Client Alert

2021 to 2025: The Incoming German Government’s Agenda for Competition Policy

01 Dec 2021
Key Takeaways: As in many other jurisdictions, the incoming German government is seeking to expand competition law enforcement with new theories and a heightened focus on technology, digital markets, and consumer necessities. Already the previous government, though, only just enacted a major “competition digitalization act” that follows rather similar objectives at least with respect to the digital economy, and further legislation is on its way at the European level. Even more so, market participants should consider expanding their own internal assessments of transactions or conduct to incorporate these new analytical factors and the likelihood of greater regulatory scrutiny.

 

On November 24, 2021, the incoming German government presented its coalition agreement for the 2021 to 2025 tenure. The agreement will set the policy agenda for the new government, consisting of Social Democrats, Greens, and Liberals, and to be led by Olaf Scholz as chancellor. The agreement still needs to be confirmed by the relevant bodies of each of the three parties before the new government can eventually assume office. This is currently planned for the week of December 6.

In the field of competition policy, the coalition is aiming for several broad policy changes:

Competition policy objectives

  • The coalition wants to “improve” the framework for fair competition. They want to adjust the framework to meet the requirements of small and medium enterprises and to integrate the aspects of innovation, sustainability, consumer protection, and social justice. With this, the proposal follows a (disputed) trend in jurisdictions around the world of considering parameters in competition policy (for example, when justifying anti-competitive conduct) that relate to other objectives than just the freedom of competition.
  • The Act against Restraints on Competition (Gesetz gegen Wettbewerbsbeschränkungen, ARC) shall be evaluated and “advanced.” Considering that the latest ARC revamp only came into effect in January 2021, the need for yet another major reform has been called into question by some policymakers and market participants. This applies in particular where the latest reform set a four-year evaluation period before re-assessing certain new provisions like enhanced regulatory powers to act against Big Tech.

Digital economy

Germany

  • The coalition wants to strengthen the Federal Cartel Office (Bundeskartellamt, FCO) when dealing with digital platforms. This was already a key topic for the most recent ARC reform where the previous government created special rules against digital platforms as “undertakings with paramount significance for competition across markets” (UPSCAM). The coalition agreement is unclear whether by further “strengthening” the FCO in this respect, it envisions yet another set of substantive rules governing digital platforms, or rather only some procedural measures to help the FCO applying existing law.
  • On some more technical points, the coalition wants to strengthen data portability. It also wants to create an interoperability obligation for dominant companies at the European level and via the ARC, with a view to safeguard – based on international technical standards – secrecy of communications, high levels of data privacy and IT security, and consistent end-to-end encryption. Supposedly, this is primarily meant to address messenger services.

Europe

  • At the EU level, the coalition wants to promote an abuse-agnostic unbundling option as an ultima ratio to act on consolidated markets. It also supports the enactment of an ambitious Digital Markets Act (DMA) that must not fall behind the level of existing national rules. The coalition further promotes the enforcement of the DMA by Member State competition authorities.

Merger control

Germany

  • The coalition wants to amend the proceedings to achieve a ministerial approval. This is a rarely used procedure where the Minister of Economics would allow a merger for political reasons (e.g., to safeguard jobs) that the FCO had previously blocked on competition law grounds. The coalition wants to reinstate an appropriate judicial recourse against such ministerial approvals and to get the Federal Parliament involved in overseeing any such decisions.

Europe

  • The coalition wants EU lawmakers to amend EU merger control rules so that they can prevent innovation-blocking strategic acquisitions of potential competitors (so-called killer acquisitions). The FCO had already called on the previous government to address the issue in the latest ARC reform, but it was not heard. By shifting the topic to the EU level, the new government might now want to try introducing it to the (trilogue stage) DMA negotiations.

Consumer protection

  • The coalition wants to enhance the role of competition law (and of the FCO) in relation to consumer protection. They want to assess how to strengthen the FCO to interfere against significant, continuous, and repeated infringements of economic consumer protection rules with the same means that are currently available for sanctioning competition law infringements.

Food retailing

  • The coalition wants to support fair competition with fair prices in food retailing. They want to strengthen abuse control and merger control by the FCO in that segment. Action shall be taken against unfair trade practices, and it shall be assessed whether the sale of food below production cost can be prohibited. The coalition agreement also calls for further monitoring of the dairy market and an evaluation of the respective supply chains.

Unfair competition

  • The coalition wants to evaluate further remedies against an abuse of cease and desist letters and related cost claims under the Unfair Competition Act (Gesetz gegen den Unlauteren Wettbewerb).
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