Exclusive Q&A on Competition and Antitrust with Ulrich Schnelle
Posted: 18th February 2016 08:20Have there been any recent regulatory changes or interesting developments?
One of the more interesting development, in particular in comparison to other jurisdictions in the EU such as the UK or the Netherlands, is the specific focus of the Federal Cartel Office (Bundeskartellamt) on restrictions of internet (online) trade. The Federal Cartel Office has launched proceedings against suppliers of consumer goods, in particular sportswear or kitchen appliances, for discrimination of online trade in distribution networks, including selective distribution systems, as opposed to stationary offline trade. The vehicle used by the Federal Cartel Office for this purpose is not Art. 102 TFEU respectively the German equivalent of but any restriction of online trade is considered as a core restriction in the sense of Art. 4 lit. b) of the Block Exemption Regulation for vertical contracts (Regulation No. 330/2010).
Can you talk us through the current competition and antitrust landscape in your jurisdiction?
There is a continued focus in the activities of the Federal Cartel Office against any restrictions of online trade, in particular against the prohibition to distributors to use standard online platforms such as Amazon or eBay. Furthermore, there is a continued focus on limiting the demand power of the German food retail chains. As far as public enforcement against cartels is concerned, the tendency is clearly to settlements between the Federal Cartel Office and the cartelists.
Within the European Competition Network, the focus of the activities in Germany will lie in the restriction of power and influence of platforms such as Google or similar organizations.
The law maker is focused on transposing the cartel damages directive into German law which is a challenge since henceforth German law has an understanding of “undertaking” which is different from that under European law.
“Platform” regulation has received considerable interest of late following a number of EU Member States (notably Germany and France) expressing their frustration at how competition law would not be enough to tackle certain issues. In your opinion, is the current competition law sufficient to address the challenges raised by platforms?
The Google proceedings with the EU Commission in Brussels shows that competition law is apt to tackle most of the challenges which are raised by platforms. However, the challenges raised by such platforms are not only of a competitive, nor even only of an economic nature and have to be tackled also by other areas of the law. With respect to competition law, basic questions such as market delineation still have to be answered with respect to the activities of such platforms. In any event, from my perspective, any activities of competition authorities have to be complemented by consumer protection regulations as well as data protection.
How has the appointment of Margrethe Vestager as the EU Antitrust Commissioner shifted the current landscape?
The appointment of Ms. Vestager has shifted the landscape insofar as the EU Commission appears to be more active also in more day-to-day issues. This is essentially reflected in the sector inquiry on online trade. Further, it appears that the approach taken by the Commission is to a certain extent more thorough and more matter of fact.
What considerations do companies need to make to avoid abuse of dominance?
In Germany, the essential issue is not so much to contest the existence of the dominant market position of a company. Unlike European law, German law has certain presumptions based on market shares for a dominant market position. These presumptions also cover oligopolistic structures. Based on these presumptions, undertakings falling under these presumptions have to rebut the presumptions which is very often hard to achieve. Therefore, the basic approach for German companies actually or potentially being covered by the presumptions is to avoid any discrimination. German case law provides for quite an extensive list of examples where the treatment would be considered as a discrimination but also where discriminating treatment would be justified by business reasons.
How can a company conduct effective global antitrust and competition risk assessment and how important is the implementation of an effective compliance program?
There are no specific issues under German law to conduct effective global antitrust and competition risk assessment except for the fact that under the German co-determination system in employment law (existence of so-called works councils), there is a certain reluctance on the part of German undertakings to implement “cold” investigations into the data infrastructure and the IT network. Even though the existence of effective compliance programs has not yet been taken as a mitigating factor in assessing fines, there are statements from judges of the highest German court, the Federal Court of Justice, reflecting at least a tendency of this court that such programs would need to be taken into consideration in assessing the fines in the future
What advice can you offer to companies that find themselves subject to an antitrust raid?
In, there is the clear need to cooperate wit.h the authorities and to minimize the impact of the raid on the daily operations. In general, any larger undertaking should have preparations for such raids and should have guidelines how the employees, in particular the key employees, should behave in case of such raids.
It is necessary to immediately have counsel on place and have counsel coordinate the activities of the undertaking. Further, it is important to be able to assess which data and documents the authorities have seized. The most important step from the legal perspective is to assess the risks of being found in breach of antitrust rules and then to decide to formally cooperate with the authorities under the respective leniency notices.
What do regulators look at when determining whether M&A activity is in breach of competition and antitrust laws? Do dealmakers generally find it difficult to obtain the necessary clearance in your jurisdiction?
The approach taken by the Federal Cartel Office to merger control proceedings is rather cooperative. The test is whether or not any concentration would significantly impede effective competition. The first and most important test is whether or not a dominant market position will be created or enhanced by a certain merger. Given the rather low thresholds for merger control and given that merger control is organized with the Federal Cartel Office in departments which are specialized for certain industries, any major deal maker is known to the Bundeskartellamt. When it may come to delineate as to the relevant geographic market, the Federal Cartel Office also considers the worldwide or the European Union market as relevant markets. However, the quote of prohibitions is higher than with the EU Commission.
What key trends do you expect to see over the coming year and in an ideal world what would you like to see implemented or changed?
The Federal Cartel Office will continue its activities against discrimination of online trade. They will finalize their proceedings against so-called best-price clauses in hotel booking platforms. The law maker and the Federal Cartel Office are working on reforms concerning the proceedings in antitrust (cartel) cases before German courts. An appeal against the decision taken by the Federal Cartel Office imposing fines is brought to the Higher Regional Court Düsseldorf and from there, however, limited to a legal review, to the Federal Court of Justice. The rules in these proceedings are not tailor-made for antitrust cases but the rules are essentially the same as for road traffic misbehavior. Therefore, one of the crucial issues would be a reform of the rules applying to the court proceedings in antitrust cases.
Ulrich Schnelle is mainly active in European and German antitrust law, in particular in antitrust proceedings, merger control, issues of abuse of dominant position and the Treaty antitrust (recommended for antitrust law in Legal 500 2012/13). He also advises domestic and foreign companies on corporate law, M & A transactions and in distribution law. A special focus of Ulrich is advising on cross-border mandates, in particular clients from English-speaking countries, from Western and Southern Europe and Asia.
Ulrich can be contacted on +49 (0)7 11 / 2 27 44 27 or by email at email@example.com