Antitrust

Shearman & Sterling Antitrust Annual Report 2019

Shearman & Sterling LLP

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S H E A R M A N & S T E R L I N G L L P | 8 3 In light of this, the report recommends supplementing the substantive test by a sentence which would allow the BKartA to consider, when assessing the probability of a significant impediment to effective competition, the existence of an overall strategy of a dominant company to systematically acquire fast- growing companies with a recognizable and considerable potential to become competitors in the dominated market in the future. According to the report, it may be an indication for such future competition that the target — while only being a niche competitor to the dominant firm — is active in a market that addresses the same basic needs as the acquirer. INTRODUCTION OF A NEW CONCEPT OF 'INTERMEDIATION POWER.' The report recommends introducing a new concept of 'intermediation power' vis-à-vis suppliers of products or services, in addition to supply power and demand power. The idea is to clarify that the assessment of potential dominance of a transaction platform must take into account all circumstances that are decisive for the power of a platform intermediary. Depending on the conditions on the distribution side, in particular the habits of those who purchase goods or services through the platform, intermediation power should be assessed specifically with respect to products or product groups or, if product range effects are significant, with respect to a whole assortment of products. PROTECTION AGAINST ABUSE OF 'RELATIVE MARKET POWER' ALSO FOR LARGE ENTERPRISES. German competition law contains provisions prohibiting abusive unilateral conduct by undertakings below the level of dominance but with 'relative market power' or 'superior market power.' (§ 20(1) and (3) GWB). While these provisions, which have no equivalent in European competition law, did not have significant practical importance for public competition law enforcement in the past, they may gain increased relevance in the context of the digital economy. The report recommends to no longer restrict the scope of protection against abusive conduct by undertakings with 'relative market power' to small- and medium-sized enterprises, noting that large undertakings may bilaterally depend on a customer or supplier as well. According to the report this may particularly be the case in the digital context where also large undertakings may be prone, for example, to strategies impeding competition by digital platforms with a gatekeeper position. EASIER INTERVENTION AGAINST UNILATERAL BEHAVIOR THAT MAY PROMOTE TIPPING. Intervention against unilateral conduct that actively facilitates or induces a market with strong positive network effects to tip, i.e., to turn into a monopoly, is currently possible only if the respective actor has a dominant position or relative or superior market power. L A R G E U N D E R T A K I N G S M A Y B E P R O N E T O S T R A T E G I E S I M P E D I N G C O M P E T I T I O N B Y D I G I T A L P L A T F O R M S W I T H A G A T E K E E P E R P O S I T I O N The report recommends prohibiting platform providers in close oligopolies, or platform providers with superior market power, to obstruct competition, insofar as the behavior in question is found to have a dangerous probability to promote a tipping of the market. The obstruction of multi-homing or switching should be included into the provision by way of example. Multi-homing may for example be strategically obstructed by technical means like deliberate incompatibility or by tariff structures, like flat rates, that tend to make multi-homing unattractive. Smaller competitors should according to the recommendation, not be prevented from obstructing multi-homing in markets prone to tipping. Otherwise, such smaller competitors could be deprived from a defense strategy against the largest and fastest growing platform, which may actually prevent the market from tipping. CONCLUSION Following submission of the export report, the Minister for Economic Affairs recently appointed an expert commission 'Competition Law 4.0' that is to make recommendations by autumn 2019. It remains to be seen which of the existing and future recommendations will ultimately become law in the next set of amendments to German competition law, which may currently be expected in the course of 2020. In any case, the regulatory environment for large digital firms and online platforms with market power can arguably be expected to become tougher.

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