German Federal Cabinet’s Draft for Amendments to the Act Against Restraints on Competition

By Dr. Raphael Reims (Willkie Farr & Gallagher)¹

(I) Tenth Amendment to the Act Against Restraints on Competition

On October 19, 2020, the German Federal Cabinet submitted the revised draft for the tenth amendment to the Act Against Restraints on Competition (“ARC”) to the German Federal Parliament.² The revised draft covers various changes in the area of (i) merger control, (ii) abuse control, (iii) administrative proceedings, (iv) cartel damage proceedings and (v) EU ECN+ directive.

In the next step the German Federal Parliament debate the revised draft and one should anticipate implementation this year to ensure a timely implementation of the EU ECN+ directive, which is due no later than February 4, 2021.³

(i) Merger Control

The revised draft proposes the following changes to the German merger control rules:

A German merger filing is inter alia required if the global revenues of all parties to a merger are EUR 500 million or more, or if one party has revenues of EUR 25 million or more in Germany and one other party has revenues of EUR 5 million or more in Germany. The revised draft proposes to raise, in Section 35(1) No 2 ARC, the first Revenues in Germany threshold from EUR 25 million to EUR 30 million and to raise the second Revenues in Germany threshold from EUR 5 million to EUR 10 million to allow the Federal Cartel Office to focus on more complex merger proceedings and to relieve small and medium-sized companies.

As a consequence, the revised draft proposes the elimination of Section 35(2) sentence 1 ARC. This is because it exempts mergers with small companies, i.e. those with global revenues of less than EUR 10 million, from the obligation to notify, regardless of whether the revenues thresholds have been met.

The revised draft also proposes to include a new Section 39a ARC, giving the Federal Cartel Office the right to extend the German merger control regime to previously investigated economic sectors where it has objectively comprehensible indications that further concentrations could significantly impede effective competition and the company has a 15 percent share in those sectors. In such cases the Federal Cartel Office shall be entitled to oblige individual companies with global revenues of more than EUR 500 million, by individual order, to notify any planned acquisition in the sector concerned. This amendment is a reaction to successive acquisition strategies in regional markets where the revenue thresholds have not been met.

According to Section 36 (1) sentence 2 No 2 ARC, a concentration which would significantly impede effective competition, in particular a concentration which is expected to create or strengthen a dominant position, shall exceptionally not be prohibited by the FCO if these requirements are fulfilled on a market in which goods or commercial services have been offered for at least five years and which had a sales volume of less than EUR 15 million in the last calendar year. The revised draft proposes to raise this de minimis market threshold from EUR 15 million to EUR 20 million in order to strengthen consolidation opportunities for small and medium-sized companies and to allow the Federal Cartel Office to focus on cases of high economic importance.

(ii) Abuse Control

The revised draft also focuses on German abuse control. It proposes to implement inter alia the following powers of intervention to the Federal Cartel Office in Section 18 et seq. ARC:

When determining market dominance, “access to data relevant for competition” shall be added as an appraisal criterion. In addition, the concept of intermediary power shall be introduced in order to take appropriate account of the intermediary and steering function of platforms in multi-sided markets. In this way the revised draft aims to respond to the current challenges of the digital economy.

For the same reason, a dominant company’s refusal to grant access to data, networks, or platforms necessary to operate on an upstream or downstream market is to be prohibited if the refusal threatens to eliminate effective competition in that market. While companies must comply with data protection rules, in particular the General Data Protection Regulation, it should be verified whether the restriction on data access on grounds of data protection does not hinder effective competition.

The revised draft also proposes to replace “abusive exploitation of a dominant position” with “abuse of a dominant position.” The revised draft thus aims to clarify that cases in which market power is manifested in the anticompetitive outcome but not in the behavior leading to that outcome should also be covered. This was disputed between the Federal Cartel Office⁴ and the Higher Regional Court of Düsseldorf⁵ in view of the Facebook decision.⁶

Finally, the revised draft provides for far-reaching powers of intervention for the Federal Cartel Office against “companies of paramount significance for competition across markets.” The revised draft thus targets digital companies such as Google, Amazon, and Facebook. The Federal Cartel Office can then in particular prohibit such companies from favoring their own offers over those of competitors, or from withholding data which they receive as part of their services thus creating unjustified dependencies. The burden of proof that the respective behavior is justified shall be borne by the companies. This would make it much easier for the Federal Cartel Office to attack certain practices of digital companies like Google, Amazon, and Facebook.

(iii) Administrative proceedings

In addition, the revised draft proposes some administrative procedural changes, including the following:

In order to ensure more efficient public enforcement of competition law, the revised draft foresees an amendment as regards interim measures. At present the Federal Cartel Office may order interim measures in urgent cases if there is a risk of serious and irreparable damage to competition. The high hurdle of proving irreparable damage to the competition process is achieved by reducing it to inter alia a “predominant probability” of an infringement to Section 32a(1) ARC.

The revised draft also proposes to include Section 32c(2) ARC, opening up the possibility of an announcement by the Federal Cartel Office of an exception to the self-assessment principle. Companies with a substantial legal and economic interest are entitled to an announcement by the Federal Cartel Office, stating that it refrains from initiating proceedings in accordance with the scope of its discretionary powers. In this way, the revised draft aims to increase legal certainty.

(iv) Cartel Damage Proceedings

The revised draft also proposes the following changes regarding cartel damage proceedings:

At the end of 2018, the Federal Court of Justice rejected the double prima facie evidence with regard to cartel bias and with regard to the cartel causality of a price increase,⁷ thus strengthening the procedural conditions of defendants. The revised draft therefore proposes to include the following Section 33a(2) sentence 4 ARC: “It is reputably presumed that legal transactions concerning goods or services with cartel participants that fall within the scope of a cartel in product, time and geographic terms were covered by the cartel.” This again is intended to strengthen the procedural conditions for plaintiffs.

The Higher Regional Court of Düsseldorf decided, also at the end of 2018, that the claims to have evidence surrendered and information disclosed for the calculation of damages pursuant to Sections 33g (1) and (10) ARC cannot also be applied to cartel damage claims which arose before those Sections entered into force in 2017.⁸ The aim of the revised draft is to clarify in Section 186 (4) ARC that these claims can indeed be applied to cartel damage claims which arose before Section 33g (1) and (10) ARC entered into force. This will again strengthen the procedural conditions for plaintiffs.

(v) EU ECN+ Directive

Finally, the revised draft also proposes some changes regarding the EU ECN+ directive⁹:

The directive provides that more powers shall be granted to the Member States’ competition authorities to ensure more efficient public enforcement of competition law. The current German competition legislation is, for the most part, already in line with the directive. However, the revised draft also proposes some amendments in Section 48 et seq. ARC such as codifying the Federal Cartel Office’s leniency program and rules on mutual assistance between the Federal Cartel Office and national competition authorities of other EU member states.

(II) Law to Mitigate the Consequences of the COVID-19 Pandemic in Competition Law

For the sake of completeness, on May 29, 2020, the law to mitigate the consequences of the COVID-19 pandemic in competition law, cf. Section 186 ARC, was also implemented. The law covers the following changes:

For merger filings received by the Federal Cartel Office during the acute phase of the corona COVID-19 pandemic, between March 1 and May 31, 2020, the examination periods of Section 40 ARC for Phase I were extended from one to two months, and for Phase II from four to six months.

The obligation to pay interest on cartel fines according to Section 81(6) ARC is suspended until June 30, 2021 if payment facilities (for example a deferral) have been granted for fines.

(III) Outlook

While the law to mitigate the consequences of the COVID-19 pandemic in competition law only leads to short-term changes, the official name of the revised draft for the tenth amendment to the ARC as the “ARC Digitization Act” already shows its long-term ambitions. If the law is implemented in this form, the Federal Cartel Office will probably have far more instruments at its disposal in the field of digital markets than any other European competition authority and will continue to be one of the most active authorities in this field.

1 Dr. Raphael Reims is a competition associate at Willkie Farr & Gallagher, London. The views expressed in this article are those of its author and should not be attributed to his law firm or clients.

2 See www.bmwi.de/Redaktion/DE/Downloads/Gesetz/gesetzentwurf-gwb-digitalisierungsgesetz.pdf. (last checked November 17, 2020).

3 Directive 2019/1/EU of the European Parliament and of the Council of December 11, to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, OJ L 11, of January 1, 2019, pages 3-33.

4 Federal Cartel Office, decision of February 6, 2019, B6-22/16, www.bundeskartellamt.de/SharedDocs/Entscheidung/
DE/Entscheidungen/Missbrauchsaufsicht/2019/B6-22-16.html (last checked November 17, 2020).

5 Higher Regional Court of Düsseldorf, decision of August 26, 2019, VI-Kart 1/19, www.justiz.nrw.de/nrwe/
olgs/duesseldorf/j2019/Kart_1_19_V_Beschluss_20190826.html (last checked November 17, 2020).

6 The Federal Court of Justice has in the meantime also decided in this matter, cf. Federal Court of Justice, decision of June 23, 2020, KVR 69/19, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=
bgh&Art=en&nr=109506 (last checked November 17, 2020).

7 Federal Court of Justice, decision of December 11, 2018, KZR 26/17, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&nr=90845 (last checked November 17, 2020).

8 Higher Regional Court of Düsseldorf, decision of May 7, 2018, VI-W (Kart) 2/18, http://www.justiz.nrw.de/nrwe/olgs/
duesseldorf/j2018/VI_W_Kart_2_18_Beschluss_20180507.html (last checked November 17, 2020).

9 Directive 2019/1/EU of the European Parliament and of the Council of December 11, to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, OJ L 11, of January 1, 2019, pages 3-33.