Antitrust Law and Merger Control17.10.2019 Newsletter
News on the forthcoming reform of antitrust law
A first draft by the German Federal Ministry for Economic Affairs and Energy [Bundesministerium für Wirtschaft und Energie, BMWi] for the 10th amendment of the German Act against Restraints of Competition [Gesetz gegen Wettbewerbs-beschränkungen, GWB] is now available. One focus of the amendment is going to be on digital markets.
There will also be a number of other changes, in particular regarding merger control and procedural rights. The draft bill entitled "GWB Digitalisation Act" has yet to go through the various ministries in the Federal Government before it can be submitted to the Bundestag as a government draft.
Below, you will find an overview of the most important changes:
- The rapid developments in the digital markets continue to pose challenges for competition law. Therefore, the provisions on abuse of dominance will be extended to the specifics of digital markets through right to data access and specific rules on data portability.
- Antitrust proceedings are also to be accelerated and simplified further. One reason for this is the necessity to be able to intervene more effectively in the digital markets. The procedural rights and investigative powers of the German Federal Cartel Office (“FCO”) [Bundeskartellamt, BKartA] will be extended in future.
- The role of the leniency programme in fine proceedings will be regulated by law; new criteria for determining the amount of the fine will be introduced.
- Meanwhile, the rules on merger control are going to be relaxed, which should lead to fewer notifications of merger projects in the future.
- Horizontal cooperation is supposed to become simpler, with companies obtaining legal certainty regarding planned projects more quickly.
- In the case of antitrust damages, some clarifications are going to be made and a legal presumption is going to be introduced with regard to the affect the cartel has had on the party concerned.
I. The changes in detail
1. Changes in the rules of abuse of dominance
The rules on abuse of dominance are going to be more closely aligned to the digital markets. The intention is to provide access to competitive data and adapt the definition of a market-dominating position inter alia by including intermediation power of digital platforms with a strong intermediary and control function.
The aim is to ensure that in the future companies with outstanding cross-marketsignificance for (digital) competition - intermediation powers - will no longer be able to easily exploit this position in an anticompetitive manner. This applies, for example, to intermediaries of sales channels such as search engines or marketplaces who bundle a high level of buyer power via their market position. The Federal Cartel Office could intervene, for example, if a search engine favours its own offers over those of other providers when presenting its search results. It is also intended to cover cases in which changing the supplier becomes an unattractive option because the previous supplier makes it difficult to take data to another supplier (data portability).
The planned changes in abuse control with regard to companies with only relative market power are likely to have considerable practical relevance. To date, these provisions are limited to the dependency of small or medium-sized enterprises. This limitation is now going to be removed and the respective provisions will apply to companies of all sizes in the future. The background to this change is that, in digital markets, the BMWi does not consider the size of the company to be an appropriate criterion for the question of dependency. In practice, however, it remains to be seen whether this extension of the scope of application of the relative market power will not also result in cuts for "non-digital" companies.
In addition, a new data accessclaim is supposed to strengthen the position particularly of smaller companies vis-à-vis large digital platforms and increase their chances of innovation and competition. In joint business transactions, but not exclusively, they can no longer be deprived of competition-relevant data.
2. Faster intervention possibilities and more rights for the Federal Cartel Office in antitrust proceedings
The threshold for issuing interim measures by cartel authorities is to be lowered. Particularly in digital markets, the BMWi wishes to achieve a quicker way of intervening to prevent industry leaders from dividing up newly emerging areas of business amongst themselves by exploiting their market power. If the FCO considers a violation of antitrust law to be likely, it is to be allowed to act by taking interim measures. However, under the draft law there will not be an enforceable right to action.
In future, the FCO will also be able to make information and surrender demands to any natural person (independent of the company) in both investigation and fine proceedings. Anyone who cooperates incompletely, incorrectly or belatedly must expect fines from the FCO. The right to refuse to make a statement is being severely restricted. If a natural person incriminates himself within this framework, this information is not to be held against him in possible criminal or administrative offence proceedings, but shall be held against the companies concerned. Also in the case of raids, an active obligation to co-operate, reinforced by a fine (already a concept of EU law), is to be introduced
If the FCO establishes a violation of antitrust law, the post-violation conduct of the company concerned is to become a criterion for the imposition of fines. What is new here is that in the future a reduction of the fine may also be achieved through effective compliance measures.
The turnover associated to the violation is also going to be included as a criterion for calculating fines. This includes any and all turnover affected by the anti-competitive conduct identified by the FCO.
For the first time, the leniency programme is now also going to be codified in the GWB, without changing any of the previous principles. Accordingly, the programme shall apply only to horizontal agreements between direct competitors. In case of vertical agreements, for example between suppliers and their customers, cooperation with the FCO may, however, be taken into account in the fine proceedings with the effect of reducing the fine.
4. Higher thresholds in merger control
The existing (second) domestic turnover threshold will be doubled from EUR 5 million to EUR 10 million. This would then probably reduce the number of notifiable mergers by about 20%. In addition, mergers on so-called minor markets with a total annual volume of up to EUR 20 million (previously up to EUR 15 million) are going to be exempted from merger control in future.
In addition, pressure upon the print press in particular is being relieved: According to the draft, mergers will only be reviewed in the future if the merging companies achieve a combined annual turnover in excess of EUR 125 million.
In the case of mergers notified and cleared by the Federal Cartel Office, no further notification of their implementation will generally be required.
The BMWi sees a need for action in horizontal cooperations between competitors, which is why this is to be facilitated - again against the background of the development of digital markets and digital trading platforms. Many companies are already using the comfort letter [Vorsitzendenschreiben] of the FCO to obtain an informal assessment of their plans under competition law. This practice is going to be maintained and incorporated into the law.
The BMWi wishes to facilitate the enforcement of private cartel damage claims. To this end, a statutory (rebuttable) presumption of the party concerned being affected by the cartel is to be introduced. If a company concludes an agreement with a cartel member, the good or service shall be deemed to be affected by the cartel if the agreement falls within the period of the cartel agreements, was concluded geographically in an area covered by the agreements and the corresponding good or service was generally covered by the agreements. According to the current status, both direct suppliers and customers as well as their customers will be able to plead this presumption. Price umbrella effects are not going to be covered however. These are cases where goods or services were purchased from competitors who do not participate in the cartel but operate on the same market and have adjusted their prices to those of the cartel members.
7. Conclusion
The draft bill envisages far-reaching extensions of the powers of the FCO: If the draft law is passed, both the barriers to intervention in (potentially) anti-competitive behaviour would be lowered and the rights of the FCO in antitrust proceedings strengthened.
The provisions protecting the digital markets are likely to especially benefit start-ups and companies that have hardly operated digitally to date: They can hope for easier market and data access. Much remains to be regulated here, however. In particular, it remains to be seen whether the planned data access claim will be effectively enforced in practice.
Cooperation projects in small and medium-sized enterprises could be significantly facilitated by the planned innovations. In particular, the planned raising of the turnover thresholds in merger control and a possible claim to a clearance declaration could accelerate mergers and simplify horizontal cooperation.
