On 24 January 2020, the draft 10th amendment to the German Competition Act was published (see link to full text in German). The amendment reflects Industry Report 4.0 (in English) and more broadly the ECN+Directive. Key developments are centred around abuse of market power of the German Act against Restraints of Competition - the equivalent of Article 102 TFEU.
| what you need to know - key takeaways |
- Assessing market power (dominance) – new factors to be considered include access to data and an intermediary's "paramount significance" across markets.
- New theories of abusing market power – examples include: refusing supply of or access to data, where such supply or access is "objectively necessary"; preferring your own services to those of competitors/discriminating against competitors' offers; preventing data portability; and "free riding" on data collated by another company.
- New enforcement power: The German competition authority can intervene to prevent a monopolist "tipping a market" where it has benefited from increased network effects and is deliberating aiming to foreclose rivals .
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Most remarkably, the proposed analysis of market power has been expanded to include data as a new factor in assessing dominance alongside traditional factors, such as market shares. Additionally, dominance is not confined to only one relevant market, but can span different markets if the undertaking acts as an intermediary.
Not only has the definition of market power been recast, but new proposed theories of abuse of dominance have been injected into the Act. If adopted, the following two theories of harm (among others) could be added - a dominant undertaking:
- refusing access to data which is objectively necessary for a market participant to operate in an upstream or downstream market; or
- preferring its own services to those of other suppliers.
These changes send a very strong signal to data-rich companies, especially to those providing advertising services and operating on multi-sided platforms. These proposed amendments are significant, particularly if the obligation to provide access to data can be stretched so far as to include a positive duty to supply rivals with access to innovations where rivals strongly depend on these. Much will depend on how "objective necessity" will be interpreted as a possible extension of the current "essential facilities" doctrine, particularly as compensation need not be offered in return for access to data. These changes also raise the complicated intersection between competition law and data protection, as consent will be needed for data transfers/access to data.
Beyond new theories of abuse of dominance, the amendment also introduces the following changes:
- Cartels - the idea that cartels cause harm has been strengthened.
- Intermediary powers have been enhanced.
- Merger thresholds - the second domestic merger threshold has been increased from EUR 5m to EUR 10m for all undertakings. Similarly, the de minimis threshold for merger notification in Germany has been increased from EUR 15m to EUR 20m.
- "Killer acquisitions" - the latest iteration of the amendment is a first step towards accommodating so-called "killer acquisitions" (acquisitions of an innovative target company/product eliminating future competition in that market). These types of acquisitions cause concern, as they may lead to "tipping" the market by eliminating competitors.
- According to the January draft, acquisitions of "small" competitors (achieving a turnover of EUR 2m with two thirds of that turnover being achieved in Germany) by bigger undertakings (turnover of more than EUR 250m worldwide) in the same sector can be notifiable, even where the current merger thresholds are not met. However, the current wording suggests that this will be limited to concerns about harm to competition in certain domestic sectors caused by successive acquisitions in the future. This provision can still therefore be fine-tuned if it were to be used more generally to tackle all types of killer acquisitions including one-off transactions.
The draft emphasises that the list of potential abusive conduct is not closed – although this is not novel and mirrors the European Commission's existing approach to Article 102 TFEU, it emphasises that further amendments may follow.
The 10th amendment is not yet set in stone and we will provide further updates when the final draft is granted legislative approval. In the meantime, global technology giants with market activities in Germany may have to prepare themselves for tighter scrutiny whilst other jurisdictions may adopt similar measures to implement digital reforms.
For further reading, please visit our article on Tightening the Screws on Tech Titans commenting on an earlier draft of the 10th amendment published on 7 October 2019.
With thanks to Nadja Waksman and Ansgar Hoffmann of Ashurst for their contribution.
