Vertical agreementsSpecial rules and exemptions
Do any special rules or exemptions apply to the assessment of anticompetitive agreements between undertakings active at different levels of the supply chain in digital markets in your jurisdiction?
There are no special rules or exemptions that apply to the assessment of vertical agreements in digital markets in Germany. The Act against Restraints of Competition (ARC) explicitly cross-refers to relevant EU block exemption regulations, including the Vertical Block Exemption Regulation (VBER), making them also applicable to German cases. When applying German competition rules to vertical restraints, the Federal Cartel Office (FCO) will, therefore, in principle, follow the European Commission’s Guidelines on Vertical Restraints and the EU case law in respect of online sales restrictions.
However, the FCO and the German courts have established their own decision-making practice over the years and do not shy away from nuancing the EU approach. For example, in the aftermath of the Coty judgment (CJEU, C-230/16, 2016), the FCO published a paper ‘Competition restraints in online sales after Coty and Asics – what’s next?‘ (2018) in which it commented that: (1) the findings in Coty are limited to luxury goods and cannot simply be transferred to other (high-quality) brand products; and (2) there could be situations where general platform restrictions and other restrictions of online sales activities reduce a dealer’s visibility to an extent that fulfils the criterion of the restriction on passive sales pursuant to article 4(c) of the VBER, noting that marketplaces and price comparison sites are ‘clearly more significant’ in Germany than in other EU member states.Online sales bans
How has the competition authority in your jurisdiction addressed absolute bans on online sales in digital markets?
Under German competition law practice (which in this context refers to the VBER and the European Commission’s Guidelines on Vertical Restraints), a complete prohibition of online sales by distributors, in principle, amounts to a hardcore restriction of competition and cannot be exempted under the VBER.
In its judgment Depotkosmetik im Internet (BGH, KZR 2/02, 2003, only in German), the Federal Supreme Court noted that the VBER does not permit a complete ban of online sales (see also the Munich Higher Regional Court’s Sportartikel decision (OLG München, U (K) 4842/02, 2009, only in German), which held that a complete ban of online sales amounts to a hardcore restriction under article 4(b) VBER).Resale price maintenance
How has the competition authority in your jurisdiction addressed online resale price maintenance?
Overall, in recent years, the FCO has shown increased enforcement activity in the area of online resale price maintenance.
In 2014, the FCO imposed a fine of €8.2 million on mattress manufacturer Recticel for imposing minimum resale prices in offline as well as online distribution. With regard to online distribution, Recticel offered online distributors the option of continuing to advertise online as authorised online distributors using the logo and data of Recticel, provided that they did not sell below the prescribed minimum resale prices in relation to strategic product lines. Deviations were subject to sanctions, for instance, by blocking the relevant distributor on Google AdWords or on eBay for unauthorised use of manufacturer data.
In 2015, the FCO imposed a fine of €300,000 on United Navigation for resale price maintenance. The company was, in particular, monitoring prices of online distributors and asking them to maintain the prescribed price level as soon as the sales price dropped below a certain threshold.
In 2021, the FCO imposed a fine of €2 million on Fond Of GmbH for vertical price fixing. The FCO inter alia found that Fond Of and the retailers involved agreed that Fond Of products should generally be sold at the price set by Fond Of as a recommended retail price. In addition, only a small number of retailers were permitted to engage in online sales.
In 2022 the FCO closed an administrative proceeding against Ordermann GmbH without imposing a fine. Distributors had complained that Ordermann had instructed them not to sell below certain prices online. Initially, Ordermann claimed that it had only communicated minimum advertising prices. After a thorough internal investigation and compliance training the FCO was convinced that a demand for minimum advertising prices had only been communicated in a very limited number of instances and that Ordermann had taken sufficient steps to avoid such conduct in the future. The FCO made clear however that they view minimum advertising prices as vertical restriction of competition.Geoblocking and territorial restrictions
How has the competition authority in your jurisdiction addressed geoblocking and other territorial restrictions?
Since December 2018, the EU Geoblocking Regulation (Regulation (EU) 2018/302) is directly applicable in Germany. The Regulation, inter alia, prohibits sellers from blocking or limiting a customer’s access to the seller’s website for reasons related to the customer’s nationality, place of residence or place of establishment. This includes a prohibition on redirecting the customer to a different local website of the seller based on nationality, place of residence or place of establishment of the customer.
The EU Geoblocking Regulation applies alongside the general prohibition on anticompetitive agreements set out in article 101 of the Treaty on the Functioning of the European Union (TFEU) and section 1 ARC, although its scope is in some respects wider (eg, it applies in the absence of an agreement) but in other aspects narrower (eg, certain sectors are excluded from the scope of the EU Geoblocking Regulation). The relationship with the VBER and, in particular, agreements restricting active or passive sales is set out in article 6 of the EU Geoblocking Regulation.
The Federal Network Agency is responsible for enforcing the EU Geoblocking Regulation in Germany.Platform bans
How has the competition authority in your jurisdiction addressed supplier-imposed restrictions on distributors’ use of online platforms or marketplaces and restrictions on online platform operators themselves?
Prohibitions of sales on online marketplaces such as Amazon, eBay and price comparison websites have been a hot topic in Germany for many years. That said, the decision-making practice of the FCO and the German courts has not always followed a consistent approach. Significant complexity arises not least from the vast amount of possible scenarios (eg, within or outside a selective distribution system, luxury product versus non-luxury product, isolated restriction versus combination with other restrictions and type of online platform or marketplace).
Prohibition of sales via online marketplaces
Despite myriad cases, the question of the conditions under which a manufacturer may prohibit its distributors from selling on online marketplaces has not been conclusively decided in German jurisprudence and remains highly fact-specific.
- In its 2014 Adidas decision (B3-137/12), the FCO held, in the context of a selective distribution system, that a per se prohibition on selling via online marketplaces amounted to a restriction of competition under article 101 TFEU and section 1 ARC that was not exempted under article 101(3) TFEU or section 2 ARC. The FCO considered that a per se prohibition on selling on online marketplaces (ie, irrespective of the design of the online marketplace) was not a qualitative criterion that was necessary to preserve the quality of the product. The FCO also considered that the per se prohibition would likely amount to a hardcore restriction under the VBER (however, the VBER was not applicable to a number of markets in this case as Adidas exceeded the market share threshold of 30 per cent).
- In its 2015 ASICS decision (B2-98/11, only in German), the FCO also considered that a blanket or per se ban on selling via online marketplaces could amount to a hardcore restriction under article 4(c) VBER (the FCO did not have to reach a conclusion on this question in the ASICS case as ASICS’ distribution system already included other hardcore restrictions that made it fall outside the VBER).
- In contrast, there have also been cases where German courts have held that a restriction on selling on online marketplaces may be permissible on the basis of the specific facts before them (eg, the decision of the Frankfurt Higher Regional Court in Deuter (OLG Frankfurt, 11 U 84/14 (Kart), 2015, only in German), and the decision of the Berlin Higher Regional Court in Scout (KG Berlin, 2 U 8/09 Kart, 2013, only in German) in relation to restrictions of sales on eBay).
It remains to be seen how the decisional practice of the FCO and the German courts will evolve following the 2017 CJEU judgment in Coty (CJEU, C-230/16). The FCO has indicated that it does not see Coty as providing all the answers (see ‘Competition restraints in online sales after Coty and Asics – what’s next?‘, 2018) and noted that the CJEU’s findings in Coty are limited to luxury products. The FCO has also raised the question of whether the assessment under article 4(c) VBER might be different if the use of online marketplaces is the most important distribution channel for distributors. It also remains to be seen how the FCO will apply the EU Commission's new Vertical Guidelines of 2022, in which the EU Commission seems to be prepared to grant suppliers more leeway when excluding specific market places, for example due to quality requirements (para. 334 Vertical Guidelines).
Prohibition of sales via price comparison websites
In its 2017 judgment in ASICS, the Federal Supreme Court (BGH, KVZ 41/17, 2017, only in German) confirmed, in the context of a selective distribution system, that a per se ban to support price comparison websites that applies irrespective of the design of the price comparison website (ie, is not linked to quality criteria) amounts to a hardcore restriction under article 4(c) VBER. The Federal Supreme Court considered that price comparison websites are of great importance in the online sales world as they allow retailers to considerably increase their ability to attract internet users’ attention for their online offering. The Federal Supreme Court also took the view that the situation in ASICS was different to that considered by the CJEU in its Coty judgment as: (1) no luxury products were concerned; and (2) in ASICS, the prohibition on using price comparison websites was accompanied by other restrictions that, in combination, did not ensure that customers would have access to the distributors’ online offering to a practically significant extent.Targeted online advertising
How has the competition authority in your jurisdiction addressed restrictions on using or bidding for a manufacturer’s brand name for the purposes of targeted online advertising?
In its 2015 ASICS decision (B2-98/11), the FCO held, in the context of a selective distribution system, that prohibiting retailers from allowing a third party to use the ASICS trademark in any form on the website of a third party, with a view to diverting traffic to the webpage of the authorised ASICS distributor, is a hardcore restriction under article 4(c) VBER. The FCO also considered that a per se prohibition on distributors using ASICS trademarks as keywords for paid search engine advertising amounts to an appreciable restriction of competition.
The FCO found that the use of Google AdWords is an important means to promote sales for many authorised distributors. This was consistent with the 2014 Adidas case (B3-137/12), where – following an investigation by the FCO – Adidas amended its e-commerce terms to clarify that all authorised retailers were free to use Adidas trademarks as search terms in the context of search engine advertising, such as Google AdWords.
In a recently opened investigation relating to Deutsche Bahn AG (2019), the FCO has indicated that it will, inter alia, investigate whether the company imposed restrictions on mobility platforms with regard to advertising on app stores, search engines and social networks. It adopted a statement of objections in April 2022.Most-favoured-nation clauses
How has the competition authority in your jurisdiction addressed most-favoured-nation clauses?
Most-favoured-nation (MFN) clauses have been a long-standing point of discussion in Germany. The FCO has traditionally taken a strict approach to MFN clauses (also referred to as ‘best price clauses’ or ‘price parity clauses’) and has brought a number of cases against online hotel booking platforms including HRS (B9-66/10, 2013), Expedia (2015) and Booking.com (2015) in recent years.
The FCO has previously held that both ‘wide’ best price clauses (clauses that prevent firms from offering lower prices on their own proprietary websites and other price comparison websites) and ‘narrow’ best price clauses (preventing firms only from offering lower prices on their own websites) infringe section 1 ARC and article 101(1) TFEU.
However, this view has not consistently been shared by the Düsseldorf Higher Regional Court. While the Düsseldorf Higher Regional Court shared the FCO’s view that wide best price clauses infringe section 1 ARC and article 101(1) TFEU in the HRS case (OLG Düsseldorf, VI Kart 1/14 (V), 2015), it has not taken a consistent approach with regard to narrow best price clauses.
In a 2016 ruling (OLG Düsseldorf, VI-Kart 1/16 (V), 2016), in interim proceedings brought by Booking.com against the FCO’s 2015 decision prohibiting the use of narrow best price clauses, the Düsseldorf Higher Regional Court considered that narrow best price clauses infringe competition law. However, in its 2019 ruling in the main proceedings of the appeal, the same court took the view that Booking.com’s narrow best price clauses did not lead to an infringement of section 1 ARC and article 101(1) TFEU (OLG Düsseldorf, VI Kart 2/16 (V), 2019). The court considered the narrow best price clauses to be an ancillary restraint to the hotel portal contract between Booking.com and the hotels.
The Düsseldorf Higher Regional Court ruling in the Booking.com case was widely criticised by the hotel industry. During the course of the proceedings, the court had asked the FCO to undertake further investigations into the effects of the prohibition on narrow best price clauses on the competitive relationship between the online hotel platforms, on the hotels’ pricing behaviour and on consumers’ booking behaviour, but it ultimately did not follow all the FCO’s conclusions from that investigation. The FCO published the findings of the investigation for a wider audience in a paper, ‘The effects of narrow price parity clauses on online sales of online hotel platforms – Investigation results from the Bundeskartellamt’s Booking proceeding’ (2020). The FCO concluded, in particular, that there are no significant redirection or freeriding activities resulting from narrow best price clauses, as consumers rarely compare prices and tend to book the accommodation on the website on which they first found it.
The FCO successfully appealed the Düsseldorf Higher Regional Court ruling in the booking proceedings. The Federal Supreme Court decided on 18 May 2021 to set aside the Düsseldorf judgment. According to the press release (only German version available) the Federal Supreme Court holds the view that – contrary to the Higher Regional Court's position – the best price clause cannot be categorised as an ancillary restraint. The FSC also does not see sufficient grounds to justify the restriction under the test of article 101(3) TFEU.
The FCO has voiced concerns over the treatment of MFNs under the new VBER. The new regime essentially foresees that only wide MFNs applied by online intermediation services will be treated as excluded clauses under article 5(1)(d), while all other MFNs continue to benefit from the safe harbour. In the eyes of the FCO this approach is 'clearly too narrow' (see FCO's comments here). It remains to be seen how the FCO will deal with the fact that the EU Commission explicitly disagrees on this point. In particular, it will be interesting to see whether the FCO will take into account the EU Commission's fundamental decision that narrow MFN are less harmful to competition when it deals with cases outside the scope of the VBER.Multisided digital markets
How has the competition authority in your jurisdiction addressed vertical restraints imposed in multisided digital markets? How have potential efficiency arguments been addressed?
The treatment of ‘hybrid platforms’ (ie, platforms that, on the one hand, act as intermediaries for online sellers and, on the other hand, are themselves active as (authorised) retailers of the same product on their platform) is very much ‘on the radar’ of the FCO. One of the questions that arises in this context is whether the relationship between the (hybrid) platform and retailers is a vertical relationship and, in particular, whether this is a situation of dual distribution for the purpose of article 2(4), second sentence, VBER.
When considering price parity clauses that Amazon imposed on sellers on its marketplace, the FCO took the view that the relationship between Amazon and the third-party sellers was not a purely vertical one, but rather a form of horizontal cooperation that, in terms of its objective, is similar to the operation of a joint online platform in the form of a marketplace. However, the FCO closed its proceedings against Amazon in 2013 (B6-46/12) after the company announced that it would drop the price parity clauses.
In its paper ‘Competition restraints in online sales after Coty and Asics - what’s next?‘ (2018), the FCO hinted that hybrid platforms could be subject to closer investigation by the FCO in the future. The FCO seems concerned that the platforms’ dual business model allows them to develop a strong market position based on increased network effects resulting from the large variety they offer, and that there is a risk that when such platforms cooperate with manufacturers, independent sellers can be disadvantaged or even squeezed out of the market owing to unfavourable conditions. The FCO stated:
As a competition authority, the Bundeskartellamt wants to keep markets open and prevent e-commerce from being concentrated in the hands of only a few players, ie the manufacturers themselves, some large dealers and even fewer leading platforms, which would dramatically reduce customers’ choice options.
Have any other key issues emerged in your jurisdiction in relation to the application of competition law to vertical agreements in digital markets?
An interesting case regarding vertical agreements and online platforms has been decided by Regional Court of Munich in private litigation (decision can be found here, only German version available).
Google and the German Ministry of Health agreed that gesund.bund.de, the Ministry's national online platform providing information on health (common diseases, healthy eating etc), would benefit from preferential treatment in Google's 'knowledge panels' going forward. Users that searched in Google's German domain for information on diseases were shown knowledge panels, displaying only information originating from Gesund.bund.de, as well as a link to the portal.
Netdoktor.de, a private company and competitor of Gesund.bund.de, financed through online advertising and offering information on diseases and treatments, filed an injunction against Google and the Ministry claiming that the arrangement between Google and the Ministry violated article 101 TFEU. Netdoktor.de was able to demonstrate that traffic on its site, in particular with a view to widespread diseases, had declined drastically after Gesund.bund.de was exclusively and prominently featured in Google’s knowledge panels. The Munich court granted the injunction on the basis that this exclusive arrangement between Google and the Ministry substantially impacted the competitive position of Netdoktor.de. The court also held that the agreement could not be justified under article 101(3) TFEU. Both Google and the Ministry have decided not to appeal the Regional Court’s judgment.