New competition tools for digital markets – German competition law vs. the European Digital Markets Act

EU

After the new German competition law came into effect in January 2021, major digital platforms are now affected by article 19a of the German Competition Act. Under article 19a, the German competition authority can determine by order that an undertaking, which is active to a considerable extent on multi-sided markets or networks as defined in Article 18 (3), is of paramount importance for competition across markets. This is the authority's first step before prohibiting certain conduct by the undertaking under the new provision. The conduct that is prohibited includes self-preferencing its products or services; envelopment strategies through various tying practices; certain types of data collection; refusing or creating impediments to interoperability of products or services or the portability of data; insufficiently informing another undertaking about the scope, quality and service provided; or demanding advantages disproportionate to the reason for the demand. Complaints against this decision will go directly to the Supreme Court.

With this, the German legislator has overhauled developments at the EU level. Undoubtedly, there is some overlap between Article 19a and the proposal for a DMA at the EU level.

The DMA as proposed would introduce rules for "core platforms", such as search engines, social networks, messaging services, operating systems and online intermediation services, which act as "gatekeepers" in the digital sector and impose unfair practices on their users and customers. In principle, the mechanism is like the one described in Article 19a of the German Competition Act.  First, the Commission will have to determine whether companies are gatekeepers. For this, three criteria need to be fulfilled:

  • the company must have a significant impact on the internal market;

  • it must operate a core platform service, which serves as an important gateway for business users to reach end users; and

  • it must enjoy an entrenched and durable position in its operations or will enjoy such a position in the near future.

The draft DMA envisages presumptions when these criteria are fulfilled and foresees an obligation for gatekeepers to notify the European Commission of them. Additionally, the European Commission can also identify gatekeepers following a market investigation. Once a company has been identified as a gatekeeper, the draft DMA would impose certain dos and don'ts for designated gatekeepers, which relate to data, interoperability, pre-installation of software and apps, self-preferencing, tying practices and other restrictions for businesses and users.

Unlike Article 19a of the German Competition Act, the draft DMA is not designed as a competition tool but rather understood as a law, which complements competition law and has as its object the establishment and functioning of the internal market. Even though the draft DMA states that it is without prejudice regarding the application of Articles 101 and 102 TFEU and equivalent national rules, a conflict might arise between the DMA and national competition rules prohibiting other forms of unilateral conduct insofar as they are applied to undertakings that are gatekeepers. It will be interesting to see how application of Article 19a of the German Competition Act will be affected once the DMA – either as currently proposed or in a similar form – is in force.

To find out more about online platforms and digital services, check out our podcast. In the first episode of Digi Pod, Roxana Kruse and Peter Giese walk you through the most important competition law concepts and concerns around online platforms and gatekeepers.

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