In January 2021, Germany has introduced a novel section to its Act against Competition Restraints (Gesetz Gegen Wettbewerbsbeschränkungen; GWB) as part of its amendment “GWB Digitisation Act”: Sec. 19a GWB. This provision provides a new instrument to the German competition authority (Bundeskartellamt; BkartA) to tackle competition restraints caused by large digital platforms.
The GWB Digitisation Act was initiated due to legislative concerns that the existing general rules covering abuse of market power in the German competition act were not sufficient to adress anti-competitive behaviour in digital markets. Through Sec. 19a GWB, the Bundeskartellamt can now intervene at an earlier stage and preventively prohibit certain types of behaviour of certain companies that are of “of paramount significance for competition across markets”. These kinds of behaviour include, for example, impeding competition by refusing interoperability and data portability or self-preferencing. By contrast to the European digital law, the Digital Markets Act (DMA), Sec. 19a GWB is perceived as competition law in substantive terms – procedurally, however, Sec. 19a GWB shows regulatory tendencies as it includes an “ex ante” element that enables the Bundeskartellamt to intervene once it has determined that a digital platform is of paramount significance across markets.
The introduction of Sec. 19a GWB was not the only change the GWB Digitisation Act amendment brought to the German competition act in 2021:
- Accelerated Judicial Review. The legal process for judicial review of proceedings under Sec. 19a GWB has been shortened in order to ensure effectiveness of the new provision. Appeals against decisions of the Bundeskartellamt pursuant to Sec. 19a GWB will be decided directly by the Federal Court of Justice (Bundesgerichtshof), thus, skipping the first instance.
- Inclusion of Internet-specific Criteria in traditional Abuse Control. Sec. 20 (1a) GWB expanded the relevant provision to assess abuse of relative or superior market power to include Internet-specific criteria: Intermediation power in form of dependency may now also arise from the fact that there is dependency on access to data controlled by an undertaking in order to carry out activities.
- Prevent “Tipping”. A novel intervention option for the Bundeskartellamt was added by introducing Sec. 20 (3a) GWB. This provision enables intervention already in case there is a threat that a market will “tip” because an undertaking with superior market power on multi-sided markets and networks impedes the independent achievement of network effects by competitors and thus, creates a serious risk of significantly restricting competition on the merits. An actual impediment of competition is not required under this provision.
What are the objectives of Sec. 19a GWB?
According to the legislative proposal for the GWB Digitization Act, the amendments are intended to create a regulatory framework tailored to the requirements of the economic digitalization, and the implementation strategy for shaping the digital transformation of the German Federal Government. More specifically, by modernizing traditional abuse control, Sec. 19a GWB is intends to create the legal framework to allow the Bundeskartellamt to monitor large online platforms that have a ”gatekeeper function” more effectively and to intervene earlier. Thus, responding to competitive threats resulting from market concentration in the digital economy.
In terms of objectives, Sec. 19a GWB was designed to capture typical characteristics and competitive threats of digital ecosystems. By taking into account that in the case of large digital platforms, activities on different markets are interconnected, Sec. 19a GWB intends to address competition concerns on markets where these platforms do not have a dominant position, yet, but a key position which already enables distortion of competition. Hence, the objective of Sec. 19a GWB is to ensure competition on the merits as a driver for competition and contestable markets in markets that are characterized by network effects, data aggregation and strong foreclosure and lock-in effects.
Two-Step Approach
Sec. 19a GWB envisages a two-step approach to intervention against digital platforms. In a first step, the Bundeskartellamt has to determine that an undertaking which is active to a significant extent on multi-sided markets or networks is of paramount significance for competition across markets (Sec. 19a(1) GWB. As second step, the Bundeskartellamt may prohibit certain conducts of these companies according to the list of anticompetitive practices included in Sec. 19a(2) GWB. The relevant undertaking can, however, demonstrate that the respective conduct is objectively justified. Insofar, Sec. 19a GWB differs significantly from the DMA which does not foresee such a justification for designated gatekeepers.
Paramount significance across markets
Under Sec. 19a(1) GWB, undertakings of paramount significance for competition across markets can be those that are active to a significant extent on multi-sided markets or networks, hence, digital platforms (although in theory, an application of Sec. 19a(1) GWB to non-digital markets remains possible). The “significance requirement” shall ensure that only undertakings are within the scope of this provision that focus their activities on multi-sided markets. The criteria constitute a significant departure from traditional market definitions and reflect a consideration of measuring competitive power in the digital economy.
To further determine the paramount significance of an undertaking across markets, Sec. 19a(1) GWB stipulates that the following criteria shall be taken into account:
- Dominant position on one or several markets
- Financial strength or access to other resources
- Vertical integration and activities on otherwise related markets
- Access to data relevant for competition
- Relevance of activities for third party access to supply and sales markets and related influence on the business activities of third parties
This catalogue of criteria is neither conclusive nor peremptory and not all of the aforementioned aspects must be met for an undertaking to be of paramount significance across markets. Rather, an overall assessment of the significance is required that takes into account factors, such as those listed in the provision itself, that can be considered as market circumstances that can impede competition based on economic experience.
So far, the Bundeskartellamt has determined that the undertakings Alphabet, Amazon, Apple and Meta are of paramount significance across markets according to Sec. 19a(1) GWB.
Anticompetitive practices listed in Sec. 19a(2) GWB
Sec. 19a(2) provides a conclusive list of anticompetitive practices which the Bundeskartellamt can prohibit undertakings of paramount significance across markets to engage in. Unlike the DMA, the prohibitions listed in Sec. 19a(2) are not self-executing once the Bundeskartellamt has designated an undertaking as having paramount significance across markets. Rather, the authority must activate these prohibitions on a case-by-case basis.
Systematically, the list of practices includes types of behavior to be prohibited which are further specified by more specific presumptive examples:
| 19a (2) | Practice | Presumptive examples |
| (1) | Self-preferencing | Presenting own offers more favourablyExclusive pre-installation or integration of own offers on devices or in other offers |
| (2) | Vertical restrictions on sales and procurement markets | Exclusive pre-installation or integration of offersAnti-steering practices |
| (3) | Impeding competitors on markets where position can be rapidly extended | Bundling and tying tactics |
| (4) | Impeding other undertakings by processing data relevant for competition | Making access conditional upon consent to data processing Use of data from business users relevant for competition outside the services provided to those business users |
| (5) | Refusing interoperability or data portability | |
| (6) | Diminishing transparency on the value of services of business users | |
| (7) | Demanding disproportionate benefits for treatment of offers | Demanding transfer of unnecessary data or rights for presenting offersMaking quality of offers conditional on transfer of data or rights |
This list of prohibitive practices listed in Sec. 19a(2) GWB is conclusive but provides for some flexibility as the presumptive examples leave room for differing specifications. To this extent, Sec. 19a GWB seems to be more flexible and future-proof than the DMA.
Another difference compared to the DMA is the possibility for undertakings to prove that the respective conduct is objectively justified – the burden of proof, however, is on the relevant undertaking. The possibility to justify practices listed in Sec. 19a(2) GWB shows that the provision can be characterised as antitrust law rather than ex ante regulation as it allows for efficiency considerations such as price effects and innovation. Therefore, the relevant undertaking can show that individual practices have positive competitive effects. Whether or not a specific is objectively justified will depend on a balancing of interest, taking into account the objective of ensuring free competition under the GWB.
Relationship between DMA and Sec. 19a GWB
The relationship between the DMA and Sec. 19a GWB is covered by Art. 1(6) 2nd sentence, b) DMA – which was introduced to the DMA with Sec. 19a DMA in mind as the forerunner of the DMA. Uner this provision, national competition rules remain applicable to the extent that they are prohibiting “unilateral conduct insofar as they are applied to undertakings other than gatekeepers or amount to the imposition of further obligations on gatekeepers”.
Hence, in the following cases Sec. 19a GWB remains applicable next to the DMA:
- The relevant undertakings and/or their services or products subject to sec. 19a GWB are not designated as gatekeepers or core platform services under the DMA;
- Obligations under Sec. 19a GWB are broader in scope and cover activities not already covered by the DMA obligations.
One example where the DMA is narrower in scope and leaves room for the application of Sec. 19a GWB is Art. 19a(2) No. 3 GWB which prohibits bundling and tying tactics. Unlike Art. 5(7) DMA and Art. 5(8) DMA, this provision is not limited to specific services or subscription and registration requirements.
Outlook
So far, the Bundeskartellamt has designated Alphabet, Amazon, Apple and Meta as undertakings of paramount significance for competition across markets and is still investigating Microsoft. In addition, the authority has initiated a number of investigations into prohibitive practices listed in Sec. 19a(2) GWB in relation to these undertakings. The Bundeskartellamt regularly updates an overview of the status of Sec. 19a proceedings on its website.