Update of 08th June 2021.
On 25 May 2021, the German competition watchdog, the Federal Cartel Office, initiated proceedings against Google and Alphabet based on the new competition law rules in the German Competition Act (Act against Restraints of Competition, ARC) for large digital companies. On 4 June, additional proceedings concerning "Google News Showcase", a service designed to provide Internet users with high-quality journalistic news, were opened.
On 20 January, when German lawmakers introduced Section 19a ARC – the new German special antitrust rules for large digital companies – they explained that the provision would only apply to “a few companies”. The new obligations are not directly applicable, but follow a two-step procedure: in the first step, the Federal Cartel Office must determine that a company qualifies as a “company of paramount significance for competition across markets” (Section 19a (1) ARC); in the second step, the Federal Cartel Office may impose special obligations on such companies (Section 19a (2) ARC). The draft bill assumed that the Federal Cartel Office would carry out three such determination procedures (step 1, Section 19a (1) ARC) over five years.
The Federal Cartel Office has already come close to its target for the first five-year period. Shortly after the introduction of Section 19a ARC, the Federal Cartel Office made for the first time use of its new tools and extended the scope of its ongoing abuse proceedings against Facebook due to the linkage between Oculus and the Facebook network, and started examining whether Facebook is subject to the new rules for “companies of paramount significance” (Section 19a (1) ARC). According to the Federal Cartel Office, Facebook may be in such a position due to Facebook’s strong market presence with its social network, WhatsApp and Instagram.
On 18 May, the Federal Cartel Office opened its second Section 19a (1) ARC investigation into whether Amazon constituted a “company of paramount significance”. In its press release, the Federal Cartel Office pointed out that an ecosystem, which extends across various markets and thus constitutes an almost unchallengeable position of economic power is particularly characteristic in this respect. According to the Federal Cartel Office, this could apply to Amazon with its online marketplaces and many other, above all digital offers.
Now the Federal Cartel office has opened its third Section 19a (1) ARC proceedings to determine whether Google qualifies as “company of paramount significance”. According to the press release by the Federal Cartel Office, an ecosystem, which extends across various markets may be an indication that a company holds such a market position. Andreas Mundt, president of the Federal Cartel, explains that “Due to the large number of digital services offered by Google, such as the Google search engine, YouTube, Google Maps, the Android operating system or the Chrome browser, the company could be considered to be of paramount significance for competition across markets.”
While in the case of the first two Section 19a (1) proceedings where the FCO extended on-going “regular” competition law proceedings and linked them to the determination procedure, the Federal Cartel Office in the case of Google further initiated new proceeding to undertake an in-depth analysis of Google’s data processing terms under the new rules for large digital companies. This is possible because Section 19a ARC allows the Federal Cartel Office – in the interest of time – to carry out steps 1 and 2 of the two-step Article 19a procedure in parallel.
The Federal Cartel Office points out that Google’s business model relies to a very large extent on processing user data and that using Google’s services always requires users to consent to Google’s data processing terms. The watchdog announced that it will therefore take a close look at the company’s data processing terms and that a key question in this context will be whether users of Google’s services have sufficient choice as to how Google will use their data.
In its assessment, the Federal Cartel Office will consider the following:
Different modes of user consent to Google’s data processing terms (i.e. use through a Google account of individual services; the possibility to adjust personal settings);
Possibility for Google to process data on an extensive cross-service basis;
Possible processing of third-party websites and apps;
Actual choice of users for the processing of their data.
These questions are related to those questions the OLG Düsseldorf referred to the ECJ for a preliminary ruling in the Facebook case (see here). However, the Facebook case is based on “regular” competition law rules, not the new rules for large digital companies in Section 19a ARC. The Federal Cartel Office, therefore, sees no obstacle to the new proceedings.
On 4 June the Federal Cartel Office has initiated additional proceedings concerning "Google News Showcase", a service designed to provide Internet users with high-quality journalistic news. To this end, Google is collaborating with different German media companies. Following a complaint from Corint Media the Federal Cartel Office has announced to examine whether the integration of Google News Showcase into Google’s general search function could constitute self-preferencing or an impediment to the services offered by competing third parties - both types of behaviour could be prohibited under the new German competition law gatekeeper rules. Further, the authority has said it will examine whether Google News Showcase includes unreasonable conditions with a view to publisher's copyrights and how the conditions for access to Google’s News Showcase service are defined.
The new proceedings against Google highlight that the Federal Cartel Office is not willing to wait for the envisaged regulation of digital markets by the Digital Markets Act (see here) and is pursuing its pioneering role to enforce competition law against the tech giants.
For more information on these proceedings and competition law in Germany, contact your CMS client partner or CMS expert Dr Björn Herbers.