After Germany hit an all-time high with cartel fines totalling more than EUR 1 billion in 2014, the focus in 2015 was rather on merger control and vertical restraints in the digital economy.
The federal antitrust agency (“Bundeskartellamt”) holds strict views when it comes to online retailing or most-favored-customer clauses. The President of the Bundeskartellamt and Chair of the International Competition Network (ICN), Andreas Mundt, has been keen to advance the development of case law and test the limits of the European competition rules, even where enforcers in other European nations saw fewer reasons to intervene.
Competition restraints in online retailing
German antitrust enforcers took their fight against competition restraints in the internet economy to a new level in 2015. The Bundeskartellamt goes beyond the EU Commission guidelines for vertical restraints by mandating that brand-name manufacturers allow their distributors to sell via third-party platforms like eBay or Amazon. While this approach has been followed by a majority of German courts, an appeals court in Frankfurt ruled that a ban of third-party platforms was legitimate in a case involving the distribution of brand-name backpacks in December 2015.
In order to encourage intra-brand competition, the Bundeskartellamt dissuaded sporting goods manufacturer ASICS from preventing its dealers from (a) using online price comparison engines, (b) using ASICS brand names on the websites of third parties to guide customers to their own online shops, and (c) preventing online sales via third-party websites. In the Bundeskartellamt’s view, where manufacturers keep their authorized dealers from using price comparison engines or online sales platforms, or where they hinder the use of the manufacturers’ brand names in their own search engine advertisements, it becomes difficult for consumers to find the smaller retailers on the internet. The concerns of the Bundeskartellamt are not shared by all EU competition authorities, even though they all apply the same EU statute.
In early 2015 the Bundeskartellamt set up a “Task Force for Internet Platforms”, which develops competition law concepts to deal with the digital economy and platform markets. Verivox, a leading internet platform for power supply contracts, agreed to stop requiring a most-favored-customer clause, which had prevented energy suppliers from offering lower prices on other platforms. The Bundeskartellamt also required the hotel booking portal HRS to stop using best-price clauses, and took similar action against booking.com event though their best-price clauses are not as far-reaching as those previously used by HRS. On appeal, the Düsseldorf Higher Regional Court confirmed the Bundeskartellamt’s decision against HRS, highlighting that HRS’s best-price clauses restrict competition in the hotel booking market to such a degree that they do not fulfil the requirements for an exemption (neither under the EU block exemption for vertical restraints, nor an individual exemption under Art. 101 TFEU). Germany has been criticized for its narrow view of these clauses, while several other EU member states had considered commitments from hotel booking portals sufficient to remedy similar concerns.
The food sector was another focus area, as the Bundeskartellamt fined several manufacturers and supermarkets approx. EUR 151 million for illegally maintaining the retail prices of confectionery, coffee, pet food, beer and body care products. All fines were imposed on the basis of a negotiated agreement, i.e. a settlement reached between the authority and the parties concerned. The retailers and manufacturers had agreed retail prices to the detriment of consumers. While the majority of companies were fined in 2015, the remaining decisions are expected for early 2016.
The Bundeskartellamt continued its battle against resale price maintenance by fining Metzeler Schaum GmbH EUR 3.38 million for imposing resale prices, restricting online sales and discouraging the advertisement of discounted prices for bed mattresses.
Portable navigation device manufacturer United Navigation GmbH was fined EUR 300,000 for resale price maintenance. For five years the company had monitored the prices of online retailers. Price increases were achieved under the threat of refusal to supply, or by granting bonuses for respecting the recommended resale price.
Some 1,100 transactions were notified to the Bundeskartellamt in 2015, most of which were cleared during the initial review phase. Eleven transactions required an in-depth examination (second request): One of these was eventually blocked, another was given up by the companies themselves. One merger was cleared subject to conditions, six without conditions. Two cases are still being examined.
The Bundeskartellamt blocked the proposed acquisition of supermarket chain Kaiser’s Tengelmann by EDEKA, one of the two leading food retailers in Germany. The enforcers voiced concerns about the lessening of competition in certain local food retail markets, as well as a strengthening of EDEKA’s position in food procurement. EDEKA has applied for an exceptional ministerial clearance, urging the federal government to clear the transaction on overarching policy grounds. This procedure is rarely used, and is more political in nature than the (alternative) recourse to the courts. The federal government has yet to decide the fate of the proposed transaction.
Pre-merger notification is mandatory in Germany. Where the parties complete a transaction without supplying accurate information and having obtained the necessary clearance, the Bundeskartellamt can order the unwinding of a combination and impose fines. The authority learned in 2015 that leading producers of organic milk products had supplied incorrect and incomplete information on their relationship in 2011, and motivated them to undo their previous deal. As a consequence, Andechser Molkerei Scheitz GmbH and Molkerei Söbbeke GmbH will again compete independently of one another in the future.
In the automotive sector, the Bundeskartellamt cleared the combination of two spare parts wholesalers only subject to significant conditions. Following an in-depth examination, the Bundeskartellamt cleared the acquisition of Trost Auto Service Technik SE by its competitor Wessels & Müller SE. Their customers are mainly independent repairers which are not tied to a specific vehicle manufacturer. The enforcers focused on the regional presences of sales outlets that offer same-day delivery. Neither online wholesalers that offer overnight delivery of spare parts, nor authorised repairers (dealerships) were considered to impose significant competitive pressure on independent wholesalers, even though these also sell car parts to independent repairers. By contrast, the Bundeskartellamt viewed dealerships as competitors of automotive glass repair centers when it cleared the acquisition of the “junited AUTOGLAS” network and three individual garages that offer vehicle glass repair services by Belron GmbH, Cologne. The Bundeskartellamt also cleared the acquisition of the HERE mapping service, formerly of Nokia Corporation, by a consortium of the German car manufacturers BMW, Daimler and Audi. High definition digital maps are considered an essential element for connected and autonomous driving.
Germany’s recent reform of the merger control regime, i.e. the move from a dominance test to a standard that mirrors the EU merger regulation’s SIEC test, has allowed the agency to take more market characteristics into account. The Bundeskartellamt cleared the merger of the second and the third largest real estate portals (Immonet and Immowelt), and also gave its blessing for the combination of two leading dating platforms (Parship and Elitepartner). While the presence of other competitors and the contestability of online markets were key aspects in these cases, countervailing bargaining power of customers allowed the Bundeskartellamt to clear the acquisition by GoodMills Deutschland GmbH, Hamburg, of the durum wheat business of Pfalzmühle Mannheim from PMG Premium Mühlen Gruppe GmbH & Co. KG and the acquisition of the household flour brands “Diamant” and “Goldpuder” from PMG Premium Mühlen Gruppe. Also among the transactions cleared was the acquisition of a part of Diehl Defence Land Systems GmbH by Krauss-Maffei Wegmann GmbH & Co. KG. The business to be acquired was the track production and repair business for Diehl armoured vehicles, which was transferred to DST Defence Service Tracks GmbH. Similarly, the Bundeskartellamt cleared the plan of Wegmann & Co. GmbH and GIAT Industries S.A. (France) to pool the business activities of their subsidiaries Krauss-Maffei Wegmann GmbH & Co. KG (commonly known as “KMW”) and Nexter Systems S.A. (“Nexter”) in a new 50:50 joint venture for development and manufacture of tanks and other armoured vehicles.
The Bundeskartellamt imposed a fine of EUR 225,000 on SodaStream GmbH for restricting competition in the market for refilling or servicing CO2 cartridges for home-made carbonated beverages. Third parties must be given the possibility to refill the proprietary CO2 cartridges of the market leader. The dominant company’s safety instructions and warranty terms had conveyed the impression that refills could only be purchased from SodaStream and its authorised partners.
Other dominance cases concerned preferential treatment of municipality-owned utility companies, regional timber markets and bulk mail postal services.
The Bundeskartellamt is also investigating the online ticket retailer CTS Eventim on suspicion of abusive practices, and recently initiated a case against Audible and Apple on account of certain agreements on audiobooks.
Having set a new record of more than EUR 1 billion in fines in 2014, the Bundeskartellamt imposed fines totalling around 190 million euros in eleven cases in 2015. The fines were imposed on 37 companies and 24 individuals. The proceedings concerned various sectors, such as automotive part manufacturers, mattress manufacturers, providers of container transport services and manufacturers of prefabricated garages.
The German Supreme Court confirmed that cartel fines need not be paid by the legal successor of an addressee of a cartel decision, where the successor is not essentially identical to the fined entity. The decision in St. Gobain Weber ./. maxit caused the German legislator to prepare an amendment to the German federal antitrust statute, aimed at closing the present loophole. The bill is expected to be voted into law in the coming months.
Like the EU Commission, the German federal antitrust agency has investigated and fined automotive component manufacturers. On account of price fixing agreements the Bundeskartellamt imposed fines totalling EUR 75 million on five suppliers of acoustically effective components and certain individuals. The cartelists had agreed minimum price levels and discounts, as well as passing increases in raw material prices on to vehicle manufacturers. The companies involved were Autoneum Germany GmbH, Carcoustics International GmbH, Greiner Perfoam GmbH (Austria), Ideal Automotive GmbH, and the International Automotive Components Group GmbH. In accordance with the German leniency programme, no fine was imposed on Johann Borgers GmbH, which was the first company to cooperate with the Bundeskartellamt. All the companies cooperated with the agency in uncovering the cartel, which led to a reduction of their fines. This investigation was originally triggered by an anonymous notification to a new online whistle-blowing system, which the Bundeskartellamt put in place only recently.
The Bundeskartellamt imposed fines totalling EUR 1.3 million on three suppliers of rubber track pads for military vehicles. The investigation was triggered by a leniency applicant. As the cartel affected public tenders, the office of the public prosecutor was involved to investigate criminal charges. While participation in a cartel is not normally a criminal offense in Germany, colluding in public tender procedures is.
The Bundeskartellamt also imposed total fines of approx. EUR 4.56 million on seven companies, the persons responsible within these companies and an association of companies on account of concerted practices concerning container transport services provided in the area of the German seaports of Hamburg, Bremen and Bremerhaven.
In the asphalt sector, the Bundeskartellamt encouraged the divestment of several shareholdings in joint venture companies, in which key competitors had all held shares. The ownership structures had facilitated an information exchange between the competing parent entities and reduced competition in local asphalt markets.
The way ahead
The German government will present a bill to amend the German antitrust statute in the spring of 2016. The proposed legislation is expected to introduce a size-of-transaction test to trigger merger filing requirements for larger deals, even where the revenue thresholds are not exceeded. The reform will also expand the liability of legal successors or parent entities for fines and cartel damages claimed by third parties. Private antitrust litigation will be encouraged by changes to the statute of limitations, improved access to documents and the introduction of a rebuttable presumption that a cartel produced effects. These changes are required in all EU member states, which need to implement the EU directive on damages action by the end of 2016.