German antitrust law is to become more effective through an improved ability to address digital markets and marketplaces, and newly introduced powers to reorganise markets that do not give sufficient space to competition. The newly presented draft bill of 15 September sheds light on what is to be expected.
I. Market structure intervention following sector enquiries
Sector enquiries by the Bundeskartellamt – introduced as early as 2005 – may reveal dysfunctional markets and the underlying causes. If such an investigation reveals violations of antitrust laws, appropriate proceedings can then be initiated against the companies involved. However, if a market failure has purely structural reasons which are not based on a violation of antitrust laws – e.g. in markets with few suppliers and simultaneously high barriers to market entry – the Bundeskartellamt’s hands are currently tied. The legislator has so far relied on the self-purifying forces of competition, such as the lack of innovation pressure in markets with weak competition and substitution competition through new offers.
The Federal Ministry of Economics intends to empower the Bundeskartellamt to order behavioural and structural remedies against market participants within 18 months after the conclusion of a sector enquiry, even in the absence of antitrust violations. These may include, among others, granting third-party access to data, supply obligations and utilisation rights, organisational separation of businesses as well as contractual design requirements. In addition, companies can be obligated to notify mergers in affected markets, well below the generally applicable turnover thresholds.
Finally, should these remedies fail to satisfy the Bundeskartellamt’s expectations, the draft bill provides for the possibility of unbundling, provided that such measure can be expected to eliminate or substantially reduce a significant continuing or repeated disturbance of competition.
Although the planned interventions may have a considerable impact on the affected companies, the draft bill does not address legal protection. As a direct consequence thereof, legal remedies against the measures sketched out above have no suspensive effect. If one takes into account that no prior misconduct by the companies is required, the draft bill gives rise to constitutional concerns. Despite affecting freedom of occupation and private property, protected by the German Constitution, the draft bill entails no additional legal safeguards leaving adequate consideration of both to the Bundeskartellamt’s discretion.
II. Skimming off benefits from cartel law violations
The draft bill improves existing possibilities to skim off profits obtained in violation of antitrust law, if these have not already been skimmed off e.g. through fines or damage claims. For this purpose, the draft bill presumes an economic advantage of at least one percent of the turnover obtained in Germany in connection with the infringement. This presumption can only be rebutted by proving that the company involved in the infringement did not make any profit in excess of the aforementioned amount. In addition, the cartel authority may, similar to courts in cartel damages proceedings, freely estimate a higher additional profit. An upper limit is set at ten percent of the total turnover of the group of companies.
In light of the extraordinary difficulties of determining a cartel-related surplus in a way that cannot be objected to by the courts, a presumption of minimum profits appears reasonable. It may render its barely used stepbrother, skimming off profits as part of sanctioning proceedings, finally superfluous. Limiting the defence to the argument that no profit was made at all, seems however questionable. Partly because of the missing link between cartel-related sur plus and a company’s overall profits itself, which may give rise to constitutional concerns. And partly because such approach may provide a future battle ground on which the correct allocation of profits may be fought even more vigorously than previous battles for quantification of cartel overcharges.
Even though the draft bill does not specify a minimum amount of damages for cartel victims, it encourages private enforcement of cartel law. This is because offsetting damages paid against the surplus to be administratively skimmed, creates an incentive for the swift conclusion of the former, allowing the companies to avoid a double burden.
III. Giving effect to the Digital Markets Act
Finally, the draft bill introduces an authorisation for the Bundeskartellamt to conduct its own investigations in case of indications of violations against the Digital Markets Act. The enforcement of the Digital Markets Act remains the sole responsibility of the European Commission. However, the Bundeskartellamt can and should report the results of its investigations to the European Commission and thus make its own contribution to contestable and fair markets in the digital sector. In case of doubt, the European Commission will also point out possible infringements in Germany in advance.
The announced tiger (cf. New antitrust law with “claws and teeth”?) is now somewhat tamer. However, the basic problems that every unbundling decision has to deal with remain. If a market shows competitive deficits that can be traced back to a dominant oligopoly, a choice must be made between the members of the oligopoly as to which company is to be unbundled. However, it is precisely in such case constellations that remedies addressing all oligopoly members would probably render the prerequisite for unbundling obsolete. This would leave unbundling only as a threat to monopolists who cannot be dealt with other than by breaking them up.
(21 October 2022)