Almost a year after publication of the draft bill for an “ARC-Digitization-Act”, the German Parliament (Bundestag) passed the 10th amendment of the Act against Restraints of Competition (ARC) on January 14, 2021. The amended ARC officially came into force on January 19, 2021. The amendment’s core objective is, on the one hand, to adapt abuse control to an increasing digital competitive environment and, on the other hand, to transpose the European legal provisions of the ECN+-Directive (EU) No. 2019/1 into national antitrust law. In addition, the legal framework for cartel damages has been further developed, the turnover thresholds in merger control have been increased and legal protection options have been made more effective. In the following, we present the main amendments to the ARC.
The ARC provisions on abuse control are comprehensively expanded to meet the special challenges of the digital economy and the platform economy. In this way, the enforcement deficits of the antitrust authorities’ instruments vis-à-vis new business models are to be compensated for, as they became known, among other things, in the Facebook-decision of the German Federal Cartel Office (Bundeskartellamt).
In detail, the following changes are worth highlighting:
- When determining market dominance, Section 18 (3) No. 2 ARC adds “access to data relevant for competition” as an additional appraisal criterion. A newly introduced Section 18 (3b) ARC establishes the concept of “intermediary power” in order to take appropriate account of the intermediary and steering function of platforms in multi-sided markets – regardless of market shares.
- Section 19 (1) ARC no longer defines abusive conduct as “abusive utilisation of a dominant market position”, but as “abuse of a dominant market position”. The intention is to define the scope of application in a legally certain way, by also covering cases in which market power is reflected in the anticompetitive outcome of the conduct (so-called causality of outcome), but is not at the same time an instrument for achieving this outcome (causal link between market power and conduct). The 9th amendment to the ARC had already partially clarified this for the prohibition to demand unjustified benefits in Section 19 (2) No. 5 ARC. The Federal Court of Justice (BGH) had just recently confirmed the causality of outcome for the exploitative abuse in the Facebook proceedings already mentioned (cf. decision of June 23, 2020, KVR 69/19).
- The prohibition of refusal of access in Section 19 (2) No. 4 ARC now covers the refusal of access to “data” thereby extending the essential-facility-doctrine. Companies, which are absolutely dependent on data sets of market-dominating Big-data companies or platforms for their complementary business model, will have a legal claim to data access for the first time.
- Section 19a ARC brings the eagerly awaited legal basis for authorising preventive action against digital corporations in the data and platform markets, for which the Federal Cartel Office has positively determined a “paramount significance for competition across markets” (cf. Section 19a (1) ARC); this provision is intended to enable rapid intervention in the light of network effects, data advantages, associated self-strengthening effects and concentration tendencies and to counteract the exploitation of the power position in the relevant market as well as threatening impairments of performance competition in neighbouring markets. The positive decision on the gatekeeper function is limited in its effect to five years after the decision becomes final (cf. Section 19a (1) sentence 3 ARC). Section 19a (2) ARC lists seven types of abuse with additional examples that are intended, among other things, to prevent digital groups from using their position of power and resources to restrict competition on other markets.
- The removal of the term “small and medium-sized” enterprises as precondition for an abuse on the basis of relative or superior market power (cf. Section 20 (1) ARC) takes into account the fact that not only small and medium-sized enterprises need to be protected from digital groups with market power and that data dependency may exist regardless of the size of the individual enterprise.
- Finally, Section 20 (1a) ARC introduces a right to data access in the area of relative market power and Section 20 (3a) ARC creates a new intervention provision in order to be able to prevent the “Tipping” of markets at an early stage; the “Tipping” of a market as such, i.e. the fact that a company with superior market power becomes a monopolist in a performance and competition compliant manner due to network effects, is not generally prohibited; however, it should be abusive if it is based on an deliberate impediment of competitors.
In order to enable the Federal Cartel Office to deal appropriately with relevant concentrations and to ease the burden on it in respect of smaller transactions, the turnover thresholds triggering a filing duty have been raised while the exemption for de-minimis markets has been expanded. In addition, the main examination procedure has been extended from four to five months. At a glance:
- The two domestic turnover thresholds in Section 35 (1) No. 2 ARC have been raised from EUR 25 million and EUR 5 million to EUR 50 million and EUR 17.5 million. The worldwide turnover threshold of more than EUR 500 million remains in place. The increase in the turnover thresholds is justified by the relief for small and medium-sized enterprises and the focus of the antitrust authorities’ activities on complex merger proceedings.
- The consequence of the increase is the elimination of the “Bagatellklausel” (currently Section 35 (2) sentence 1 ARC), which exempts mergers with small companies (with worldwide turnover of less than EUR 10 million) from the notification obligation despite the fact that the turnover thresholds have been reached.
- The de-minimis market threshold in Section 36 (1) sentence 2 No. 2 ARC is increased by EUR 5 million to a total of EUR 20 million. At the same time, the law stipulates that the total turnover achieved in several markets affected by the merger project must be combined for this assessment. This is the first time that the administrative practice developed for certain case constellations of a bundled consideration of several minor markets has found a legal basis.
- As a reaction to successive acquisition strategies in regional and waste management markets in which the general turnover thresholds have not been reached, the obligation to notify is extended by a new instrument in Section 39a ARC. Accordingly the Federal Cartel Office can impose a general notification obligation on companies with a total worldwide turnover of EUR 250 million by administrative act for all future acquisitions in certain sectors of the economy. Such an obligation to notify is valid for three years from the date on which the acquisition becomes effective.
- By contrast, the amendment does not include a special provision for the systematic acquisition of start-ups and high-growth companies (so-called “killer acquisitions”). The ministerial authorization (“Ministererlaubnis”) remained unchanged, too.
To identify a potential filing duty under to the revised filing thresholds, please revert to our updated Merger Control Quick Test.
Cartel damage claims
- A rebuttable presumption regarding the cartel involvement of direct suppliers and customers of a cartel in transactions with companies participating in the cartel is to be included in Section 33a (2) sentence 4 ARC. The legislator is thereby adopting the approach already outlined by the Federal Court of Justice’s “rail cartel” decision of 11 December 2018 (KZR 26/17). The rebuttable presumption is intended to make it easier for claimants to prove that they are biased by the cartel.
- The new Section 33c (3) sentence 2 ARC also extends the rebuttable presumption to indirect customers in the event of a passing-on. A presumption for the quantification of the damage still does not exist – in contrast to partial court rulings. The explanatory reasons also make it clear that the presumption does not encompass umbrella pricing.
More effective and faster legal protection
- In order to provide effective legal protection against companies with market power in fast-moving digital markets, the instruments of interim legal protection will be simplified at antitrust authority level. For example, essential access to interfaces or other essential facilities should also be possible with temporary anticipation of the main proceeding. The high hurdle of proving irreparable damage to the competition process is achieved by reducing it to a “predominant probability” of the infringement in Section 32a (1) ARC; even individual companies will be able to benefit of interim measures in case they are able to demonstrate evidence of an imminent, serious impairment and a proportionality test weighing the interests of the company concerned is met.
- Pursuant to Section 73 (5) ARC, the Federal Court of Justice now has jurisdiction in the first and last instance for all disputes against orders of the Federal Cartel Office under Section 19a GWB. This is based on the consideration that the antitrust problems in fast-moving digital platform markets can often no longer be adequately resolved after lengthy court proceedings. According to Section 75 (5) GWB, the Federal Court of Justice can obtain economic opinions from the Monopoly Commission (Monopolkommission) in these proceedings.
Further procedural innovations and ECN+
- In order to increase legal certainty in the area of cooperation between companies within the framework of horizontal cooperation agreements, Section 32c (3) ARC opens up the possibility of a so-called “chairman’s letter” as an exception to the self-assessment principle under antitrust law. Undertakings with a substantial legal and economic interest are entitled to a negative decision by the Federal Cartel Office within six months, stating that there is no reason for action.
- The implementation of the ECN+-Directive (EU) No. 2019/1 in Sections 48 et seq. ARC is extensive but not excessively revolutionary. The ECN+-Directive regulates the procedural law in the Member States and is orientated “roughly speaking” on the contents of Regulation (EC) No. 1/2003 as the relevant procedural rules for the European Commission.
Fines: Consideration of preventive compliance measures
In the provisions on antitrust fines, special importance has been attached to compliance measures under antitrust law (Section 81d (1) sentence 2 No. 4 ARC). The provision makes it possible to take into account the appropriate and effective compliance precautions taken in the run-up to the infringement to prevent and detect infringements when calculating the fine. With this mitigation of sanctions, the legislator emphasizes the importance of effective internal compliance systems.
Conclusion and outlook
Particularly in the area of abuse control, the ARC-digitization act goes new paths to keep pace with the digital age that have, however, also been marked out by decision-making practice and case law. While the legislative process for platform regulation is still in full swing at the European Union level, the German legislator is creating the first supervisory instrument at Member State level in the form of Section 19a ARC. The first practical cases and the interaction with the judicial concentration at the Federal Court of Justice can be looked forward to with excitement.
On the other hand, one looks in vain for more far-reaching regulations or cross-references to the Act against Unfair Competition (UWG) and official consumer protection in the ARC amendment – irrespective of the tasks already assigned to the Federal Cartel Office by the 9th ARC amendment (with the exception of the first mention of the term “competition on the merits” in Section 20 (3a) ARC).
The consideration of appropriate compliance measures as a positive predicate offense in the setting of antitrust fines is to be welcomed without reservation. This addendum adequately reflects the great efforts made by many companies in the area of antitrust prevention through efficient compliance systems.
Raue’s antitrust law team would be happy to answer any questions you may have on the amended ARC.
(19 December 2021)