Abuse control for digital companies for safeguarding competition.

The 10th ACR-amendment – labelled as „ACR Digitalization Act“ – introduces a new regulatory framework for comprehensive abuse control in the digital business by enhancing existing and adding new anti-abuse rules. The new rules will mainly affect the “big tech companies”.

Beyond, the amendment also brings changes to merger control rules and, by way of implementation of the European ECN+Directive, fine proceedings as well as other matters. This article provides a short overview of material new rules of the ACR.

The bill has been adopted by parliament on January 14, 2021, and passed the Federal Council on January 18, 2021. On the same day the 10th amendment was published in the Federal Law Gazette and thus came into force on January 19, 2021.

1. Abuse Control

Putting into place the new anti-abuse rules the government aims at restricting the market power of large digital companies. Key provision for this regulatory goal is the newly introduced sec. 19a ARC. The Federal Cartel Office will be empowered to declare that a company has an “overwhelming importance for competition across multiple markets” (“super-dominant company”).

Once the Federal Cartel Office has issued a respective decision (subject to judicial review) there are, in addition to the anti-abuse rules already in place, new measures available as laid down in sec. 19a para. 2 ACR. Following new measures can be applied:

• Ban on “self-preferencing”, i.e. the Federal Cartel Office can prohibit a digital company from giving preference to its own offerings vis-à-vis those of competitors (based on the “Google-Shopping” case of the EU Commission).
• Prohibition of measures of the “super-dominant company” that impede other companies in their activities on the buyer’s or seller’s market if the “super-dominant company’s” activity is important for the access to these markets.
• Prohibition to impede competitors in a market in which the “super-dominant company” may quickly expand its market position.
• Prohibition to shift market power from a dominated market to non-dominated markets through the use and/or linkage of existing competition-relevant data if this impedes other companies.
• Prohibition that a “super-dominant company” impedes interoperability with other services and data portability. 
• Prohibition to withhold data that a “super-dominant company” obtains in connection with its services – and in this way creating unjustified dependencies.
• Prohibition to request advantages for treating offers of another company that are not appropriate in relation to the reason of the request.

In order to prevent “tipping” (i.e. the shifting of a market into a monopoly) the powers of the Federal Cartel Office will be extended also below the threshold of market dominance. The new rule in sec. 20 para. 3a ARC allows for taking action at an early stage against certain conduct of companies that are not yet market dominant but already have a superior market position and aim at tipping a market by non-competitive measures.

Further, the future scope of the anti-abuse rules pursuant to sec. 20 para. 1 ARC will not only include small and medium-sized companies but also large companies. The reason for this extension is that large companies can also be dependent from digital platforms.

2. Horizontal Cooperations

Due to the principle of self-assessment a company is, in general, responsible for assessing the antitrust law compliance of its conduct. Nevertheless, in case of a specific project a company may informally consult with the Federal Cartel Office for an assessment (so-called “informal chairman latter”). After the introduction of sec. 32c para. 4 draft ARC a company will have a claim to the Federal Cartel Office issuing a formal decision within a six-month period that there are no grounds for action in a certain case if there is a significant legal and economic interest for such decision. However, this provision only applies to co-operations between competitors.
 

3. Merger Control

As a material change of the merger control regime the domestic thresholds are raised from currently EUR 25 million to EUR 50 million and EUR 5 million to EUR 17.5 million, respectively. Due to that increase the affiliation clause in sec. 35 para. 2 ARC (no filing obligation if target and seller have combined turnover of less than EUR 10 million) will not be applicable anymore. The threshold for minor markets will be raised from EUR 15 million to EUR 20 million.

The duration of the main examination proceedings will be extended from four to five months from the date of filing.

The filing obligation is to be temporarily suspended for concentrations in the area of hospitals provided that the concentration takes place across different specialties of different hospitals, the concentration is support from the Hospital Structural Fund (Krankenhausstrukturfonds) and completed by the end of 2027.

4. Procedural Law

The 10th amendment will also transpose the European ECN+-Directive (Directive (EU) 2019/1, dated December 11, 2019) into German law aiming at harmonizing the enforcement of the competition rules across the EU.

The transposition entails i.a. the inspection of files in antitrust administrative proceedings will be regulated in the ARC for the first time. Third parties must demonstrate that they have a legitimate interest in the inspection. In case the inspection of files is preparatory for damage claims it is limited to the authority’s decisions. Further, the investigative powers of the antitrust authorities will be extended.

Another crucial change in law is the future obligation of a natural individual person to provide information or hand over evidence (request for information). In accordance with EU law, in case of a dawn raid there shall be a duty to cooperate (punishable by fine). Under certain circumstances a natural person has an obligation to self-incrimination. However, information stemming from such self-incrimination cannot be used against that person in criminal or administrative offence proceedings.

5. Fine Proceedings

The regulations regarding fine proceedings are to be amended in particular concerning the cooperation and disclosure obligation of the affected persons. The new rules will lower the current (high) level of protection in German law to the EU level. In future, an affected person is obligated to answer general questions relating to the circumstances of the infringement that may be used as circumstantial evidence for the infringement. The natural person is protected by the inadmissibility of evidence regarding self-incrimination in criminal or administrative offence proceedings. However, respective statements can be used in fine proceedings against the company.

The rules applied by the Federal Cartel Office for calculation of fines and leniency applications that are currently only laid down in (judicially non-binding) guidelines are to be laid down in the ARC.

Codifying a (non-exhaustive) list of criteria for the calculation of fines shall lead to greater legal certainty as well as a higher level of harmonization of the methods for determining the fine used by antitrust authorities and courts. The current risk of facing an even higher fine in case of judicial review due to different calculation methods is expected to be lowered significantly.

The leniency rules will not be substantially altered by being codified. As yet, only cartels between competitors (horizontal agreements) can benefit from the leniency program. However, as a new rule, the Federal Cartel Office may in future recognize the voluntary cooperation of a company involved in vertical restraints on competition (e.g. resale price maintenance) when calculating the fine.

Another important novelty is the contingent liability covering fines against business associations. According to sec. 81b ARC the members of the association will have to pay the fine in case the association is not solvent. Further, the amount of a fine imposed on an association will in future be calculated on the cumulated turnovers of the members that are active on the concerned markets (so far, only the turnover of the association itself was decisive).

6. Conclusion

The powers of the Federal Cartel Office in the abuse control will be significantly enhanced by the amendment in order to safeguard effective competition, in particular in the digital business. In principle, this development is to be welcomed. Whether or not the new measures are effective remains to be seen over the next couple of years.

Further amendments can also be assessed as positive. Increasing the domestic turnover thresholds in the merger control rules will significantly relieve the companies and was overdue in international comparison.

By codifying a list of criteria for the calculation of fines legal certainty will be improved. However, the risk of facing an even higher fine in case of judicial review due to different calculation methods is not completely excluded.

_{Published: January 2021}