Key Changes in German Competition Law Affecting Digital Companies

In a move that could create a precedent worldwide, the German Federal Parliament introduced new rules regulating digital gatekeepers and other companies deemed to be "of paramount significance to competition across markets." In the future, the German Federal Cartel Office (Cartel Office) will have the power to identify companies of paramount significance to competition across markets and to counter their abusive behavior.

According to the new rules, the Cartel Office will take into account a wide range of circumstances when determining whether or not a company is of paramount significance to competition across markets. In particular, it will consider whether or not the company in question:

1. Has a strong market position on one or several markets,
2. Controls substantial financial or other resources,
3. Is vertically integrated and active on several related markets,
4. Has access to competitively relevant data, or
5. Whether it plays an important role for the ability of others to have access to upstream and downstream markets.

Once a company has been identified as being of paramount importance for competition across markets, it runs the risk of seeing its freedom to operate restricted. The Cartel Office may:

1. Restrict a company from favoring its own products when granting access to supply and distribution markets, for example by manipulating how offers are displayed to potential customers, or by pre-installing exclusively its own products on devices, or otherwise incorporating its own products in offers;
2. Order a company that is able to exert influence on the conditions of market access to not impede the business activities of other operators, in particular, to abstain from the exclusive pre-installation or the incorporation of its own products in offers, and not to prevent or limit the ability of others to market their own products or to connect with customers outside the marketing channels controlled by the company;
3. Order a company to not impede the competitive actions of others on markets when it is expanding its position on markets where it is not yet dominant, for example by bundling offers or tying the offer of a service to the use of another service;
4. Order a company to not create or increase market entry barriers, or otherwise interfere with the access to supply or distribution markets, through its ability to process competitively relevant data, or by imposing terms that render such data processing possible, for example by rendering the offer of a service conditional on the users consenting to the processing of data generated by another service or another service supplier, or by processing competitively relevant data received from other market operators for purposes that are unrelated to the service provided to those market operators;
5. Order a company to not refuse or limit the interoperability of products or services or the portability of data and thereby to impede competition;
6. Order a company to not withhold information on the services that have been provided and thereby interfere with the ability of others to carry out an assessment of those services;
7. Order a company to not extort terms that are disproportionate to the value of the service performed, for example by imposing undue conditions with regard to the transfer of data or rights for the display of offers or the way how they are displayed.

The Cartel Office will normally review every five years its decision to subject a company to the rules governing companies of paramount significance to competition. They can in principle also target companies outside German territory, given that the Act against Restraints of Competition (ARC) applies to all anti-competitive conduct having an effect on the German market, irrespective of where the conduct takes place.

Ahead of the legislation entering into force in March 2021, it will be interesting to note which companies will be first in line to be singled out by the Cartel Office as being of "paramount significance to competition across markets." The precedent set by the German Federal Parliament will, without doubt, influence other legislators in Europe, and beyond, that are interested in more actively regulating digital gatekeepers. Lastly, it remains to be seen how the EU institutions will react to the German legislation as, in December 2020, the European Commission published its own Digital Markets Act proposal which equally aims to address digital giants' anticompetitive behavior. These changes are likely to be just the start of what may trigger a raft of competition regulation targeting digital companies.