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Germany changes its antitrust laws – The new Antitrust Digitisation Act will likely affect most businesses

  • Germany
  • Competition, EU and Trade

28-01-2021

On 14 January 2020, the German parliament (Bundestag) passed a long-awaited amendment to German Antitrust law (Act against Restraints of Competition (ARC)). It has been dubbed the “ARC Digitialisation Act” as it is meant to modernise German antitrust law in the digital age. However, the amendment also introduces changes to all areas of competition even those unrelated to digitalisation. 

Takeaway 1: Control of abusive practices tightened significantly especially for undertakings with "paramount cross-market importance for competition"

The tightened control of abusive practices is aimed at regulating the digital economy but affects all companies and not only major digital gatekeepers. Any company handling data should review their policy in light of the new legislation.

Takeaway 2: Domestic merger control thresholds increased to EUR 50 million and EUR 17.5 million respectively  

Takeaway 3: The ARC introduces a new merger review system enabling the Federal Cartel Office to intervene where the parties do not meet the turnover thresholds in certain sectors

Takeaway 4: Compliance programs help companies reduce their fine

The Reform of the ARC has given more powers to the FCO in the fining regime. One of the changes includes that adequate and effective compliance precautions may result in a reduction in the level of fines.

Background

Prompted in part by the obligation to transpose the European Directive 2019/1/EU ("ECN+ Directive") into German law, the German legislator views itself at the forefront of regulating digital markets.

While the German lawmaker was clearly aware of the draft EU-regulation in this field (i.e. the Digital Markets Act), some of the new rules may deviate from the European regulation.

Abuse of dominance rules

The abuse of dominance rules have changed considerably. The changes are twofold.

  • The scope of “control” has been extended to include companies with "intermediary power". This amendment is clearly aimed at digital platform operators (such as Google, Facebook or Amazon). à Section 18 (3b) ARC
  • The creation of a new legal basis for the abuse of digital powers that includes control over data. à Section 19a ARC

The new definition of dominance may also apply to some companies that would traditionally not view themselves as “dominant”.

Under the new definition a company may be considered “dominant” if “the undertaking [has] access to data relevant for competition,” or is exercising innovation-driven competitive pressure.”

Further, there is now a completely new “digital dominance” section in the law. This lists seven practices which could amount to an abuse under German law specifically in relation to companies with “paramount significance for competition across markets”.

The new rules are illustrated with ten detailed examples. For example:

  • Preinstallation of a search engine in browsers or apps/mobile assistants on mobile devices;
  • contacting customers other than for the service they signed up for; and
  • access and fees in app stores.

Some of the new rules are rather broad and are subject to interpretation, such as:

  • processing competitively sensitive data or creating barriers to market entry;
  • impeding the interoperability of products or limiting the portability of data;
  • refusing to grant access to data for an appropriate consideration without objective justification. 

The new digital dominance rules will be subject to a quick judicial review. All cases will be heard by the German Federal Court in the first and last instance.

Merger control – Thresholds increased and a new regime

The domestic merger control thresholds were increased from EUR 25 million to EUR 50 million and from EUR 5 million to EUR 17,5 million, respectively. The international threshold (combined EUR 500 million) stays the same. The “value of the transaction” based threshold (EUR 400 million) also remains unchanged.

The ARC also introduces a new merger control regime which applies to certain industry sectors selected by the FCO. In such sectors the FCO may ask companies to notify their transactions if lower thresholds are met (Section 39a GWB).  These thresholds are:

  • the worldwide revenues of the acquirer exceeds EUR 500 million in the last business year; and
  • the worldwide turnover of the target company exceeds EUR 2 million and that undertaking achieved more than two thirds of its turnover in Germany.

This law, known as the "Remondis Clause", addresses a wish of the FCO to be able to regulate situations where a number of smaller companies are purchased (where none of the deals are notifiable). The specific design of this law is a paradigm shift away from purely objective criteria. In the future, it will also depend on the FCO's assessment of whether there are any indications that competition in certain sectors of the economy is restricted. Sectors such as rolled asphalt, hospitals and food retail are likely to be the first in focus.

Finally, please note that the de minimis threshold has been upped from EUR 10 million to EUR 20 million.

Administrative procedures

Following the example of France, the Bundestag has amended the instrument of “provisional order” (Section 32a GWB) hoping that it will be used more in the future. Under this rule the FCO may order interim measures ex officio if an “infringement appears predominantly probable”. The provisional order allows the FCO to act quickly as an interim measure. 

The “chairperson's letter”, a (very handy) informal way of receiving the FCO’s guidance, will remain in place. It is now codified in Section 32c (2) GWB and retains its flexibility. Undertakings will continue to be able to receive the FCO’s view on a wide range of subjects.

Fines

The ARC introduces a number of changes to the fining regime which serve to implement the ECN+ Directive (EU 1/2019). For example, the FCO’s searching powers have been enhanced.  Sadly, the lack of legal privilege rules has not been addressed.

Compliance programmes are now taken into account when determining the fine. This could incentivize companies to review their compliance systems in order to benefit from the new regulation.

Damages

Damage claims by those affected by cartels have been very successfully in Germany in recent years. However, one stalling point for claimants was the necessity to prove that the “cartel impact” was deliberate. This hurdle has now been removed, further strengthening the position of claimants. Section 33a (5) GWB now states that the “cartel impact” is refutably assumed, which should be very hard for defendants to disprove.

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