Amendment of the German Act against Restraints of Competition

After yesterday’s publication in the Federal Gazette, the 10th amendment to the German Competition Act has entered into force today as the “Act Amending the Act against Restraints of Competition for a focused, proactive and digital competition law 4.0 and amending other competition law provisions” (“GWB-Digitalisierungsgesetz” - GWB Digitalisation Act ).

Important changes regarding the protection of competition in the digital economy

A key element of the amendment is the modernisation of abuse control.
Andreas Mundt, President of the Bundeskartellamt: “The competition authorities’ traditional control of abusive conduct is aimed at terminating or penalising the anti-competitive practices of powerful companies ex-post. On this basis, even as a national competition authority we have been able to achieve significant successes in recent years, for example in our proceedings against Amazon or Facebook. However, the highly dynamic digital economy and the rapid growth of the large digital platforms have made it necessary to be able to take even faster and more effective action. The amendment to the German Competition Act will allow us to take a major step forward. In future we will be able to prohibit big tech companies from engaging in certain types of conduct much earlier and, so to speak, shut the stable door before the horse has bolted. We will be allowed to take preventive measures which can contribute decisively to curbing the market power of the large digital platforms. The German lawmaker has assumed an international pioneer role in this area as the legislative process at the European level, where similar tools are being discussed, is still in its initial stages.”

The newly introduced Section 19a probably represents the most important change as the Bundeskartellamt will now be able to intervene at an early stage in cases where competition is threatened by certain large digital companies. As a preventive measure the Bundeskartellamt can prohibit certain types of conduct by companies which, due to their strategic position and their resources, are of paramount significance for competition across markets. Such conduct includes e.g. the self-preferencing of a group’s own services or impeding third companies from entering the market by processing data relevant for competition.

The lawmaker has also reinforced the effectiveness of the new provision by shortening the legal process. Appeals against decisions issued by the Bundeskartellamt on the basis of Section 19a will be directly brought before the Federal Court of Justice. By-passing the Düsseldorf Higher Regional Court, the court of first instance in all other competition law proceedings, will save a considerable amount of time in the proceedings.

The lawmaker has also specified in more detail provisions regarding the traditional control of abusive conduct and added internet-specific criteria. As to the assessment of market power, the Act now stipulates that access to data relevant for competition, and the issue of whether a platform has what is called power of intermediation, must also be taken into account. Such a key position in the provision of intermediary services can result in dependence relevant under competition law.

As to the rules for companies with relative or superior market power, the protective scope of the Act will no longer be limited to small and medium-sized companies. Another important new feature is that under certain preconditions the Bundeskartellamt can order in favour of dependent companies that access to data must be granted in return for adequate compensation. The Act also affords the Bundeskartellamt special competences to intervene in cases where a platform market threatens to ‘tip’ towards a large supplier (‘market tipping’).

Changes in merger control

The Act aims at easing the bureaucratic burden on companies by readjusting the turnover thresholds in merger control. In Germany, most merger projects must be notified by the companies concerned only if their worldwide or domestic turnover reaches certain minimum thresholds. In future mergers will be subject to merger control only if, among other conditions, one of the companies concerned achieves an annual turnover in Germany of at least 50 million euros (previously 25 million euros) and if another company participating in the merger achieves an annual turnover in Germany amounting to at least 17.5 million euros (previously five million euros).

Andreas Mundt: “So far we have examined around 1,200 mergers each year, many of which were not really relevant cases in terms of competition. A huge amount of work has gone into this impressive number of cases which is why we generally welcome the fact that the thresholds are to be raised. However, the threshold value that has now been chosen could result in some critical cases not being examined. The resources that will now become available to us will allow us to focus even better on those cases that raise serious concerns.”

Furthermore, the Bundeskartellamt will be able to oblige companies active in certain economic sectors to notify mergers even if they do not reach the turnover thresholds. This is subject to specific conditions being fulfilled, including e.g. reaching certain threshold values, and the Bundeskartellamt must have previously conducted a sector inquiry in one of the economic sectors concerned.

Implementation of the ECN Plus Directive

The implementation of the ECN Plus Directive will strengthen the effectiveness of cartel prosecution. In line with the system in place at EU level, companies and their employees will be required in future to cooperate to a certain extent in establishing the facts of a case.

Another important step is the fact that the amendment strengthens the competition authorities’ position in judicial proceedings concerning administrative fines. Even after an objection has been filed against a fining decision, the Bundeskartellamt will remain the competent enforcement authority (not the General Prosecutor’s Office as has previously been the case) and will in future have the same rights in these proceedings as the public prosecutor’s office.

The amendment also includes several new provisions regarding administrative fines. New rules will apply to fines imposed on associations of companies. In addition, the leniency programme has now been enshrined in law. The Bundeskartellamt will adjust its notices accordingly. Leniency applications can of course still be filed at any time.

Changes regarding administrative proceedings

The amendment lowers the requirements for ordering interim measures as a further step to improve the Bundeskartellamt’s ability to take faster and more efficient action in vulnerable markets.

The authority also welcomes the new provisions regarding access to files. While also oral hearings will become possible in cartel administrative proceedings, more detailed provisions on granting parties to the proceedings and third parties access to files will provide more legal clarity.

Lastly, the established practice of providing companies with informal advice in the form of a letter by the Chair of a Decision Division has now been embodied in law.
The decision of the German Bundestag on the GWB Digitalisation Act (Bundesrat publication 38/21) can be downloaded here