 81(1), No. 2 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.53
In procedures under the new Section 19a of the ARC, the FCO can only prohibit certain conduct of undertakings with paramount cross-market significance for the future, but cannot issue fines. However, undertakings can be fined for violating enforceable prohibition orders issued on the basis of Section 19a of the ARC (Section 81(2), No. 2, letter a, ARC).
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 of the ARC allows the FCO to impose interim measures in urgent cases. However, this power has not yet been used. To promote a 'faster intervention', the 10th Amendment to the ARC has lowered the thresholds for the FCO to adopt interim measures in infringement procedures in cases where an infringement is more likely than not and the interim measure is necessary to protect competition and to avert immediate and serious harm to another company. To compensate for the lower thresholds for interim measures, Section 32a of the ARC now provides for the possibility to avert interim measures in the case of undue hardship for the company concerned. As well as in abuse of dominance or cartel procedures, interim measures may also be adopted in paramount cross-market significance procedures under Section 19a of the ARC.
Section 32(2) of the 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 HRS54 and http://www.Booking.com55 to delete best-price clauses from their contracts with hotel partners.
Section 32(2) of the 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 of the 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 adequately and effectively address the competition concerns identified. Commitments that do not adequately remedy these concerns will not be accepted by the FCO. The FCO then adopts a decision that makes the commitments binding on the party under investigation. The main difference between a decision pursuant to Section 32 of the ARC and a commitment decision pursuant to Section 32b of the 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 Section 32 or 32a of the ARC).
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).
Any orders or preliminary measures by the FCO against companies with paramount cross-market significance (Section 19a ARC) can be challenged only before the FCJ (which may request expertise from the Monopolies Commission). The FCJ therefore serves as the first and last instance in these cases, to increase the speed of proceedings. Because the FCJ is not accustomed to dealing with the facts of cases, it is questionable whether this will lead to an acceleration of proceedings.
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).56 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. The 10th Amendment to the ARC (Section 56(1) ARC) has clarified that the FCO has the discretion to conduct an oral hearing instead of sending a written statement of objections.
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.
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 of the 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.57
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.58 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.59
Both the FCO and the German legislator have focused on digital markets in recent years, and this trend is set to continue.
The FCO president, Andreas Mundt, repeatedly stresses that 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. 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.
The 10th Amendment to the ARC, overhauling the German abuse of dominance rules significantly, will further boost the FCO's intention to play a leading role in competition law enforcement in digital markets. The 10th Amendment not only introduced powers to intervene against companies with paramount cross-market significance, but also focuses on the platform economy more generally. The importance of a platform's intermediation or matching services shall now be taken into account when assessing a dominant position. Moreover, access to data is now a general dominance criterion not only in digital, but also in non-digital, markets. Additionally, the concept of relative dominance shall be extended to all companies, irrespective of their size, and is now also taking into account the role of intermediaries and access to data to constitute dependence on another undertaking. Digital platforms with gatekeeper functions can now have relative dominance because even large companies may depend on them. The 10th Amendment has also introduced a competition law-based right of access to data by extending the access to essential facilities provision in Section 19(2), No. 4 of the ARC to expressly include data and, in the case of relative market power, by requiring non-dominant companies to grant access to data if a supplier's or customer's business model depends on this. Finally, the 10th Amendment lowered the causality requirements for exploitative abuses. An exploitative abuse no longer requires a finding that the conduct was only possible as a result of dominance. This change could significantly broaden the scope of application of the rules of dominance even in cases where there is no (clear) connection between dominance and violation.
Only a few days after the 10th Amendment to the ARC entered into force, the FCO began its first proceedings (against Facebook) under the new rules and concept of paramount cross-market significance. It can therefore be expected that the FCO will make use of its significantly extended enforcement powers against digital platforms and intervene even more often and swiftly in digital markets – with far-reaching effects for large players in the digital economy.
It also remains to be seen how the new procedural approach to the new concept of paramount cross-market significance, where the FCJ should serve as the first and last instance to increase the speed of proceedings, will work in practice. As well as constitutional concerns (e.g., that a single instance can constitute sufficient legal recourse only in exceptional cases, which has been confirmed so far for administrative decisions of trans-regional or general importance of administrative decisions that require fast and final clarification; such criteria would not be per se satisfied by orders pursuant to Section 19a of the ARC), practical challenges could arise as the FCJ normally only decides on questions of law, and therefore may not be well placed to serve as a single instance that is also responsible for the review of the underlying facts. While the FCJ can request an expert opinion from the Monopolies Commission, an expert opinion might not solve any factual issues, but will usually only give economic guidance. In addition, involving the Monopolies Commission and requesting an expert opinion could run counter to the aim of accelerated proceedings.
Last-minute changes were made to the 10th Amendment, relating, in particular, to the special regime for large digital companies with paramount cross-market significance. The legislator has obviously taken inspiration from the European Commission's proposal for the DMA. While the notion of paramount cross-market significance clearly targets platforms operating a digital ecosystem that could also be referred to as gatekeepers, the ARC's approach is somewhat different from the European proposals for the regulation of gatekeepers under the DMA. While the draft DMA foresees that the Commission needs to designate who is a gatekeeper, providers of a (necessarily digital) core platform are presumed to be gatekeepers if they have met certain revenue and user number thresholds in three consecutive years, which must be notified to the Commission (Article 3 DMA). Only where a gatekeeper does not meet the criteria (or can rebut the presumption), the Commission has to proceed with a case-by-case assessment involving a formal market investigation (Articles 3(5), (6), 15(1) DMA).
Further, the new Section 19a of the ARC and the European Commission's draft DMA overlap in their scope of application but are not congruent. In particular, Section 19a of the ARC may apply to a number of smaller platforms that would likely not be caught by the quantitative thresholds of the DMA. At the same time, the practices that can be prohibited under Section 19a of the ARC in part go beyond what is set out in the DMA. For example, the prohibition of self-preferencing under Section 19a(2), No. 1 of the ARC is very broad and goes beyond the current DMA proposal, which only prohibits preferential display (Article 6(1), letter d, DMA) and expressly allows exclusive pre-installations, as long as users remain free to uninstall software that is not technically required (Article 6(1), letter b, DMA). Section 19a(2), No. 3 of the ARC, under which the FCO can prohibit companies from hindering competitors on adjacent markets in which a company with cross-market power can rapidly expand its position because of competitive advantages (e.g., through bundling or tying), is more far-reaching than the DMA, which only prohibits bundling related to some specific product categories, namely identification services (Article 5, letter e, DMA) and subscriptions and user registration (Article 5, letter f, DMA). In addition, while the FCO can prohibit certain exploitative conduct under Section 19a(2), No. 7 of the ARC, namely requests for unfair advantages, the DMA currently does not foresee any comparable prohibition of exploitative conduct.
Accordingly, the question is whether the DMA, once enacted, will prevail over Section 19a of the ARC, or whether the FCO will still be free to prohibit behaviour that would be allowed under the DMA. Aiming for a harmonisation of rules governing gatekeepers, Article 1(5) of the DMA prevents Member States from imposing further obligations on gatekeepers 'for the purpose of ensuring contestable and fair markets'. Article 1(6) of the DMA, however, provides that national provisions on the abuse of dominance, including those going beyond Article 102 of the TFEU, remain applicable. However, it remains to be seen whether Section 19a of the ARC will ultimately be considered as a national provision on the abuse of dominance remaining applicable pursuant to Article 1(6) of the DMA: notably, Section 19a of the ARC significantly deviates from the traditional abuse of dominance framework as it foregoes the traditional market definition approach and does not require a finding of a dominant position on a relevant market or proof by the FCO of the conduct's competitive harm, but rather requires the addressee to show that the conduct is objectively justified. Section 19a of the ARC introduces an entirely new concept of market power and an ex ante regulation-type approach. Finally, because the DMA does not foresee the involvement of national authorities, intense discussions regarding the relationship and differences between regulation and competition (abuse of dominance) law can be expected.
1 Romina Polley is a partner and Katharina Apel is a counsel at Cleary Gottlieb Steen & Hamilton LLP.
2 An English version of the Act against Restraints of Competition (ARC) is available at http://www.gesetze-im-internet.de/englisch_gwb/index.html. However, the official English translation does not yet reflect the most recent amendment.
3 Google, Amazon, Facebook and Apple.
4 An English version of the guidelines is available at http://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Leitlinien/Guidelines%20for%20the%20setting%20of%20fines.pdf?__blob=publicationFile&v=3.
5 Federal Cartel Office (FCO) decision of 7 February 2019; the case report and press release are available on the FCO's website.
6 Düsseldorf Court of Appeal (DCA) order of 26 August 2019, Case VI-Kart 1/19 (V).
7 Federal Court of Justice (FCJ) decision of 23 June 2020, Case KVR 69/19.
8 DCA press release of 24 March 2021, available in German at http://www.olg-duesseldorf.nrw.de/behoerde/presse/Presse_aktuell/20210324_PM_Facebook2/index.php. Request for a preliminary ruling available in German at www.justiz.nrw/nrwe/olgs/duesseldorf/j2021/Kart_2_19_V_Beschluss_20210324.html.
9 See FCO press release of 10 December 2020, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2020/10_12_2020_Facebook_Oculus.html?nn=3591568; and press release of 28 January 2021, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2021/28_01_2021_Facebook_Oculus.html.
10 FCO press release of 17 July 2019, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/17_07_2019_Amazon.html?nn=3591568; case summary available at http://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/Missbrauchsaufsicht/2019/B2-88-18.pdf?__blob=publicationFile&v=5.
11 Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services. See, in particular, concerning (1) access to terms and conditions and prior notice on changes (Article 3(1), letter b and 3(2)); and (2) 30 days' notice for ordinary termination and obligation to state reasons for extraordinary termination of accounts (Article 4(1) and 4(2)).
12 See FCO press release of 29 December 2020, 'Bundeskartellamt – Review of 2020', available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2020/29_12_2020_Jahresr%C3%BCckblick.html?nn=3591568.
13 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) of the ARC (see FCO decision of 4 December 2017, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2017/04_12_2017_CTS_Exklusivit%C3%A4t.html?nn=3591568).
14 DCA decision of 5 December 2018, Case VI-Kart 3/18 (V).
15 FCO decision of 9 September 2015, Case B6-126/14. A press release is available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/09_09_2015_VG_Media_Google.html?nn=3591568.
16 FCO press release of 23 December 2015, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/23_12_2015_http://www.Booking.com.html?nn=3591286.
17 Most online cases were dealt with under Article 101 of the Treaty on the Functioning of the European Union (TFEU) and its German equivalent, Section 1 of the 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 of the ARC (abuse of dominance). Given the violation of Article 101 of the TFEU and Section 1 of the ARC, the DCA ultimately left open whether the best-price clause also infringed Sections 19 and 20 of the ARC (judgment of 9 January 2015, Case VI-Kart 1/14 (V)).
18 FCO press release of 27 September 2019, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/27_09_2019_Leitfaden_Preisspitzen.html?nn=3591568; guidelines available only in German at http://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Leitfaden/Leitfaden_Preisspitzen.pdf?__blob=publicationFile&v=4.
19 FCO press release of 17 December 2019, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/19_12_2019_Marktmachtbericht.html?nn=3591568; full report available in German at http://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Berichte/Marktmachtbericht%202019.pdf?__blob=publicationFile&v=7.
20 FCO press release of 28 November 2019, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/28_11_2019_DB_Mobilitaet.html?nn=3591568. The case was ongoing at the time of writing.
21 A comprehensive list of the FCO's past dominance cases is available on its website in German only at http://www.bundeskartellamt.de/SiteGlobals/Forms/Suche/Entscheidungssuche_Formular.html?nn=3591512&cl2Categories_Format=Entscheidungen&cl2Categories_Arbeitsbereich=Missbrauchsaufsicht&docId=3590026.
22 FCO press release of 27 February 2020, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2020/27_02_2020_XXXLutz.html?nn=3591568.
23 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.
24 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).
25 FCJ judgment of 5 October 2004, Case KVR 14/03, Melitta/Schultink.
26 See Section 18(2a) of the ARC, which was introduced by the 9th Amendment.
27 Dominance may also (exceptionally) be found to exist if the market share remains below the presumption threshold.
28 See also the FCO's working paper of 9 June 2016 regarding market power of platforms and networks, available in German at www.justiz.nrw/nrwe/olgs/duesseldorf/j2021/Kart_2_19_V_Beschluss_20210324.html.
29 General Court of the European Union judgment of 6 June 2002, Case T-342/99, Airtours.
30 Section 20(3) ARC.
31 FCJ judgment of 15 May 2012, Case KVR 51/11, Wasserpreise Calw,
32 FCJ decision of 23 June 2020, Case KVR 69/19.
33 See, in particular, FCJ judgment of 11 December 2012, Case KVR 7/12, Puttgarten/German Ferry Terminal, for further details.
34 FCO decision of 3 July 2014, Case B2-58/09.
35 DCA decision of 18 November 2015, Case VI – Kart 6/14 (V).
36 FCJ judgment of 23 January 2018, Case KVR 3/17, Hochzeitsrabatte.
37 FCO press release of 11 January 2018, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2018/11_01_2018_Moebel_Hochzeitsrabatte.html;jsessionid=20D2BFFFB2E0D1EB3D04360940ACCDFB.2_cid387?nn=3591568; FCO press release of 27 February 2020, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2020/27_02_2020_XXXLutz.html?nn=3591568.
38 In addition to the rules laid out in Sections 18 to 20 of the 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 dependent trading partners or small or medium-sized competitors, Section 21 of the 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).
39 Epic Games advertised and offered, in violation of Apple's App Store rules, alternative payment methods that by-passed Apple's App Store to avoid the commission Apple collects on all sales through the App Store. As a reaction, Apple banned Epic Games from the App Store (we note that Google is involved in a similar, but less widely reported lawsuit with Epic Games, Epic Games, Inc. v. Apple Inc., No. 4:20-cv-05640-YGR (N. D. Cal. 2020)).
40 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.
41 European Court of Justice, judgment of 16 July 2015, Case C-170/13 – Huawei.
42 FCJ, judgment of 5 May 2020, Case KZR 36/17 – FRAND-EINWAND.
43 FCO press release of 22 August 2014, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2014/22_08_2014_VG_Media.html?nn=3591568.
44 FCO decision of 9 September 2015, Case B6-126/14. A press release is available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/09_09_2015_VG_Media_Google.html?nn=3591568.
45 The FCJ considered it abusive under Section 19(1) of the 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.
46 FCO decision of 6 February 2019; a non-confidential version is available in German only at http://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 http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/07_02_2019_Facebook.html?nn=3591286.
47 DCA order of 26 August 2019, Case VI-Kart 1/19 (V).
48 FCJ decision of 23 June 2020, Case KVR 69/19.
49 DCA press release of 24 March 2021, available in German at http://www.olg-duesseldorf.nrw.de/behoerde/presse/Presse_aktuell/20210324_PM_Facebook2/index.php. Request for a preliminary ruling available in German at www.justiz.nrw/nrwe/olgs/duesseldorf/j2021/Kart_2_19_V_Beschluss_20210324.html.
50 FCO press release of 17 July 2019, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/17_07_2019_Amazon.html?nn=3591568; case summary available at http://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/Missbrauchsaufsicht/2019/B2-88-18.pdf?__blob=publicationFile&v=5.
51 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 that used in other sales channels.
52 FCO press release of 27 February 2019, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/27_02_2019_DOSB_IOC.html?nn=3591568.
53 Section 81(4) ARC.
54 FCO decision of 20 December 2013, Case B9-66/10. A press release is available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2013/20_12_2013_HRS.html?nn=3591568.
55 FCO press release of 23 December 2015, available at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2015/23_12_2015_http://www.Booking.com.html?nn=3591568.
56 There is no formal complaint procedure, however, which means, notably, that complainants do not have a legal remedy against a rejection of their complaint.
57 See Idealo press release of 12 April 2019, available in German at: http://www.idealo.de/unternehmen/pressemitteilungen/idealo-verklagt-google-auf-schadensersatz-wegen-missbrauchs-seiner-marktbeherrschenden-stellung/.
58 Section 33b ARC (formerly, Section 33(4) ARC, changed by the recent amendment to the ARC).
59 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.