Germany takes the lead in GAFA "gatekeeper" proceedings

The German Federal Cartel Office kept its word. Following the entry into force of the latest German Competition Law Reform in January 2021, the authority is moving fast against tech giants. Several departments are investigating Facebook, Amazon, Google and most recently, to complete the quartet, Apple. Germany is the first jurisdiction which has an active ‘gatekeeper’ regime in place and lessons learned from these cases will most likely shape legislative proposals on EU level.

Common ground: digital ecosystems 

The first step for all the ongoing GAFA proceedings is to establish whether these companies have a "paramount significance for competition across markets" – this is the Germany-specific terminology to describe "gatekeepers", generally based on their "digital ecosystems". It broadly includes market players that combine a variety of tools and systems and offer platforms for several market players.

Second, the FCO will assess whether companies qualifying to have such "paramount significance" abuse this position on the basis of a non-exhaustive list of prohibited behavior. Taking each of the GAFAs in turn:

• Facebook was the first company against which the FCO exercised its new powers only days after they entered into force. The FCO continued proceedings already underway under the new rules and is investigating allegations based on the interlocking of virtual reality glasses (Oculus) with Facebook’s social networks including WhatsApp and Instagram. These proceedings are running in parallel to the authority’s data case against Facebook which was launched in 2019 and is still pending before the European Court of Justice (focusing on the interrelation between competition and data protection laws).
  
  
• Next on the list was Amazon and interestingly, the FCO’s investigations do not appear to be based on a specific allegation. Publicly, Mundt confines himself to the statement: "If we find that the company does have such a [paramount] market position, we could take early action against and prohibit possible anti-competitive practices by Amazon.”
  
  
• Google is facing several investigations. The FCO is looking at the company’s large number of digital services, such as the Google search engine, YouTube, Google Maps or Chrome, to assess its market position. Separately, the authority is examining Google’s data processing terms. Similar to the Facebook case, it is the users’ choice in relation to the data usage and processing by Google that is under scrutiny. Further, the German watchdog is investigating potential discrimination and self-preferencing in relation to the Google News Showcase services. The latter seem to be the only proceeding initiated by third-party complaints.
  
  
• Finally, and only recently, the FCO opened an investigation against Apple as the fourth GAFA company. Apple is under scrutiny because of its ecosystem of devices, such as tablets and computers, that are linked to Apple services (e.g. iCloud, Apple Music or Apple TV). The FCO will focus specifically on the App Store, as it could have a significant influence on the business of third-parties, and investigate whether and to what extent Apple favors its own products.

The FCO’s president expects the tech companies to take legal action in these complex cases and thus calls the newly introduced mechanism allowing direct appeals against the decisions to the Federal Court of Justice a "blessing". 

Against this background, Mundt is very much aware that the proceedings have to be "waterproof" and stand judicial review. Consequently, and with respect to its pioneering role in setting important and new precedent, the FCO is expected to be particularly thorough in these proceedings. As a result, no prediction on the duration of the investigations has been made.

Competition or co-ordination between national and EU rules?

It is interesting that the FCO has initiated the proceedings quickly and well before the EU Digital Markets Act comes into force, as expected in 2022/2023.

The draft DMA – as it currently stands – does not leave much room for gatekeeper regimes or investigations, stating that Member States shall not impose further obligations on "gatekeepers". While German rules do not explicitly refer to "gatekeepers", its "paramount significance" regime is similar. It nevertheless remains to be seen if the new FCO powers will go beyond the EU’s gatekeeper provisions. The GAFA companies currently targeted by the FCO would clearly fall under the draft EU rules.

Notably, the draft report of the European Parliament, dated 1 June 2021, suggests amendments to the draft DMA that would further limit the role of Member States’ national authorities to a purely supporting and consultative nature. The national authorities responded with a joint paper on the potential involvement in DMA enforcement, published on 23 June 2021, noting that although the "center of gravity" for enforcement should be at EU level, national authorities claim shared powers. 

Antitrust regulators in the member states want the capacity to initiate or enforce DMA proceedings against gatekeepers and intervene in support of the European Commission's powers. Asked about the EC’s relationship with the national authorities in the area of tech enforcement, Mundt said: “We complement each other”.

Outlook for tech companies generally

Now that all GAFA companies are currently under investigation by the FCO, it will be interesting to see if the FCO will open further investigations against other tech companies under the new rules. The ongoing proceedings, as well as potential next steps of the FCO, will help in shaping a clearer definition for ‘gatekeepers’. The FCO, in any case, made clear that it will make use of the new powers and that it takes its leading role very seriously. Judging by the events of the last few weeks and months, it seems that the final curtain has not yet fallen.