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Germany sets up body to lead modernisation of competition law

A new body tasked with proposing reforms to competition law to better support digital companies based in Europe has been set up by the German government.12 Sep 2018

The Commission Competition Law 4.0 was set up by the Ministry for Economic Affairs. It has been asked to prepare "concrete recommendations for action on European competition law" by autumn 2019.

The mandate for the Commission's work said: "American and Asian internet services dominate the markets. The seven most valuable companies of the world are digital platform companies from America and China. In the medium and long term, structural reforms are necessary, that secure Europe's position and competitiveness especially in the digital markets at international level and that secure at the same time our economic and social prosperity."

According to the Commission's mandate, the body will assess European competition law and make recommendations to address nine specific questions.

It will look to answer whether fundamental changes in the competition framework are required to enable internationally competitive digital companies in Germany and Europe, and how European competition law could take into account the scaling and cooperation needs of German and European digital companies in a better way.

In addition, the Commission will assess whether competition law should be adapted to support cooperation and standardisation efforts, including in the context of 'industry 4.0' – the term coined in Germany to describe the fourth industrial revolution that is seeing the latest technologies modernise manufacturing.

The Commission will also look at whether new competition laws are needed to regulate access to data and how the development of a competitive data economy can be aligned with the requirements of data protection law.

The role competition rules have to play in driving innovation and investment in new technologies, such as artificial intelligence, will also be considered, and the Commission is also expected to look at whether changes in contract law are needed to account for the increasing use of algorithms and AI for example for 'matching' and 'ranking' purposes as well as for dynamic pricing to ensure markets remain fair and competitive.

The Commission has also been asked to look at how competition rules for "powerful platform companies" could be developed and whether procedural changes are needed to enable regulators to better respond to "dynamically changing digital market platforms and companies".

It will also investigate how the interaction of competition law, on the one hand, and the rules on fair advertisement, consumer protection and data protection on the other, can be improved and better integrated.

Munich-based competition law expert Dr. Michael Reich of Pinsent Masons, the law firm behind Out-Law.com said that it remains to be seen whether more regulation would help to attract investment in the development of internet services in the EU.  

The creation of the Commission had been promised earlier this year by Germany's coalition government, which has set itself the goal of modernising competition law. That promise was contained in the coalition treaty formed by the governing Christian Democrats and Social Democrats.

The new body has three chairpersons and six other members, while three members of Germany's parliament, the Bundestag, will have rights to voice their opinion but not to vote. The Commission will also consider the views of industry, including digital platforms, according to the mandate.

An advisory firm called DICE Consult has already made initial recommendations for reform to the Ministry for Economic Affairs. According to press reports, a tightening of the merger control regime and requiring certain companies to open up access to data they hold are among the potential changes that could be pursued.

The proposed reforms to the merger control regime would enable competition authorities to prohibit acquisitions of dominant companies that make it their strategy to "systematically buy up high-growth companies at an early stage of their development that have a recognisable and considerable potential to become competitors", according to one report.

Improving access to data is something that the leader of the Social Democrats, Andrea Nahles, has voiced support for. He has proposed a new 'Data-for-All' Act in Germany. Setting out his proposals in a German newspaper, Nahles said: "Once a digital company exceeds a specified market share for a certain period of time, it is required to publicly share an anonymized and representative part of its data."

Dr. Heike Schweitzer, a competition law professor at Berlin's Humboldt University, was one of the authors of the DICE Consult report. She is also one of the three chairpersons of the new Commission Competition Law 4.0.