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Major Developments in German Competition Law in the first half of 2022

Client Briefing Competition Law - 


The geopolitical situation also had a significant impact on the German Federal Cartel Office's work in the first half of 2022. The war-related increase of mineral oil prices prompted the FCO to monitor price developments as well as potential antitrust violations by mineral oil companies, in particular with the help of its Market Transparency Unit for Fuels. The authority announced that it would impose strict sanctions on any antitrust violations in this regard. However, the FCO was also very active in its "classic" areas of cartel prosecution as well as merger and abuse control. Hence, the FCO and German courts have yet again issued a number of noteworthy decisions.

 

I.    Merger Control

1.    Higher Regional Court of Düsseldorf on Prohibitions Without Market Dominance 

In the XXXLutz/Tessner Group case, the Higher Regional Court of Düsseldorf granted the parties' appeal in March, which aimed at establishing the unlawfulness of the ancillary provisions in the clearance decision of the German Federal Cartel Office (FCO) (see Newsletter 2/2020). The Higher Regional Court clarified that an isolated challenge of ancillary provisions is possible and that an interest in a declaratory judgment can arise from the preparation of a state liability claim even if the conditions have already been fulfilled. On the merits, the decision sets out narrow prerequisites for the prohibition of so-called gap cases. Such concentrations do not lead to the creation or strengthening of a dominant position and were at the core of the legislator’s decision to extend the prohibition criteria and to include the significant impediment of effective competition. The Higher Regional Court of Düsseldorf now ruled that prohibiting such cases, which do not fulfill the standard example of Section 36 (1) ARC, can only be considered if the relevant market has or develops an oligopolistic structure and if the merger leads to non-coordinated effects between the companies involved and other members of the oligopoly, as a result of which effective competition is significantly impeded. If non-coordinated anticompetitive effects in the form of an exploitation of merger-related scope of action are not to be expected, a significant impediment to effective competition cannot be assumed merely on the basis of the merger-related increase in resources. The Higher Regional Court of Düsseldorf has thus set narrow limits to the scope of application of the prohibition criterion for German merger control outside the standard example of a dominant market position.

2.    Meta/Kustomer

Following a notification by the FCO in December 2021 (see Newsletter 1/2022), the FCO cleared the acquisition of Kustomer by Meta (formerly Facebook) in February. In parallel proceedings, the Commission had also examined the case in response to referral requests from a total of 10 member states and approved it with commitments at the end of January. The FCO took the latter into account in its review. In view of the improved access to customer data from Kustomer and the possibility of further developing own services with Kustomer functionalities, an at least indirect effect of the merger on the area of social media online advertising, in which Meta already has a pronounced position, appeared possible. In his own words, the FCO’s President therefore felt “at unease that we ultimately had to acknowledge that the effects of the acquisition would not have warranted a prohibition under existing competition law”. 

3.    Further FCO Proceedings 

The FCO had already prohibited the acquisition of BIRCO by ACO in January. Due to the high combined market share of over 40% in the relevant market for drainage channels, the FCO was apprehensive of the creation of a dominant position. 

Similarly, the NortonLifeLock/Avast merger resulted in a combined market share in excess of 40% on the German market for consumer antivirus software. However, the FCO concluded that a sales-based approach would not take into account the considerable competitive pressure exerted by pre-installed or free-of-charge security software and therefore cleared the transaction in the preliminary proceedings.
The EG Group/OMV case was approved in mid-February subject to the condition that EG Group and OMV each sell 24 service stations in southern Germany. Specifically, the FCO feared the emergence or strengthening of a joint dominant position of the leading suppliers BP (Aral), Shell and EG Group (Esso) in individual regional markets. The decision documents the FCO’s preference for conditions precedent and its willingness to accept mixed divestment commitments from the businesses of both companies involved.

In a rather unusual constellation, the FCO cleared two merger proceedings notified by two competing bidders (TeamBank and EQT) regarding the acquisition of SCHUFA. This case shows that the FCO is prepared to examine mergers even if their implementation is uncertain or even mutually exclusive. However, this is subject to the condition that the projects are sufficiently defined and that there is a serious intention to acquire. As a result, TeamBank prevailed in the bidding process and increased its minority stake in SCHUFA.

March also saw the latest chapter in the saga surrounding the sale of Real supermarkets by the Russian investor Sistema. Following the acquisition of Real stores by Kaufland, EDEKA and Globus (see most recently Newsletter 1/2021), a team of Real managers together with the Tischendorf family has now taken over 58 further Real outlets. The management buy-out did not pose any problems under merger control law. The FCO only subjected the planned purchasing agreement with REWE to a detailed separate examination, at the end of which, however, the Office saw no reason to initiate proceedings under Art. 101 TFEU. 

The acquisition of Arriver by Qualcomm was notified on the basis of the transaction threshold in Germany. The deal structurally secures the cooperation between the chip manufacturer Qualcomm and Arriver as the software division of the automotive supplier Veoneer in the field of automated driving. Against the background of high market dynamics, the creation of an alternative to Intel's integrated offering and a lack of evidence of possible foreclosure effects, the office cleared the deal in March.
Possible market foreclosure effects were also at issue in the Beretta/Ammotec case, which received phase I clearance in May. The Office did not identify any incentives for Ammotec, as a major supplier of low-pollution ammunition for military and government purposes, to limit or abandon cooperation with competing firearms manufacturers following its acquisition by Italian arms manufacturer Beretta.  

4.    New Sector Inquiry on Waste Management

In January, the FCO launched a further sector inquiry in the waste disposal industry on the question of whether the Rethmann Group (Remondis) can be subjected to an extended notification requirement for future takeovers. Specifically, the FCO is examining whether the requirements of Section 39a ARC are met with regard to the Rethmann Group. The provision, which was already referred to as the "Remondis clause" during the legislative process, allows the FCO to oblige market participants to notify acquisitions in certain industries even below the turnover thresholds under merger control law. Encouraged by the results of a sector inquiry concluded in December 2021, the FCO fears that the Rethmann Group’s acquisition of smaller competitors in the field of household waste collection will create a structural problem to competition, which is to be countered by extending merger control.

5.    Foreign Trade Law

In the first half of 2022, there was a formal and a de facto prohibition of mergers by the German government. First of all, the planned acquisition of the semiconductor manufacturer Siltronic by the Taiwanese company GlobalWafers collapsed at the end of January when, after more than 12 months of examination, the Federal Ministry of Economics had not yet given its approval. However, no formal decision was issued. Then, in April, the acquisition of respiratory equipment manufacturer Heyer by the Chinese Aeonmed Group was prohibited. 
These cases are evidence of the difficulties that especially Chinese investors are currently facing when acquiring companies in key technologies. Last but not least, the Russian war of aggression on Ukraine has contributed to the fact that in the future presumably more transactions will be stopped with a view to the public safety and order of the Federal Republic of Germany.

II.    Prohibition of Cartels

1.    Fining Decisions in the Construction Sector

Two fining decisions in the construction industry were issued during the first half of 2022. In decisions dated 10 February 2022, the FCO imposed fines totaling approximately EUR 7.3 million on two manufacturers of modular expansion joints for bridges. The two sole manufacturers of this type of joints were accused of forming a quota cartel over a period of around 15 years and thus dividing up the market among themselves according to fixed market shares. Due to the influence on public tenders, criminal proceedings against responsible bodies and employees are still pending.
In addition, on 9 June 2022, the FCO imposed fines of around EUR 12.5 million on two industrial construction companies. The case is noteworthy because it is the first time that the FCO has sanctioned anti-competitive agreements between a bidder and the contracting entity in a tender, whereas usually, the violation of competition law consist of an agreement between bidders. In the present constellation, the owner of a meanwhile liquidated industrial construction company acted as the lynchpin between horizontal and vertical cartel agreements (which are also relevant under criminal law). 

2.    Non-compete Clause in Chainsaw Distribution

In a decision dated 31 May 2022, the FCO retrospectively declared that a non-compete clause in distribution agreements of the chainsaw manufacturer Stihl had violated competition law. As part of its selective distribution system, Stihl had agreed a non-compete clause with a selection of premium dealers, prohibiting them from trading in competing products. As a result, the FCO rejected an exemption under the Vertical Block Exemption Regulation due to Stihl's high market shares. An individual exemption was also out of the question.
The FCO emphasizes that every individual supplier is responsible for carefully examining their vertical distribution agreements under the exception system. Against the background of the new version of the Vertical Block Exemption Regulation, which entered into force on 1 June 2022 and which is stricter in some areas than the previous regulation, this appeal is more topical than ever.

3.    Competitor Cooperation

The FCO adopted a number of decisions and publications on cooperation initiatives among competitors in the first half of 2022.
With regard to the formation of joint purchasing cooperatives and their legal requirements, the FCO discontinued proceedings against the Krieger/Höffner Group for joining the furniture purchasing cooperative Begros on 19 January 2022. With far-reaching amendments, the group could ultimately convince the FCO that the purchasing power of Begros resulting from the entry to the cooperative was still in conformity with competition law. The joint assessment and negotiation of purchasing conditions with food retailers by the cooperative "Die Freien Brauer" (The Independent Brewers) was also not objected to by the FCO, with reference to the low market significance of the regional breweries (less than five percent nationwide).

In the area of communications technology, a cooperation agreement between Vodafone and Telekom to eliminate so-called "gray areas" in mobile communications coverage was approved on 21 March 2022, but only after the two companies had opened up their cooperation to the competitor Telefónica at the instigation of the FCO. Without this step, the cooperation would have given Vodafone and Telekom an almost unassailable technical and economic advantage over their competitor and thus constituted a significant restriction of competition.

On 24 May 2022, the FCO also announced that it raised no objections to the cooperation between around 80 companies from the German automotive and IT sectors called "Catena-X" for the establishment of a data network. However, the FCO did provide the companies with specific competition law guard rails that are also relevant in other cases. These include, above all, limiting the exchange of competitively sensitive information to the necessary level of cooperation. 

4.    Sustainability Initiatives

The FCO is also increasingly and very diligently dealing with a special form of competitor cooperation, namely sustainability-driven industry initiatives, particularly in the food sector.
In January, the FCO announced that it had given the green light to an initiative by the German food retail sector and the Deutsche Gesellschaft für Internationale Zusammenarbeit (German Society for International Cooperation) on living wages in the banana sector. As part of a voluntary commitment, the retail sector will ensure fair wages at the production level on the basis of an industry cooperation and jointly developed standards. In December 2021, the FCO also did not object to the further development and introduction of the compensation model of the Animal Welfare Initiative in the beef industry. In particular with reference to various sustainability criteria, the FCO eventually did not express any antitrust concerns, but pointed out that the initiative would have to be further developed by 2024 with new, less restrictive proposals for the remuneration of animal welfare costs. With comparable considerations, the FCO approved the so-called "milk sector agreement" in March 2022. Here, companies from the milk and dairy industry and the food retail sector agreed on the introduction of a product label, various animal welfare criteria, and individual rules for financing the additional costs incurred by means of a so-called animal welfare surcharge for producers.

In contrast to this, the FCO issued remarkable letters of 6 October 2021 and 10 January 2022 on a financing concept proposed by the Agrardialog Milch for a distribution of risks and burdens of the agricultural transformation processes in favor of the milk producers. In unambiguous terms, the FCO regarded the proposal as a blatant violation of the prohibition of cartels. Potential sustainability considerations could not render a price fixing agreement in the form of the presented "price stabilization mechanism" permissible, because the initiative could "not in any way sufficiently relate to a higher sustainability standard." The case illustrates that the FCO makes a precise distinction between actual and merely ostensible sustainability considerations. - The European Commission can be expected to adopt a similar approach under the revised Horizontal Guidelines planned for 2023.

III.    Abuse of Dominance  

1.    Facebook Proceedings before the European Court of Justice (ECJ) 

As reported in our Newsletter 1/2021, the FCO’s decision against Facebook (now Meta) from 2019 has now become the subject of ECJ proceedings via referral questions of the Higher Regional Court of Düsseldorf. The FCO had objected to Facebook linking the data of its users with data from other sources without obtaining consent from the users. In the FCO’s opinion, this constitutes a violation of the General Data Protection Regulation (GDPR), and at the same time qualifies as an abuse of Facebook's dominant position on the German market for social networks.

In the oral hearing before the ECJ in mid-May, the main topics were the allocation of responsibilities and the required cooperation between the national competition and data protection authorities, as well as whether an (alleged) violation of the GDPR can be qualified as an abuse under competition law. In addition, there was a lively discussion about the extent to which competition authorities and data protection authorities can come to different conclusions when assessing the same conduct covered by the GDPR and whose vote prevails in the event of a conflict. Most neutral observers see the numerous and detailed questions of the judges as skepticism towards the approach of the FCO (supported by the European Commission as intervener).
The Advocate General has announced his opinion for 20 September 2022, so that the ECJ's ruling can be expected for the first half of 2023 at the latest.

2.    Warning Letters against Lufthansa and Deutsche Bahn

In the first half of 2022, the FCO advanced two noteworthy abuse proceedings in the travel sector, each involving access to critical infrastructure.
In February, the FCO sent a warning letter to Lufthansa to express its preliminary view that the company is obliged to continue granting its competitor Condor access to feeder flights for its long-haul passengers. According to the FCO's findings, the Lufthansa Group has a dominant position on the feeder market, particularly for flights to the Frankfurt/Main, Munich and Düsseldorf hubs. In the event of a termination of the existing cooperation, Lufthansa could gain considerable competitive advantages on almost 90 transfer connections to tourist destinations on which it is in current or at least potential competition with Condor and could thus further expand its position on the already highly concentrated long-haul markets at Condor's detriment. This is one of the rather exceptional abuse cases involving the concept of an abuse of a dominant position for the purpose of gaining competitive advantages in an upstream or downstream market that is not (yet) dominated. 

In a more than 300-page warning letter, the FCO also informed Deutsche Bahn (DB) of its preliminary assessment that the company had behaved abusively in many respects with regard to so-called mobility platforms. Mobility platforms primarily offer online solutions for integrated route planning and arrange a combination of train tickets with flights, car sharing, long-distance buses or rental bicycles, for example. With the exception of selected cooperation partners such as Google, Deutsche Bahn has so far refused to give providers of such services access to essential information, for example about delays, journey progress or train cancellations. According to the FCO, this behavior is aimed at further expanding the already strong market position of DB's own mobility platform with the portal bahn.de and the app DB Navigator. In addition, the FCO objected to a number of contractual restrictions ranging from advertising bans to vertical price fixing vis-à-vis travelers or potential discrimination in the level of commission fees for ticket sales. 

This procedure is noteworthy on the one hand because the FCO apparently relies on both the EU decision-making practice with regard to access to "essential facilities" and the - in this respect somewhat less strict - abuse standards of German competition law and is considering applying the relevant principles to access to indispensable data as well. On the other hand, EU Competition Commissioner Vestager as well as representatives of national competition authorities have in the recent past repeatedly highlighted the sales modalities for rail tickets as a focal point of their market supervision and have in some cases already initiated their own proceedings in this regard. For this reason, the FCO investigation, which could be concluded before the end of the year, is being followed with great interest by many different parties.  

3.     Proceedings under Section 19a ARC

Section 19a ARC, which came into force in January 2021, allows the FCO to take earlier and more effective action against anti-competitive practices by large digital groups. In such proceedings, the FCO first needs to determine whether a company qualifies as an undertaking of overriding cross-market significance with, in particular, a so-called "gatekeeper" function; in parallel or in a subsequent second step, the FCO examines the existence of anti-competitive practices. 

After the FCO had already confirmed the existence of an overriding cross-market significance of Alphabet/Google in a formal decision dated 30 December 2021, two further such rulings were issued against Meta (May 2022) and Amazon (June 2022). In contrast to the other companies, Amazon is considering legal action against the FCO's decision - the company sees itself primarily as a retailer and points to a market share of less than 15% based on all online retail sales in Germany in 2021. Irrespective of the accuracy of these objections, a referral to the Federal Court of Justice would be welcome to obtain some clarification on the vague wording of the central notion of the relevant provisions of the ARC.

In addition, the FCO has also intensified its review of the behavior of the so-called GAFA groups with significant staff resources and has initiated a number of further proceedings in this respect. Three formal investigations are currently pending against Google alone, one of which (June 2022) also concerns the possible discrimination of third-party providers’ access to Google Maps. With regard to Apple, the FCO opened proceedings in June 2022 - in parallel to the still pending review of its status as an undertaking of overriding cross-market significance - concerning the company's app tracking rules, which may favor Apple's own offerings over third-party apps.

IV.    Private Enforcement

1.    Further Rulings on Assignment Models 

Since the Federal Court of Justice’s AirDeal decision, it has been established that it is generally possible for injured parties to assign their claims to specially established vehicles, which then collectively bring these claims to court. Such assignment models are also becoming increasingly popular in connection with cartel damage actions. However, recent rulings also show the limits of such assignment models - especially from the Legal Services Act. 

For example, the Higher Regional Court of Karlsruhe ruled in the Die Freien Brauer case against members of the sugar cartel that the model chosen there was not compatible with the Legal Services Act. The plaintiff, an association of free brewers organized as a limited partnership (Kommanditgesellschaft), did not have a license under the Legal Services Act. However, according to the Court, the assignment of cartel damage claims constituted an extrajudicial legal service requiring a license under Section 3 of the Legal Services Act. This was also not privileged under Section 7 of the Legal Services Act because, in the opinion of the Higher Regional Court, the plaintiff was not an association founded to represent common interests and which provided legal services for its members within the scope of its statutory remit.

The Higher Regional Court counters the plaintiff's objection that this approach unduly impedes the private enforcement of competition law contrary to the principle of effet utile. By referring to the AirDeal case of the Federal Court of Justice, the Higher Regional Court points out that German procedural law does indeed permit the bundling of antitrust damage claims if the claims vehicle is structured appropriately. This possibility was reaffirmed by the Federal Court of Justice in a recent ruling in connection with the so-called diesel scandal, and the claims vehicle MyRight was also granted standing even if suing for assigned claims from Swiss diesel customers. 

2.    Facilitations in Case of Damages Suffered by Indirect Purchasers

The Higher Regional Court of Stuttgart has granted a rather far-reaching easing of the burden of proof for damages suffered by indirect customers in a ruling on the truck cartel from December 2021 that has now been published. The court considers it sufficient for the conclusive presentation of a cartel damage if an indirect purchaser determines the price surcharge at its own level of the supply chain by comparing the price actually paid with the probable counterfactual price absent the infringement. The Court does not deem it necessary for the claimant to prove that and to what extent the direct purchaser has suffered a cartel-related damage at the upstream level and to what extent this has been passed on to the indirect purchaser.

With this finding, the Higher Regional Court of Stuttgart opposes the case law of the Regional Court of Stuttgart and a number of other regional and higher regional courts. These regularly require - also in cases outside the truck cartel complex – the presentation of a damage at the first level and its subsequent pass-on along the supply chain.

It remains to be seen in practice to what extent the approach of the Higher Regional Court of Stuttgart will actually relieve indirect purchasers. Even under the Higher Regional Court of Stuttgart’s approach, a reliable regression analysis will only be feasible if all relevant explanatory factors can be determined in order to distinguish the normal market influences from the cartel-related influences on the price. From an economic point of view, this includes in particular the events at the first level. In any case, even under the approach of the Higher Regional Court of Stuttgart, economic expert opinions will continue to dominate the damage assessment.

3.    Damage-excluding Participation of the Trade Level in Vertical Agreements

In connection with the coffee roaster cartel, a so-called hub-and-spoke cartel, the Regional Court of Dortmund had to decide on a case in which a retail company was allegedly harmed by the cartel but at the same time was suspected to have participated in vertical cartel violations. 

The Regional Court conducted the necessary balancing of all indications speaking for and against the occurrence of damage and came to the conclusion that the plaintiff had not suffered any damage in this atypical case. The factual presumption that cartels lead to a damage, which the Federal Court of Justice developed in particular in its rail cartel case law, is "hardly to be given any weight" in such atypical cases. Rather, the involvement of the retail level in particular in the implementation of the agreements through "price maintenance measures" speaks against the occurrence of a damage. The Regional Court also explains in detail that the involvement of the retail level excludes a damage from the outset and is not just to be taken into account in the context of a possible passing-on of damages.

In its preliminary opinion of 16 February 2022, the Regional Court had made further considerations as to how such behavior by the claimant is to be classified in legal terms. For example, it raised the question of whether the plaintiff, as a participant in the overall plan of the cartel, was already excluded from the personal scope of protection of the relevant provisions or whether a participation of the retail level in the agreements could be taken into account in the context of contributory negligence. In the end, the Regional Court did not enter such "new dogmatic territory", but dismissed the action as unfounded at the level of the occurrence of damages. This shows that the Federal Court of Justice’s postulate of a comprehensive overall assessment of all relevant circumstances has provided the regional courts with a suitable instrument for making appropriate decisions even in such atypical constellations .

4.    Damages Actions for Abuse of Market Power 

Two recent decisions against companies of the Deutsche Bahn (DB) Group for alleged abuses of market power show that private enforcement is not limited to follow-on actions after cartel agreements, but that other violations of the provisions of the ARC are also increasingly giving rise to actions for damages.

In its ruling of 28 February 2022, the Federal Court of Justice ordered DB Netz AG to pay damages for abusively excessive track access charges. Even without a final decision by the Federal Network Agency, the aggrieved rail transport companies were able to prove an abuse of market power in setting the track access charges and the resulting damage. The Federal Court of Justice did not consider the objection raised by the defendant regarding the pass-on of damages to be valid. Contrary to the view of the defendant, the infrastructure costs reimbursed by the public authorities do not constitute a permanent advantage to the transport companies. The contracts concluded with the authorities stipulate that reimbursements received for unlawfully excessive infrastructure charges must be returned. 

The claim underlying a judgment of the Higher Regional Court of Frankfurt of 9 March 2021, which has recently been published, was also based solely on a commitment made by two DB subsidiaries, which had been accused of having demanded abusively high sales commissions for ticket sales from private rail companies. The claimants initially asserted claims for information under Section 33g of the ARC by way of an action by stages (Stufenklage).

The Higher Regional Court dismissed the action because the claimants had not substantiated the claim for damages against the defendant as required for a claim for information. The court set high standards regarding the demonstration of allegations to the satisfaction of the court. After a detailed examination of the abusive character of the commission fees, the Higher Regional Court came to the conclusion that the claimants had not sufficiently substantiated the alleged damage claim.

The ruling is further evidence of the courts’ tendency in practice to be very reluctant to grant the information claims under the ARC. Therefore, the claims for information have not yet proven to be a particularly powerful instrument for the promotion of private antitrust enforcement.  

This client information contains only a non-binding overview of recent developments in German competition law and is not meant to replace legal advice. In case of comments or questions, please contact:

Silvio Cappellari

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