All questions

Antitrust: restrictive agreements and dominance

i Significant casesHorizontal agreements

According to the FCO, the authority received an increasing number of enquiries from the engineering sector and the metal industry concerning cooperations between producers and their business customers or suppliers. The focus of these cooperations was often on platform models designed to improve digital networking for market participants. One of the projects the FCO dealt with in 2018 was the launch of a business-to-business online trading platform for steel products which was allowed by the authority subject to certain modifications of the original plans. In particular, the FCO had been concerned that the platform would increase transparency. Therefore, the platform had to be designed in such a way that there would be no anticompetitive exchange of information on prices and product availability. In particular, prices should only be visible to customers logged in on the platform and any new customer would have to identify itself with their VAT number. Moreover, there had to be organisational separation between the operator of the platform and its corporate group in order to make sure that there would not be a flow of sensitive information.

Another case in the steel industry concerned the reorganisation of a trade association. After several cartel proceedings in the industry, the German Steel Federation decided to take measurers in order to reduce the risks of competition law infringements within the association's framework. In particular, the association decided to limit the committee work to topics that are essential for representing the political interests of the German steel industry. Furthermore, the association installed an internal clearing centre and reorganised its activities in the area of collecting data and publishing statistics.

In October 2018, the FCO announced that it would be reviewing the cooperation between the pay-television provider Sky Deutschland and the operator of the DAZN streaming service Perform as regards the broadcasting of the Champions League in Germany. Sky had acquired the broadcasting rights for all matches between 2018 and 2021 in a tender. Following such tender, Sky and DAZN divided the rights among themselves. The FCO is concerned that the agreement could contribute to a further consolidation of Sky's market position and will examine whether the cooperation may restrict competition by object or effect.

Another proceeding that the FCO initiated in 2018 concerns Germany's largest furniture purchasing cooperation. The proceedings were triggered because an additional retailer intended to join the cooperation. The FCO – while acknowledging that joint purchasing cooperations can be beneficial in particular for smaller furniture retailers – stressed the fact that it wants to make sure that the buying power of purchasing cooperations does not increase to an extent that it raises concerns with regard to the furniture manufacturing landscape as a whole, which is mostly characterised by small and medium-sized manufacturers. The authority is concerned that 'if manufacturers are unable to compete in the long run because they cannot cope with the pressure raised by the retailers' conditions and disappear from the market as a result, there will be less variety on the market and prices will increase, putting consumers at a disadvantage'.

Vertical restrictions

The year 2018 started as 2017 had ended: with a success for the FCO in court. In a decision of 12 December 2017, which was published on 19 January 2018, the Federal Court of Justice confirmed the FCO's decision in the ASICS case. According to the decision, ASICS may not forbid its dealers from using price comparison engines as such per se prohibitions which are not tied to quality requirements were inadmissible hardcore restrictions.

On 28 February 2018, the Higher Regional Court of Düsseldorf increased the fine that had been imposed on drugstore chain Rossman for vertical price fixing as regards the sale of roasted coffee more than fivefold – from €5.25 million that had been imposed by the FCO to €30 million. The court fully confirmed the findings of the FCO. When setting the fine, it took into account that the case concerned a vertical infringement of competition law with nationwide horizontal effects in the sale of a major consumer good.

Outside of these two court cases, 2018 appears to be a somewhat 'slower' year when it comes decisions of the FCO in the vertical sphere with only one notable case: in early 2018, the FCO closed a sample investigation it had conducted against the purchasing conditions for raw milk of Deutsche Milchkontor eG (DMK), Germany's largest dairy. Long-term exclusive supply agreements locked farmers into the relationship with a single customer whose ability to unilaterally retroactively set prices could lead to market foreclosure. While the changes DMK made to its agreements did not completely remove the FCO's concerns, they were considered an encouraging first step in the right direction and sufficient to close its investigation for the time being.

Abuse of dominance

In 2018, the FCO conducted a number of abuse of dominance proceedings. However, the year started with a victory of the FCO before the Federal Court of Justice. In a decision of 23 January 2018, the Federal Court of Justice confirmed key elements of a decision of the FCO against the German retailer EDEKA from 2014. After its takeover of the stores of rival retailer 'Plus' in 2008, EDEKA had unilaterally demanded certain favourable conditions from its suppliers. These conditions were often referred to as 'wedding rebates' (Hochzeitsrabatte). The FCO started an investigation as regards EDEKA's demands in relation to the suppliers of sparkling wines as an example and found that such demands constituted an abuse of a dominant position. On appeal by EDEKA, the Higher Regional Court of Düsseldorf annulled the FCO's decision. The FCO in turn appealed against the decision of the Higher Regional Court in three key points and the Federal Court of Justice confirmed the position of the authority in this regard: (1) it found that EDEKA's demands for an alignment of conditions to individual, more beneficial conditions that had been granted to Plus constituted an abuse of bargaining power; (2) the Court also regarded EDEKA's demand for its own payment terms to be adjusted per se to those of Plus as abusive; and (3) finally, it held that EDEKA's request on suppliers to share the costs for the refurbishments of outlets was an abuse of bargaining power.

In a similar case in the furniture sector, the FCO objected to a demand by furniture retailer XXXLutz that conditions it enjoyed should also retroactively be applied to purchases made by another retailer it had acquired. The FCO pointed out that it saw no objective justification for demanding such benefits and that the fact that suppliers complied to such demands without objections could be a sign of their dependency on the retailer. Given the intervention of the authority, XXXLutz decided to abandon its demands for retroactive adjustments of the purchase conditions.

In May 2018, the FCO informed the public that it would not initiate abuse of dominance proceedings against German airline Lufthansa. After the insolvency of rival airline Air Berlin in 2017, Lufthansa held a monopoly position on several German domestic routes. A random analysis of price data showed that the prices of flights on connections that had become a monopoly were on average approximately 25 to 30 per cent higher than in the previous year when Air Berlin had still been operating. In individual cases the price increases were even higher. However, the FCO found that the price increases were only short term. From January 2018, British airline easyJet started offering flight connections on several of the previous 'monopoly routes'. The FCO found that in February 2018 the prices on these routes fell by on average 25 to 30 per cent compared to the prices in autumn 2017 (i.e., after the market exit of Air Berlin). Thus, the prices ended up at roughly the same level as before. In its press release and case summary regarding the case, the FCO highlighted that the question as to whether the price increases were the result of a price algorithm or human intervention was of no significance for the investigation and its outcome. In any event, the use of an algorithm for pricing would not relieve a company of its responsibility. While letting Lufthansa 'off the hook' for the time being, the FCO ended its report by stressing that it will keep an eye on the industry: 'The Bundeskartellamt will continue to closely observe developments on the German domestic flight markets. If it receives tip-offs about abusively excessive prices it will again consider whether to initiate proceedings.'

Online retailer Amazon had no such luck and did not escape with a simple 'warning'. Rather, in November 2018 the FCO initiated abuse of dominance proceedings against the company with the aim of examining Amazon's terms of business and practices towards sellers on its German marketplace According to the FCO, the terms of business and practices that might be considered as abusive are liability provisions to the disadvantage of sellers in combination with choice of law and jurisdiction clauses, rules on product reviews, the non-transparent termination and blocking of sellers' accounts, withholding or delaying payment, clauses assigning rights to use the information material that a seller has to provide with regard to the products offered and terms of business on pan-European despatch. The proceedings were triggered by numerous complaints the FCO had received from sellers. In contrast to the investigation of the European Commission, the FCO in its proceedings will not focus on Amazon's use of data to the disadvantage of marketplace sellers.

The year 2019 started with another milestone in the area of abuse of dominance proceedings: on 6 February 2019, the FCO issued its decision against Facebook and imposed far-reaching restrictions as regards the processing of user data on the company.

ii Trends, developments and strategies

The fact that there were not many decisions of the FCO as regards vertical restrictions in 2018 by no means implies that the authority has lost its interest in this regard. Rather, it can be expected that vertical restrictions both in the digital as well as in the 'brick and mortar' sphere will remain a high priority on the FCO's enforcement agenda. This is illustrated by the fact that 2019 started with fines totalling €13.4 million on a bicycle wholesaler, its representatives and 47 retailers for vertical price fixing.

iii Outlook

The FCO is actively involved in the ongoing debate in Germany and other jurisdictions as to whether the competition law regime is well suited to deal with all the challenges brought about by the digital economy or whether it needs to be 'modernised' to avoid an enforcement gap. At any rate, the authority has not shied away from taking up cases in the digital sphere with its existing tools, even if that meant entering into uncharted legal waters.