Germany is about to implement an ambitious new “digital antitrust law” (“GWB-Digitalisierungsgesetz”) to effectively regulate online markets. The draft Ministerial bill on the 10th amendment of the German Act Against Restraints of Competition (“GWB”), published at the beginning of October, aims at continuing Germany’s role as a pioneer in antitrust regulation of digital markets.

Regulation of digital markets – the broader context

“Divesture”, “Break up”, or “Regulation” of tech players. Political statements and requests on how to deal with “Tech Giants” from Silicon Valley or China have become more frequent, especially over the last 12 months. According to our global study on regulation of technology markets, there were more than 450 political initiatives in the first half of 2019 which supported a tougher regulatory stance on “Big Tech”. However, so far most of these fairly populist proposals lack implementation.

Over the last few years, antitrust law has transformed into a particularly powerful tool against market power in the online market. EU Competition Commissioner Margrethe Vestager made a name for herself with billions in fines and tax reclaims against companies, especially from Silicon Valley. In the next term Commissioner Vestager will also be given responsibility for the digital sector. This dual role will further strengthen the importance of antitrust law. In Germany, the Federal Cartel Office (“Bundeskartellamt”) was no less ambitious and used its competences to deal with online marketplaces and social networks. Thus, it does not come as a surprise that our global study on regulation of technology markets around a quarter of the political initiatives opting for stronger regulation of tech companies.

By and large, these proposals have not made it through the discussion stage. However, with the now published draft German “digital antitrust” bill, Germany is focusing on an actual legislative project to endow the Bundeskartellamt with more competences, placing itself at the forefront of global regulators.

Main proposals on regulation of digital markets at a glance

About two years after the last revision of the GWB, the German goverment has decided to take the next step towards stronger antitrust regulation of companies with digital business models. Some parts of the current proposals will certainly attract particular attention in Silicon Valley and China. In particular, the German digital antitrust bill provides for,

  • Access rights to “data relevant for competition”, making such data a factor in determining a dominant market position and refusal of access to such data being regarded as an abuse of market power;
  • Stricter antitrust regulation of digital platforms through a mechanism that enables the Bundeskartellamt to not only declare by order that large digital platforms are such with “paramount significance for competition across the markets”, but also to impose stricter antitrust rules on them in a second step;
  • Particular regulation of digital platforms: so called “intermediaries”, e.g. multi-sided digital platforms whose business model it is to collect, aggregate and evaluate data in order to reconcile supply and demand between user groups, will be subject to specific antitrust supervision;
  • Right of intervention against so-called “tipping” of markets, i.e. the “overturning” of a market with several suppliers into a monopolistic or highly concentrated market as well as new interim injunction measures that make it easier for the Bundekartellamt to deal with possible violations of antitrust laws in the future;
  • Broader protection against so-called relative market power that – under the new law – will not only protect small and medium-sized enterprises, but apply to any B2B situation where a company is dependent on other market participants.
  • More legal certainty for horizontal cooperations through new rules entitling companies to a decision by the Bundeskartellamt on the legality of a planned cooperation with a competitor (instead of reliance on a self-assessment only) if the companies have a substantial legal and economic interest in such a decision.Over the last years Germany has seen itself as a pioneer of antitrust law regulation of digital markets. As the official title of the now proposed 10th amendment of the GWB shows, the German Government has proposed nothing less than a “Law digitizing the Act against Restraints of Competition” which – if adopted – will equip the Bundeskartellamt in the area of digital markets with far more tools than most other competition authorities.In the end, it remains to be seen whether Germany’s legislative push will result in further fragmentation of regulation or, whether perhaps the German draft will become a blueprint for other European and non-European countries. If Germany, with its ambitious digital antitrust law, succeeds in setting standards for tools being made available to competition authorities and if the Bundeskartellamt manages to make use of them in a reasonable and successful way, Germany may soon belong to the digital avant-garde albeit in regulating big tech companies rather than attracting them.
  • In any event, the proposed bill sets the scene for future antitrust enforcement in digital markets, probably not only in Germany. Companies should be aware of these changes and make sure their antitrust compliance systems are digital avant-garde as well.
  • Germany breaks new ground with this proposed bill. However, it also raises plenty of questions that beg for answers: Unlike many other markets, the online markets are truly global. Big players are represented in almost all markets in the US, Europe and – with a few exceptions in China, South Korea and Japan which often have strong domestic digital companies – also in most Asian countries. That being said, what is the reason for a German rather than a European solution? Wouldn’t the European Commission with its ambitious Competition Commissioner Vestager and the newly achieved digital portfolio be better equipped to create a Union “level playing field”?

Conclusion and Outlook

Over the last years Germany has seen itself as a pioneer of antitrust law regulation of digital markets. As the official title of the now proposed 10th amendment of the GWB shows, the German Government has proposed nothing less than a “Law digitizing the Act against Restraints of Competition” which – if adopted – will equip the Bundeskartellamt in the area of digital markets with far more tools than most other competition authorities.

Germany breaks new ground with this proposed bill. However, it also raises plenty of questions that beg for answers: Unlike many other markets, the online markets are truly global. Big players are represented in almost all markets in the US, Europe and – with a few exceptions in China, South Korea and Japan which often have strong domestic digital companies – also in most Asian countries. That being said, what is the reason for a German rather than a European solution? Wouldn’t the European Commission with its ambitious Competition Commissioner Vestager and the newly achieved digital portfolio be better equipped to create a Union “level playing field”?

In the end, it remains to be seen whether Germany’s legislative push will result in further fragmentation of regulation or, whether perhaps the German draft will become a blueprint for other European and non-European countries. If Germany, with its ambitious digital antitrust law, succeeds in setting standards for tools being made available to competition authorities and if the Bundeskartellamt manages to make use of them in a reasonable and successful way, Germany may soon belong to the digital avant-garde albeit in regulating big tech companies rather than attracting them.

In any event, the proposed bill sets the scene for future antitrust enforcement in digital markets, probably not only in Germany. Companies should be aware of these changes and make sure their antitrust compliance systems are digital avant-garde as well.