Enforcement proceedings in dominance in Germany

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The FCO is responsible for the enforcement of the dominance rules. It carries out investigations and decides whether a specific practice must be prohibited and whether a fine is appropriate. Prohibition and fining decision may be taken simultaneously or successively. Before adopting a formal decision, the FCO will normally issue a statement to which the enterprise concerned may respond. The FCO commences investigations either on its own initiative or, in the majority of cases, in reaction to complaints of third parties (ie, in particular competitors, customers or suppliers). As part of its proceedings, the FCO may carry out informal discussions or send informal questionnaires. Alternatively, the FCO may also take formal measures such as information requests or, subject to a prior court order, surprise inspections (dawn raids). Although there is no regulatory framework for settlements, according to the FCO, its power to conclude settlements derives from its discretion to pursue cases. The FCO’s competences have recently been expanded to cover some consumer protection aspects. Under section 32e(5) of the ARC, the FCO may now in particular conduct sector inquiries if there is evidence of sustained, significant and repeated violations against consumer protection law in an industry. In December 2017, the FCO launched a first sector inquiry on this basis focusing on the conduct of price comparison websites in the area of travel, insurance, financial services, telecommunications and energy, and published its preliminary findings in a consultation paper in December 2018 (available on the FCO’s website), concluding that the investigation confirmed suspected infringements of consumer rights. The FCO has invited the companies concerned and other interested parties to submit comments on its report by 4 February 2019, and expects to publish its final report in 2019. In addition, the FCO can now act as amicus curiae in court proceedings that concern such violations (section 90(6) of the ARC).

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

Fines

The FCO may impose fines on persons or entities that participated in an infringement of antitrust law or violated an FCO decision. In contrast to EU law, the FCO needs to identify one or more individuals who have committed the infringement and then attribute their behaviour to the legal entity they represented to impose a fine on that entity. Because the FCO may not refer to the concept of a ‘single economic entity’, it is therefore difficult for the FCO to fine a parent company for infringements committed by employees of its subsidiaries.

The FCO may impose a maximum fine of up to €1 million on an individual and 10 per cent of the consolidated group turnover on a legal entity (section 81(4) of the ARC). According to the FCO’s 2013 fining guidelines - which differ significantly from the European Commission’s fining guidelines - the 10 per cent maximum does not constitute a cap limiting a fine calculated independently, but rather provides for an upper limit of the fining scale, which should be applied only in cases of the most extreme hard-core infringements. In order to calculate a fine according to these guidelines, the FCO first determines a basic amount, which equals 10 per cent of the turnover that the entity generated with the products or services related to the infringement throughout its duration. In a second step, this amount is multiplied by a factor between two and six depending on the size of the entity (or even higher in cases where the entity’s turnover exceeds €100 billion). In a third step, the resulting basic amount may then be adjusted according to mitigating or aggravating circumstances. In addition, German administrative offence law allows the FCO to skim off any profits that the entity derived through its infringement (in which case the total fine may exceed the 10 per cent maximum).

Remedies

According to sections 32 to 34 of the ARC, the FCO may impose all remedies that are necessary to bring an infringement effectively to an end and that are proportionate to the infringement. This includes in particular the right to impose behavioural remedies (ie, measures that require action by the infringer). According to section 32a of the ARC, the FCO may also impose interim measures in cases of urgency if there is a risk of serious and irreparable damage to competition (the duration of interim measures should, however, not exceed one year). In addition, section 32(2) of the ARC provides for the - as of now theoretical - possibility of structural remedies. These include in particular the ability to order the divestiture (unbundling) of companies. Such structural remedies would, however, be subject to a strict proportionality test and can only be applied where behavioural remedies would be insufficient to remedy an infringement. To date, the FCO has not imposed any structural remedies in abuse cases.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The FCO can impose sanctions directly without prior petitioning of a court or other authority.

What is the recent enforcement record in your jurisdiction?

Throughout the past decade, the FCO has investigated potential abusive practices by dominant enterprises on several occasions. However, only in a few cases has the FCO actually adopted a formal decision based on either sections 18 et seq of the ARC or article 102 of the TFEU, with fines imposed in even fewer cases (a list of the FCO’s past dominance cases is available on the FCO’s website in German only at: www.bundeskartellamt.de/SiteGlobals/Forms/Suche/Entscheidungssuche_Formular.html;jsessionid=A980E7DC344F4F92321FAE58654279FD.2_cid371?nn=3589936&cl2Categories_Format=Entscheidungen&cl2Categories_Arbeitsbereich=Missbrauchsaufsicht&docId=3590026). Instead, the FCO has often dropped its investigations after the companies concerned have agreed to discontinue their allegedly abusive behaviour on a voluntary basis. In the same vein, the FCO has often ended proceedings by adopting commitment decisions (ie, by declaring offered commitments as binding).

The FCO’s past enforcement activity has focused in particular on the energy, retail, postal service, water, harbour service and air transport sectors. It also carried out several sectoral investigations in industries with arguably oligopolistic structures in which it suspected structural problems, including the energy, fuel and food retail sectors. Since May 2011, the FCO has published nine reports on investigations into different sectors of which seven specifically deal with (possible) abuses of market power (district heating, milk, fuel retail, wholesale fuel, food retail, ready-mixed concrete and meter-reading services). In addition, the FCO is currently conducting further investigations, for example, regarding the household waste disposal and hospital sector.

Since 2015, the FCO has in particular focused more on the digital economy and online platforms - notably in light of the recent rise in ‘online cases’, including a decision concerning an alleged abuse of dominance by Google (see the FCO’s decision in Google/VG Media, 8 September 2015), the FCO’s sector inquiry on price comparison websites, which the authority plans to conclude in 2019 (see question 26 and the FCO’s press release, 12 December 2018), the FCO’s decision against Facebook, and its ongoing proceedings against Amazon. In Facebook (see questions 2 and 22), the FCO found that Facebook enjoyed a dominant position in the German market for social media networks) which enabled it to collect and process user data beyond what is legally acceptable under EU and German data protection rules. In particular, the FCO held that requesting a user’s consent for far-reaching data collection and processing in exchange for access to Facebook’s social network was abusive and harmed users, who lost control over what personal data was collected from which sources and for which purpose. The FCO refrained from imposing a fine given the complexity of the investigation. Facebook has already appealed against the FCO’s decision. In November 2018, the FCO also initiated proceedings regarding Amazon’s terms and conditions and its behaviour in relation to the retailers using its German marketplace platform amazon.de (see question 2). Inter alia, the FCO’s activities in this respect inspired the German legislator to introduce new provisions on dominance in digital markets (see question 2).

In 2015, the FCO also found that Deutsche Post AG abused a dominant position in the provision of postal services by agreeing on letter prices and loyalty discounts with some of its largest customers that were impossible for other postal service suppliers to compete against (FCO decision in Deutsche Post AG, 2 July 2015, confirmed by the Düsseldorf Court of Appeal, judgment of 6 April 2016). The FCO found that Deutsche Post AG’s behaviour was abusive in two ways: it fulfilled the requirements of a margin squeeze (see question 18) and also constituted an illegal use of loyalty rebates (see question 14).

In 2016 and 2017, the FCO issued only a single formal prohibition decision regarding CTS Eventim’s use of exclusivity clauses. CTS Eventim - the operator of Germany’s largest ticketing system - had required organisers of live events to sell the tickets for their events exclusively via CTS Eventim’s ticketing system, while at the same time requiring ticket offices to source tickets only from the same system. In its decision, the FCO took account of CTS Eventim’s significant market share, but also applied the newly introduced criteria for the assessment of a company’s dominance on multisided platform markets under section 18(3a) of the ARC (for more details regarding the new provision, see question 2).

In addition, the FCO adopted a number of commitment decisions, inter alia concerning several district heating suppliers for charging excessive prices (the suppliers committed to reimburse their customers and to decrease their current prices, see decisions regarding Danpower and Innogy, both of 13 February 2017).

The FCO also investigated the German Football Association (DFB) for an abuse of its dominant position regarding the allocation of the German ticket quota for the 2018 soccer world cup, because the DFB intended to sell tickets only to its own members who had to pay an annual membership fee of €40. While the FCO considered that this behaviour could be justified, at least in part, by security considerations (effectively preventing ticket sales to known hooligans), the DFB, nonetheless, committed to introduce a short-time membership at a reduced fee. Against this background, the FCO dropped its investigation.

On 27 February 2019, the FCO closed its proceedings against the German Olympic Sports Confederation (Deutscher Olympischer Sportbund, DOSB) and the International Olympic Committee (IOC) regarding the advertising restrictions that they impose on athletes with a commitment decision. The FCO had initiated proceedings in 2017 because IOC and DOSB had prohibited athletes participating in the Olympic Games to use their person, name, picture or sports performances during the Olympic Games - and several days before and after the games - for advertising purposes. According to the FCO’s preliminary view, these restrictions constituted an abuse of the DOSB’s and IOC’s alleged dominant position (as the athletes - who are the performers of the games - do not profit directly from the very high advertising revenues generated by the official Olympic sponsors). Faced with this preliminary assessment, DOSB and IOC offered to loosen some of their restriction, thereby enhancing advertising opportunities for German athletes and their sponsors. The FCO accepted these proposals after market testing the proposed commitments with athletes and sponsors (see FCO’s press release of 27 February 2019).

The FCO recently investigated Lufthansa’s price increases on some routes. After the insolvency of Germany’s second biggest airline Air Berlin, Lufthansa enjoyed a monopoly position for a few months on some German domestic flight routes. The FCO’s investigation showed that Lufthansa’s tickets prices on these routes had increased by an average of 25 to 30 per cent after Air Berlin’s exit from the market. However, as these increases were only of a temporary nature and prices returned to the previous level only a few months later after easyJet’s entry into the market, the FCO did not open formal proceedings (see FCO’s press release of 29 May 2018).

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

According to section 134 of the German Civil Code, legal transactions violating statutory prohibitions, such as sections 19 and 20 of the ARC, are void. However, it must be determined on a case-by-case basis, in line with (German) civil law, whether the fact that certain legal clauses within a comprehensive agreement violate sections 18 or 19 of the ARC results in the nullity of the entire agreement, or whether the nullity is restricted to the problematic contractual clauses. In many cases, it is regarded reasonable to limit the nullity to single contractual clauses in order to protect the disadvantaged party, for example, if a contract, while providing for an overcharged price, is important for the other contractual party.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

The legal basis for private enforcement is section 33(1) of the ARC, which provides the affected party with claims for compensation and rectification of the infringement as well as, where there is a risk of recurrence, for an injunction. The legal consequences of these claims strongly depend on the individual case at hand. In certain cases it may even be at the discretion of the dominant company how to rectify the infringement, eg, whether to offer the same rebate to the discriminated company or to subsequently deny preferential treatment to the favoured company. In general, granting access to infrastructure, supplying goods or services or concluding a contract are all possible legal consequences of private enforcement under section 33 of the ARC. Accordingly, in one instance the owner of an airport was ordered to grant a company providing shuttle services access to the roadway leading to the terminal (judgment of the Koblenz Court of Appeals, 17 December 2009).

Following a significant increase in cartel-related follow-on damage litigation over recent years, damage actions or other types of litigation (eg, requesting the termination of discriminatory conduct, access to a network or infrastructure) based on alleged restrictive unilateral conduct have also become fairly commonplace. Unlike cartel damage cases, these actions often do not follow an investigation and decision by the FCO (or other competition authorities) but are brought on a stand-alone basis.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Section 33a of the ARC provides an express legal basis for damage claims based on deliberate or negligent infringements of antitrust law, which are adjudicated by the ordinary courts of law (civil courts). In the context of follow-on suits, German courts are legally bound by the final decisions of the FCO, Commission, or any other EU member state’s antitrust authority with respect to the determination of the antitrust infringement (ie, other factors, such as causality and amount of damages, are not covered by the binding effect). The amount of damages that may be granted is strictly limited to the material losses of the company harmed by the abusive practices. There is no legal basis for punitive damages.

German law currently does not provide for class actions seeking damages. Instead, victims of illegal unilateral conduct that want to consolidate their individual damage claims may assign their claims to one party or institution, which then brings the law suit.

To what court may authority decisions finding an abuse be appealed?

FCO decisions are subject to judicial review of the facts and the law by the Düsseldorf Court of Appeal. The court’s decisions can be further appealed - on points of law only - to the Federal Court of Justice. In practice, the courts indeed carry out an independent review of the cases brought before them. While they often side with the FCO, it is by no means rare that FCO decisions are overturned.