Germany could be the first country to test the effectiveness of ex-ante rules for digital platforms, with lessons to be learned for regulators around the world
Google has been found to have ‘paramount significance’ – Amazon and Facebook could come next: On 5 January, the German competition authority took the first step to imposing ex-ante regulation on Google. The Bundeskartellamt found it to have ‘paramount significance’ across markets, after an investigation that started in May 2021. This decision marks the first time the Bundeskartellamt has used its new powers, following a reform of the Competition Act that came into force in January 2021 to preserve competition in digital markets. In a two-steps process, the authority can identify companies of ‘paramount significance’ and prohibit them from engaging in anticompetitive practices. With ongoing investigations into Amazon and Facebook, more decisions like this one are expected soon.
While this designation paves the way to remedies, none have been imposed yet: The German authority found Google to have a dominant position in general search services (its market share is higher than 80%) and is the main search advertising provider. Google also leverages its digital ecosystem to exert significant influence over other companies’ access to its users and advertising customers and can set rules and conditions for other businesses across markets. Google said it does not intend to appeal the Bundeskartellamt’s decision, but it does not necessarily agree with the authority’s conclusions. The company will more likely focus on the Bundeskartellamt’s future decisions, such as those on Google’s data processing terms and on its News Showcase service. These will provide a clearer indication as to which remedies Google could face, and whether the company will challenge them.
Regulators around the world will look to Germany with interest: Germany is now on course to become the first country to regulate ex-ante big tech. This will be a test of global significance, since there is currently no real world experience as to whether ex-ante remedies will work in practice in digital markets. As we recently noted, several jurisdictions are reforming their competition frameworks to reflect the evolution of digital markets. Of these, Germany and the UK appear to strike a reasonable balance between flexibility and effective intervention – but only the practical implementation of the new rules will tell whether they protect competition without stifling innovation. There is still a lively debate on whether interoperability and data access remedies actually work. Similarly, stricter merger rules could discourage startups from generating value since they make it harder to pursue an exit-by-acquisition strategy. 2022 looks set to be the year when regulators will test these theories in practice.
