Draft law passed: Cartel office to control digital companies more closely

The federal government has decided to reform competition law. “Large market-dominating digital companies are subject to stricter abuse control. We create the possibility that the cartel office can react faster with interim measures”, said Federal Minister of Economics Peter Altmaier (CDU) after a cabinet meeting in Berlin on Wednesday. Medium-sized companies would also be relieved of the burden of merger control and would receive more legal certainty, “so that you can use the opportunities of digitization”.

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  1. DAW SE, Ober-Ramstadt
  2. Berliner Verkehrsbetriebe (BVG), Berlin

The Ministry of Economic Affairs had already presented the draft bill for an amendment to the Act against Restraints of Competition (GWB) in October 2019. This has since been coordinated within the various ministries. The Bundestag still has to approve the plans.

The now decided 176-page draft of the GWB Digitization Act (PDF) adds another criterion for dominant companies in a new paragraph 18, paragraph 3b of the GWB. This is supposed to be the concept of “Power of intermediation” in addition to the usual supply and buyer power.

Access must not be denied

Accordingly, when assessing the market position of a company that acts as an intermediary in multi-sided markets, “in particular to consider the importance of the brokerage services provided by him for access to procurement and sales markets”. This is aimed at providers such as Google or Amazon who could also direct search queries to their own offers.

Another new feature is a regulation in Section 19, which is intended to prevent dominant companies from offering certain services such as “Access to data, networks or other infrastructure facilities” to refuse. According to the Essential Facilities Doctrine a refusal should in future be unfair competition law under certain circumstances.

Tighter controls by the cartel office possible

A new Paragraph 19a of the GWB provides that the Federal Cartel Office must issue a “Outstanding cross-market importance for competition” can determine. The antitrust authorities can then prohibit such companies from “Treating the offers of competitors differently than own offers when arranging access to procurement and sales markets” or competitors “to be hindered directly or indirectly, provided that the hindrance is capable of significantly impairing the competitive process”.

In addition, the Cartel Office can prohibit such companies “to complicate the interoperability of products or services or the portability of data and thus to hinder competition” such as “Insufficiently informing other companies about the scope, quality or success of the service provided or commissioned, or otherwise making it difficult for them to assess the value of this service”.

With the new paragraph, the government wants to create a basis “which is intended to enable the Federal Cartel Office to control those large digital corporations more effectively, which are of paramount importance for competition across markets”.

Criticism from the IT industry

The IT industry is still dissatisfied with the plans. “With the current draft, there is a move away from proven, functioning and legally secure practices in competition and antitrust law in some areas – a paradigm shift”says the managing director of the IT association Eco, Alexander Rabe. This not only has serious consequences for the large digital corporations, which are threatened with stronger control by the Federal Cartel Office in the future. Unlike the federal government, Eco does not expect more legal certainty, but rather fears “numerous legal uncertainties for all other companies”.

In the opinion of the association, this is due, among other things, to the fact that the government has not created an empirical basis for the structural and temporal development of so-called tipping markets. This has resulted in legal uncertainties. On the other hand, there is praise for the new rules on corporate mergers. “As a result of increasing digitization, cooperation within but also across industries will gain in importance in the coming years”said Raven. The government’s plans provided a legally sound basis for mergers. Startups and small and medium-sized companies in particular could benefit from this.

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