Home / Publications / 2021 traffic-light coalition – Impact of the coalition... / The traffic-light coalition’s competition law p...

The traffic-light coalition’s competition law plans

The coalition wants stricter EU regulation on gatekeepers and intends to review the Act against Restraints on Competition (GWB), strengthen the Cartel Office in consumer protection matters and combat unfair trading.

Competition plays a major role in the coalition agreement. The traffic-light coalition parties are taking a stance on regulation of digital gatekeepers (through competition law), but also sticking to the line taken by the previous government. They also intend to review the Act against Restraints on Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB) in its entirety with regard to “innovation, sustainability, consumer protection and social justice”.

Specifically, they have committed to addressing interoperability and data portability. More stringent regulations under food competition law and on unfair trading practices are also on the agenda. With regard to consumer protection, where Germany’s Federal Cartel Office has so far had only limited powers, the coalition is considering giving it a bigger role. At EU level, the new coalition intends to call for stricter merger control of “killer acquisitions”. As a last resort, it would break up companies to deal with sclerotic markets even when there is no abuse. These are ambitious proposals with echoes of hipster antitrust sentiment.

However, the incoming government has no revolutionary plans with regard to two topics that were the subject of lively discussion in the run-up to the election. The coalition partners reject the abolition of ministerial approval of banned deals and also the splitting up of Deutsche Bahn AG.

Below are details of the coalition’s plans as laid down in the coalition agreement: 

Digital competition law 

Regulation of digital gatekeepers is currently a key focus of competition policy worldwide. By adopting an amendment to the Act against Restraints of Competition (GWB Digitalisation Act), Germany took early action in January 2021. Section 19a of the GWB creates wide-reaching options for the Federal Cartel Office to intervene against major digital companies. At EU level, gatekeeper regulation will be implemented by the Digital Markets Act (DMA), which is set to be passed next year.

The new government now intends to press for “ambitious provisions” in the DMA, which should not be weaker than those in the GWB. Interoperability obligations and merger control rules are explicitly mentioned. Demands for stricter rules in the DMA had already been made by the outgoing German government. The new coalition’s call to include merger control in the DMA so as to have more influence on transactions by large digital companies that are problematic from a competition viewpoint was also previously raised in Brussels by the German government. There is thus unlikely to be any change of tack by the new federal government with regard to the DMA in the trilogue negotiations between the European Parliament, the European Commission and the Member States, which are due to begin shortly. (The outgoing government also made the same proposals as contained in the coalition agreement in a protocol declaration on the Council’s position on the DMA of 25 November 2021.)

Having said that, the call to involve the Member States’ competition authorities in enforcement of the DMA resembles a rearguard action. Germany – along with France and the Netherlands – has previously pushed on multiple occasions for stronger powers to be given to their national competition authorities when applying the DMA, but met with little success in the European Parliament or in the Council of Member States. The signs are that Brussels is keen on central enforcement of the DMA by the European Commission. Essentially, it’s now more a question of the extent to which national competition authorities such as the Federal Cartel Office will be hogtied by the DMA when applying national competition law. Germany is opposing moves being discussed by the European Parliament to resolve conflicts between the DMA and national competition law by giving the European Commission a veto in favour of the DMA.

Review of the Act against Restraints on Competition (GWB)

The coalition has also announced a (general) re-evaluation of the GWB. The review will focus on “innovation, sustainability, consumer protection and social justice”. The issue of sustainability and how it relates to competition law has been closely examined by the Federal Cartel Office in recent years. When it comes to the prohibition of cartels, however, the precedence of EU law has to be observed in cases involving more than one Member State. As such, any solution that aims to reconcile sustainability and competition law in the GWB would have to be limited to purely national cases (as Austria has demonstrated with a national “green exception” in its competition legislation).

Greater consumer protection powers for the Federal Cartel Office

The coalition agreement includes a specific mandate to consider giving the Federal Cartel Office greater consumer protection powers. This would enable it to investigate and act on material, persistent and repeated breaches of the norms of commercial consumer law (especially fair competition law and legislation on general terms and conditions), as it does in competition law.

The 9th GWB amendment in 2017 gave the Federal Cartel Office powers around commercial consumer protection for the first time, mainly with the aim of addressing deficiencies in the enforcement of consumer rights in the digital economy. To date, however, the Cartel Office has only been able to conduct sector investigations and issue amicus curiae opinions. It has no powers of intervention, with the result that Division V (responsible for consumer protection) tends to be perceived as a toothless paper tiger. For this reason, the Federal Cartel Office has long been calling for additional powers to make decisions and impose penalties; a Professors' Study commissioned by the Federal Ministry for Economic Affairs and Energy supported this objective and was published back in 2018.

Ministerial approval procedure will (only) be reformed

The traffic-light parties intend to re-establish appropriate options for legal action against ministerial approval and work towards ensuring that the German Bundestag is involved in the procedure. The background to this announcement is that unlike EU merger control, in Germany the Minister for Economic Affairs has the option of overruling a prohibition order by the Federal Cartel Office against a merger. This is designed to allow competition-unrelated aspects to be taken into account, e.g. to prevent technology outflows from Germany and to preserve jobs.

The 9th GWB amendment passed in 2017 by the grand coalition severely curtailed the right of third-party companies to take legal action against ministerial approval decisions. Whereas previously it was sufficient that their economic interests were negatively impacted, since 2017 they have had to show that their rights have been violated by the decision before they can mount a legal challenge. In most cases, competitors of the companies involved in the merger will be unable to demonstrate such a violation of rights. This curtailment of legal protection (resulting from judicial criticism of the then minister’s course of action when approving the Edeka/Kaiser's-Tengelmann merger) will now be reversed.

What is new is the additional announcement that the German Bundestag will also be involved in the procedure. Under current law, the Federal Ministry of Economics must hold a public hearing. A decision can also be made without an oral hearing, with the consent of the parties involved. Involving the Bundestag (with its more than 700 members) in the procedure would seem difficult to implement, especially in view of the need to safeguard the business secrets of the companies involved.

Interoperability and data portability in competition law

The new coalition intends to include an obligation in the GWB for market-dominant companies to provide interoperability. It is also calling for a corresponding obligation at European level. Enhancing data portability is likewise an objective. Up till now, the Federal Cartel Office has been able to issue an order under section 19a of the GWB, which was added as part of the 10th GWB amendment in January 2021, to prohibit companies that have “overriding importance for competition across markets” (as expressly established by the Federal Cartel Office) from denying or impeding the interoperability of products/services or the portability of data. The scope of these obligations would be extended if these aspects are included in the prohibition of abuse. Practical and legal issues arise, though, including around data protection, IT security and possible restrictions and exceptions.

Fair competition online and offline

In general, the new coalition intends to continue aiming for fair competition between the business models of major digital companies and local businesses. This may also affect enforcement of competition law in online selling.

Focus on food competition law and combating unfair trading practices

The coalition also intends to take action on food competition law and unfair trading practices (UTP). This will involve tightening up abuse supervision and merger control by the Federal Cartel Office. The rules on abuse, especially in relation to supply relationships, have only recently been revised and in some cases tightened by the 9th GWB amendment (2017) and 10th GWB amendment (2021). It is possible that demanders with a strong market presence will face further tightening.

In German merger control, greater consideration could be given to demand-side power. While the substantive test of German merger control is modelled on the substantive EU standard, German merger control is not bound by European law in this respect. This makes it possible to have divergent and stricter rules.

A ban on “selling food below production cost” will also be considered. A ban of this nature is, however, likely to be practicable only in a few scenarios. This is because calculating unit production costs would be very complicated and involve significant uncertainty (i.e. around allocation of overhead costs). The ban on selling below cost was abolished years ago precisely on these practicality grounds.

To deal with unfair trading practices, Germany passed the Agricultural Organisations and Supply Chains Act (AgrarOLkG) in June 2021 to transpose the UTP Directive, thereby exceeding the minimum level required across the EU. More far-reaching regulations are now under consideration. Lastly, the incoming coalition intends to “continue to monitor” the milk market. This market has already been the subject of various cartel investigations, including a sector investigation by the Federal Cartel Office.

Preventing “killer acquisitions” 

With regard to EU merger control, the new federal government is committed to making changes to prevent acquisitions of potential competitors that could stifle innovation (“killer acquisitions”). Firstly, this is about giving the European Commission the ability to exercise merger control when dealing with transactions of this type where the target company has (as yet) low sales and thus does not meet the sales thresholds required for EU merger control. The European Commission has only just taken a conscious decision against introducing new trigger thresholds, e.g. based on transaction value. Instead it plans to use the referral mechanism in Art. 22 of the Merger Control Regulation. This means that it will accept the referral of potentially problematic transactions even in cases that come neither within the purview of the referring Member State’s merger control authority nor of EU merger control – a policy that has drawn sharp criticism from the Federal Cartel Office.

Secondly, there is the issue of what constitutes a “killer acquisition” in substantive merger control. The outgoing German government has already called for the requirements to be tightened in terms of both evidence and the test to apply. This tightening is somewhat at odds with the coalition’s plans to create a more supportive environment for start-ups in Germany. Tougher merger control regulations, e.g. in the digital sector, would restrict the exit option of selling to a major digital player.

Break-up of super-dominant companies as a last resort

In sclerotic markets, the coalition parties will also consider breaking up companies as a last resort even when there is no abuse, and intend to lobby for this at European level. In adopting this line, they are reprising an idea that was discussed in connection with German competition law some ten years ago but failed to gain traction.

While the break-up of digital giants is also being considered in the ongoing competition law discussion in the US, the EU is being very cautious here, especially as it is currently pressing ahead with extensive regulation of the sector via the DMA. This makes it unlikely that the new German government will be able to win support for its proposal in the EU.

Not much change for regulated industries 

In the regulated industries, the coalition intends to amend the Postal Act (Postgesetz) with the aim of boosting fair competition while also raising socio-ecological standards. The coalition agreement doesn’t contain any specific details on this policy. The new government flatly rejects any idea of splitting up Deutsche Bahn AG, as proposed by the Monopolies Commission to encourage competition in rail transport:

We will maintain public ownership of Deutsche Bahn AG as an integrated group, including its internal labour market.

EU competition law to counter unfair competition practices

At the level of EU competition law (in the broader sense), the new coalition government intends to leverage “European competition law and the strength of the single European market” to fight unfair competition practices by authoritarian regimes. This would align with the EU proposal for a new regulation to address distortions caused by foreign subsidies in the Single Market (although that initiative is not limited to “authoritarian regimes”). The new coalition also supports the creation and development of autonomous trade policies to counter unfair trading practices at European level.

Our blog series on the impact of the coalition agreement provides information on how the coalition agreement will affect businesses across a range of sectors.

Authors

Björn Herbers
Dr. Björn Herbers, M.B.L.
Partner
Rechtsanwalt
Brussels - EU Law Office
Dietmar Rahlmeyer
Dr. Dietmar Rahlmeyer
Partner
Rechtsanwalt
Duesseldorf

Contact

If you have any questions about the coalition agreement and the opportunities and effects for your company, please feel free to contact us at any time.