Another victory for the Bundeskartellamt! The German Supreme Court (BGH) confirmed that Apple is an undertaking of paramount significance for competition across markets (UPSCAM) pursuant to Sec. 19a para. 1 GWB. Although the full decision is not out yet, today’s press release already gives us an idea of what the BGH has been thinking about over the last few weeks since the hearing. The devil seems to have been in the details, and the BGH and the Bundeskartellamt seem to be largely aligned after all. The decision comes just in time to back the Bundeskartellamt’s statement of objections against Apple’s App Tracking Transparency Framework (ATTF), a proceeding under Sec. 19a para. 2 GWB. Read below to find out how the court summarised its findings!
By the SCiDA Team
While the tech oligarchy on the other side of the Atlantic seems to be focusing on EU actions against the US tech titans, the enforcement of Sec. 19a GWB against Big Tech in Germany seems to be largely unaffected by the power shifts in the US. The Bundeskartellamt’s president, Andreas Mundt, has reportedly confirmed that the Bundeskartellamt does not feel any pressure from the US related to its competition law enforcement against Big Tech platforms. The same seems to be true for the BGH. The court appears to have largely confirmed the Bundeskartellamt’s reasoning for designating Apple as UPSCAM, and only hinted at a few minor disagreements with the German competition watchdog.
For the time being, this is the last decision by the BGH on an appeal against an UPSCAM-designation by the Bundeskartellamt, with no further designation proceedings or appeals pending. With other tech platforms out there (X, Booking, ByteDance are not yet covered by Sec. 19a GWB) this may not be the end of an era for the BGH in deciding on appeals against Sec. 19a GWB designations. But the decision on Apple’s appeal certainly marks the end of an era for the presiding judge of the competition law senate, Prof. Dr. Wolfgang Kirchhoff, who is retiring this month. When Kirchhoff joined the ranks of the BGH in 2004, it was a huge bang: He had been a partner with Freshfields Bruckhaus Deringer (as the firm was known then) at the time, it was the first such change in Germany (where judges usually pursue a straightforward career in the judiciary.)
Sneak Peek: What the press release tells us about the reasoning behind the decision
While we will have to wait for the publication of the full decision to see the complexity of the court’s reasoning, the press release already indicates where the BGH did and did not buy the arguments heard at the hearing in January:
- Those of you who read our courtroom report on the hearing will remember that Apple tried to convince the court that it does not really qualify as a digital platform, but is simply a
fruithardware provider. What did not work for Amazon in its appeal against its UPSCAM designation did not convince the BGH in Apple’s case either. In its press release, the court briefly clarified that multi-sided markets pursuant to Sec. 18 para. 3a GWB (a prerequisite for the UPSCAM designation under Sec. 19a para. 1 GWB) are not only platforms that intermediate business transactions between different market sides. Instead, the court clarified that it is sufficient for a platform to qualify as a multi-sided market if it draws the attention of one group of users to another or technically enables interaction between different groups of users. - Apple’s attempt to introduce its own benchmarks for designation under Sec. 19a para. 1 GWB also did not meet the court’s approval either. Apple had proposed a two-step test, according to which the Bundeskartellamt would first have to demonstrate solid facts that the criteria established for UPSCAM-designation are met. Secondly, the Bundeskartellamt would have to provide an evidence-based prediction of an abstract threat to competition. The BGH simply wiped out such a suggestion by repeating its findings from the Amazon decision that designation according to Sec. 19a para. 1 GWB does not require the existence of a concrete threat to competition or that competition has already been impaired. Instead, Sec. 19a para. GWB addresses an abstract risk potential, for which access to strategic and competitive opportunities is sufficient.
- But there seems to be a small win for Apple: The BGH does not seem to buy the Bundeskartellamt’s argument that on-device data constitutes access to data relevant for competition within the meaning of the designation criteria in Sec. 19a para. 1 no. 4 GWB. The court stated that Apple does not have access to user data that is only stored on devices or transferred in encrypted form between devices or between a device and the user’s iCloud if Apple cannot actually or legally access this data. However, the court found that Apple still has broad and deep access to data on other grounds. Whether or not these findings in relation to on-device data will play a role in the Bundeskartellamt’s case against Apple’s ATTF under Sec. 19a para. 2 GWB remains to be seen.
- The BGH seemed largely unconcerned by what appeared to be Apple’s biggest argument during the hearing: The (Apple: unclear) relationship between the Digital Markets Act (DMA) and Sec. 19a GWB and the BGH’s obligation to request a preliminary ruling from the Court of Justice of the European Union. The court, however, simply pointed out that it had already taken a stand on this issue in the Amazon decision and that recent voices in the literature and public sphere wouldn’t change its findings (sorry Mario Draghi! Apple quoted on the Draghi report during the hearing, stating that Art. 1(6) DMA and the complementary role of national competition law next to the DMA would introduce uncertainties).
- The BGH also confirmed what it had already stated at the hearing in January: The designation of Apple’s operating systems and App Store under the DMA and Apple’s
non-compliance with the DMA obligations do not preclude Apple’s designation as UPSCAM under Sec. 19a para. GWB, as the BGH does not see that changes in Apple’s business practices based on the DMA would have changed its position and potential for competition in a manner relevant to Sec. 19a GWB. This is an important clarification by the BGH of something Apple apparently did not get: Unlike Sec. 19a GWB, the DMA is not about restoring competition. Instead, it recognizes the monopoly positions of gatekeepers to a certain extent, with most of the DMA obligations focusing on fairer conditions and more opportunities for business users. Still, the BGH’s view of DMA (in)effectiveness one year after the “self-executing” obligations of the DMA kicked in, is not the kind of report that people in Brussels will proudly hang on their walls.
The press release announcing the BGH’s decision to uphold the Bundeskartellamt’s decision to designate Apple as UPSCAM is short and sweet, and leaves no doubt that the Bundeskartellamt has done a good job overall. However, to find out more about some of the nuances of the BGH’s assessment of the Bundeskartellamt’s findings and Apple’s counterarguments we will have to wait for the publication of the full decision (patiently – it took the court almost three months to publish the Amazon decision after the announcement).
Outlook
The president of the Bundeskartellamt, Andreas Mundt, was swift to express his delight about the BGH’s decision, stating that the ongoing investigation into Apple’s ATTF under Sec. 19a para. 2 GWB is now based on “solid ground”.
The BGH’s decision comes about a month after the Bundeskartellamt had expressed its concerns about Apple’s ATTF practices. The case is one of the Bundeskartellamt’s five ongoing investigations against Big Tech under Sec. 19a para. 2 GWB. The second paragraph of Sec. 19a GWB contains a list of prohibited practices for digital platforms designated as UPSCAMs under the first paragraph of the provision. The case concerns Apple’s new data tracking policy introduced in 2021 which requires third party app providers (but not Apple itself) to obtain consent from their users to access data for advertising purposes. This policy change has a significant impact, in particular on free apps that depend on commercialisation through personalised advertising displayed in their apps. While the Bundeskartellamt is not concerned about stricter data protection requirements as such, it takes issue with the fact that Apple does not subject itself to the stricter data tracking policy. According to theBundeskartellamt, such a practice, whereby Apple favours its own apps over third-party apps, could amount to unequal treatment and self-preferencing, which is prohibited by Sec. 19a para. 2 no. 1 GWB.
While the Bundeskartellamt is also investigating the case under the abuse of dominance provision of Art. 102 AEUV, the BGH’s decision to confirm Apple’s designation as UPSCAM under Sec. 19a para. 1 GWB will make it easier for the Bundeskartellamt to identify an infringement of competition law. In contrast to traditional abuse of dominance law, the designation under Sec. 19a para. GWB does not require a finding of market dominance. In addition, even if finding an infringement of Sec. 19a para. 2 GWB requires a case-by-case analysis, including a determination of the effects on competition and an assessment of proportionality of a prohibition decision, the list of prohibited practices in Sec. 19a para. 2 GWB has a strong indicative effect for anticompetitive behavior by UPSCAMs.
Whether due to the head start Sec. 19a GWB (introduced already in January 2021) compared to the DMA or due to the fact that the presiding judge Wolfgang Kirchhoff is wrapping up before his retirement, in terms of concluding designation litigation, Sec. 19a GWB is one step ahead of the enforcement of the DMA where appeals against DMA designations are still pending before the courts. It remains to be seen what the Bundeskartellamt makes out of this. Andreas Mundt has confirmed today that the Bundeskartellamt is working under high pressure on this and other cases agains tech platforms. Stormy weeks ahead for gatekeepers in Europe – or a fresh breeze for competition!
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