June 23. 2024. 2:14

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Germany proposes giving more teeth to competition authority

The German government proposed a draft law on Wednesday (5 April) to give its competition authority more powers to tackle interferences with competition, following allegations that petrol stations had artificially kept fuel prices high in 2022.

After oil prices skyrocketed following Russia’s aggression against Ukraine in the spring of 2022, fuel prices at German petrol stations stayed high for a long time – even after oil prices had fallen again on global markets.

Politicians suspected that oil companies, who own most of Germany’s petrol station network, could misuse their market power in order to increase their profits, with Economy Minister Robert Habeck asking the competition authority, the Federal Cartel Office, to investigate the matter.

In the following investigation, however, no price collusion could be proven, meaning that the actions available to the competition watchdog were limited.

With the updated law, the authority could take action anyway, even if no illegal price collusion is evidenced. The new law would provide for the Cartel Office to act if “significant and continuing interference with competition” is present within a market, identified in a sector enquiry.

The cost of market concentration

Technological progress and lax anti-trust enforcement have led to high market concentration, which in turn led to ballooning profits of some big corporations, to the detriment of economic development, economics professor Jan Eeckhout told EURACTIV in an interview.

“The starting point for the creation of this law at the time was the debate about high fuel prices in Germany,” Economy Minister Robert Habeck (Greens) told journalists on Wednesday (5 April).

The reform would, however, go beyond this individual case, creating a new “structural possibility that can affect different parts of the economy”.

In the UK, where a similar reform had already taken place, 18 different sectors subsequently became the subject of measures in order to increase competition, Habeck said.

The draft law would give the Federal Cartel Office a range of options in acting upon an identified distortion, from facilitating market access for newcomers to, as a last resort, “unbundling” companies – in other words, breaking them up.

Paradigm change in competition law

For Habeck, the proposal reflects “the biggest reform of competition law in many decades”, maybe even “the biggest reform since Ludwig Erhard”.

Erhard is seen as the founding father of Germany’s “social market economy” model, which combines guardrails for markets and social policy with a tradition of little direct state intervention.

Opposition party CDU, of which Erhard was a member, sees his heritage threatened.

“With the government draft of the 11th amendment to the Competition Act, the Federal Cartel Office receives a blank cheque to fight market power,” Hansjörg Durz, member of the German parliament for CDU, told EURACTIV.

This “fosters state dirigisme [direct intervention] and is a departure from the pure teachings of the social market economy”, he said, adding that “the Federal Cartel Office is in danger of becoming politicised”.

However, Justice Minister Marco Buschmann of the liberal FDP party told journalists on Wednesday (5 April) that his ministry had ensured that for instruments like unbundling, “one can only resort to this sharp sword under very narrow conditions”.

“So in terms of a ‘blank cheque’, I think the criticism would not be justified,” Buschmann said.

Non-compete clauses for workers: Will the EU follow the US lead?

As the US competition authority proposed to ban non-compete clauses in employment contracts, a conversation about the exploitation of market power by employers is slowly taking shape in Europe.

Experts, too, argue that contrary to the fear of increased political influence, the process would now be made subject to more objective criteria.

“So far, policymakers have always reacted more or less ad hoc to certain events in order to then intervene in markets in a regulatory manner,” Justus Haucap, director of the Düsseldorf Institute for Competition Economics, told EURACTIV.

“This process is now enormously objectified by the fact that the Federal Cartel Office first conducts a sector enquiry and can then – on the basis of facts – intervene, which must meet the standard of proportionality,” he said.

“That is a much better process,” said Haucap, who advised the government during the drafting phase of the law.

Supporting role to implement EU’s Digital Market Act

The draft law also prepares for the implementation of the EU’s Digital Markets Act (DMA), giving the national authority a supporting role in the European Commission’s new powers to tackle anticompetitive practices by platform operators, so-called ‘gatekeepers’.

Unlike the previous amendment of the German Competition Act, the now 11th amendment aims to avoid duplication of competencies with the European level, instead giving the German competition watchdog a legal basis to work together with the European Commission.

Regarding big tech companies, the previous (10th) amendment had created a basis to counteract structural market problems.

Since the European Commission is dealing with almost identical issues under the DMA, intensive collaboration between the authorities would be necessary “even if there may be occasional disputes over competence”, Aline Blankertz, policy adviser of Wikimedia Deutschland, told EURACTIV.

“The 10th amendment [of the German Competition Act] established rules related but not identical to the DMA,” she said. “Thus, both authorities must continue to conduct parallel investigations.”

While approaches would sometimes differ, “both authorities are pursuing the same goal: an expansion and flexibilisation of antitrust law in order to take more effective action against undesirable market structures and outcomes for which the established antitrust law was too rigid,” she continued.

Despite the newly proposed amendment giving the German competition authority a more flexible approach to structural problems in other sectors, “no significant changes are to be expected for large tech companies”, Blankertz said.

“The additional powers in the sector enquiry may also be applied in the digital sector, but there are also various other sectors with structural problems (like energy), in which the Cartel Office had so far few options to investigate and intervene,” she added.