10th Amendment of the German Act against Restraints of Competition

The German competition law regime as set out by the Act against Restraints of Competition (“ARC”) is scheduled to undergo major changes in the next year. While the ARC had only recently been amended at the end of 2016, additional changes became necessary to fulfil the requirements of the EU-Directive 2019/1 designated to empower the national competition authorities of the member states (“ECN+”-Directive), which set new standards on available measures, the status and cooperation of the national competition authorities. The Ministry for Economic Affairs and Energy in charge of the reform meanwhile also wanted to make further amendments to the ARC to account for changes in the digital economy and to tweak the efficiency and effectiveness of the German competition law regime.

After scattered details on the reform plans of the Ministry had already been spread in the past months, recently, a full draft of the respective bill surfaced with the status of the bill as of 7 October 2019 (“ARC-D)”. While it would anyway still take some time until the currently circulated draft bill becomes law and further changes (either by the Ministry for Economic Affairs and Energy itself, the cabinet of the federal government and/or the German Parliament are to be expected, the current draft is the most elaborated and detailed version yet and most of its provisions will probably remain the same.

The most important changes to the ARC (besides the requirements set out in the “ECN+”-Directive) as currently envisioned by the draft are:

• when determining the market position of an undertaking, its access to data relevant for competition shall also be taken into consideration (Sec. 18 (3) ARC-D). Likewise access to data may also become decisive when determining a dependency on undertakings with relative market power as per Sec. 20 (1a) Sentence 1 ARC-D);

• when assessing the market position of undertakings acting as intermediaries on multi-sided markets, special account should be taken of the importance of its services for the adjoined supply and sales markets (Sec. 18 (3b) ARC-D);

• Sec. 19a ARC-D would grant the FCO far-ranging powers to intervene against undertakings with “paramount significance for competition across markets“ that are active on multi-sided markets. The FCO may declare undertakings to be of “paramount significance for competition across markets” and prohibit these undertakings from various actions that could (potentially) harm competition. Among those the draft lists:

  • self-preferencing of vertically integrated undertakings;
  • impeding competitors in markets where the undertaking does not hold a dominant position but could rapidly expand its market position;
  • establishing or increasing barriers for market entry or otherwise impeding competitors on other markets;
  • impeding the interoperability of products and serviced or the portability of data;
  • providing insufficient information on the scope, quality or success of its services or otherwise impeding an assessment of its services;

• Sec. 20 ARC contains a new definition of relative market power. Relative market power may not only be assumed in relation to small and medium sized enterprises anymore. As for the new relative market power based on data pursuant to Sec. 20 (1a) Sentence 1 ARC-D described above, an abuse of such market power may in the future also be assumed when the respective undertaking denies access to its data to other companies dependant on it, even if such data has not yet become subject to business dealings in general;

• further, an unfair impediment may also be assumed when an undertaking with superior market power impedes the positive network effects by its competitors causing a deterioration of competition (Sec. 20 (3a) ARC-D);

• Sec. 32c ARC-D contains a codified consultation process with the Federal Cartel Office on the admissibility of cooperations between market participants under the ARC regulations and Article 101 & 102 of the Treaty on the Functioning of the European Union (TFEU). While the statements by the FCO declaring an intended cooperation not to violate competition law would not be legally binding, the draft at least entitles all companies that have a substantial legal and economic interest in such a preliminary judgement with regard to cooperation with its competitors to a decision by the FCO within six months’ time;

• regarding merger control proceedings, the second domestic turnover threshold pursuant to Sec. 35 (1) No. 2 ARC would be increased to EUR 10m. Additionally, a minor market not subject to merger control as per Sec. 36 (1) Sentence 2 No. 2 ARC shall already be assumed when the cumulative turnover on the market did not exceed EUR 20m per year. As a result, merger notifications would become necessary less frequently;

• the duration of second phase proceedings in case of merger control would in general be extended to five months, on the other hand additional extensions of this timeframe would be limited to a month (Sec. 40 (2) ARC-D); and

• the Ministerial Authorisation pursuant to Sec. 42 ARC for merger proceedings not cleared by the FCO would become conditional on having at least taken steps for and being denied an interim injunction by the courts to allow the intended concentration. This change would significantly lengthen merger proceedings reliant on a Ministerial Authorisation, making it less attractive for companies to seek such an extraordinary permission.

While these changes are expected to make dealing with competition law more convenient for small and midsized companies and established industries with traditional supply chain models, the amendments could lead to a quite strict regulation of successful companies in the new platform economy. Especially the approach towards data may cause concern in the digital economy. On the one hand, data would be considered something akin to an “essential facility” and a decisive asset for determining market power, on the one hand the new law may even require companies to share these assets even though they did not intend to create a market for such data in the first place and hinder the vertical integration of successful intermediaries in multi-sided markets. Meanwhile, companies dealing with private user data may also become caught up between the requirements set out by the new ARC and the rules of the General Data Protection Regulation. However, it still remains to be seen how the current draft will develop.