Happy New Year? The German FCO closes its first GAFA proceeding under new competition rules

Last week, the German Federal Cartel Office (FCO) published the outcome of its proceedings against Alphabet/Google initiated in May 2021 under the new German gatekeeper rules (read more). Google is now the first ever company which according to the authority has a “paramount significance for competition across markets”. It is the first of two steps under the new gatekeeper mechanisms of Section 19a of the German Act Against Restraints of Competition (ARC) - in a second step the FCO can now intervene if it finds that Google abuses its gatekeeper position. Investigations under the new rules against Amazon, Apple and Meta/Facebook are still ongoing and it can now be expected that the FCO will issue decisions quickly.

Impact for Google

The FCO’s decision is valid for five years and within this period Google is subject to extended abuse control rules for large digital companies, meaning that the FCO can, at any point, intervene earlier and prohibit certain (digitally) abusive practices.

In fact, the FCO is already investigating Google under the gatekeeper scheme in relation to its data processing terms and the Google News Showcase service. Now the important hurdle to finalising these proceedings of establishing gatekeeper status has been cleared. Google decided not to appeal the decision but to constructively work with the FCO during the ongoing proceedings.

How Google’s paramount position was established

The FCO – in short – holds that Google’s market position enables the company to set the rules for other businesses across markets. According to the FCO Google “has an economic position of power which gives rise to a scope of action that is insufficiently controlled by competition”. In line with the non-exhaustive statutory list of criteria the FCO relies on:

• the company’s strong position on the market for general search services in Germany (80%) and in search advertising
• the high numbers of daily and monthly active users
• the range of highly vertically integrated or otherwise interconnected services
• the “Google infrastructure” and gatekeeper function to access its users and advertising customers
• its access to a “broad and deep database”, and
• the company’s market capitalisation.

Interestingly, the FCO also goes beyond merely economic aspects and expands on the company’s significance for participation in social life. Since this criterion is not mentioned in the ARC, the FCO backs its decision with case law and underlying legislative materials.

Indications of the FCO's gatekeeper agenda - looking ahead

One by one, the FCO opened proceedings against all four GAFA companies last year, including Google 8 months ago. During this time, it collected information through discussions and surveys with Google and various market players as well as from publicly available sources. 

The FCO’s decision on Google’s paramount position may already indicate the FCO’s gatekeeper agenda in general. For example, the decision highlights the company’s agreements on pre-installations and default settings with OEMs and the gatekeeper role for accessing services from third parties. It is now clear that these are practices which can be regulated under the new provisions.

The decision also proves that access to data is key and a competitive advantage which will not be tolerated if it creates barriers to entry or if data is processed from different services without users’ choice. These questions will now be dealt with in the ongoing two investigations against the ‘paramount’ Google. This will require a detailed analysis of prohibited practices for large digital companies which could also affect the shaping of the European Digital Markets Act. So, the most interesting part is yet to come!