On Wednesday, the Federal Cabinet approved a draft bill for a new reform of competition law. It is aimed at making limited changes and simplifications. The Bundestag will consider the bill after the summer recess. We participated in the brief consultation on the first draft. We welcome some specific improvements. In other areas, we see room for improvement and missed opportunities.
Highs and Lows in Merger Control
Rebalance Now generally recognizes the need to strengthen merger control in order to halt further market concentration and limit power imbalances in the economy. The draft bill changes the thresholds for merger control, above which a merger is subject to approval.
We oppose raising the revenue thresholds. Even though many smaller mergers are unproblematic, this creates the risk that sensitive mergers will go unregulated. This applies in particular to fragmented, more regional markets, such as the baking and artisan food sectors, medical practices, and the skilled trades. With the entry of private-equity investors, there has been an increase in corporate mergers in these sectors.
On the other hand, one positive aspect of the draft is an adjustment to the so-called transaction cost threshold. In the future, this will allow for the review of mergers starting at a certain acquisition value if the companies are expected to operate domestically. Until now, an existing presence on the German market was required.
Another sensible provision in the draft is that the restriction on third parties’ ability to challenge a ministerial approval is to be lifted. Ministerial approval enables the leadership of the Ministry of Economic Affairs to approve a business merger even if the Federal Cartel Office prohibits it.
At the same time, we feel that more far-reaching reform is needed. The ministerial approval mechanism has a flaw: it only allows for corporate takeovers to be approved on grounds of the public interest. Logically, there should also be a provision for prohibition. Furthermore, when making a decision based on the public interest, not only the Ministry of Economics but the entire federal government should have a say.
Procedural Reforms: Improvements and a Missed Opportunity
The draft contains a number of clarifications and procedural simplifications. The term of office of the President of the Federal Cartel Office will be limited to eight years in the future. We generally welcome the changes. At the same time, we see this as a missed opportunity to further open up competition policy to new stakeholders. The revised version should expand opportunities for participation by civil society organizations that represent people and interests affected by economic power and its abuse.
Energy Sector Anti-Abuse Measures Extended
With regard to abuse of dominance, we welcome the extension of expanded oversight for the energy sector for another five years. In addition, we would recommend introducing expanded abuse of dominance provisions for the food sector as well. In its special report, the Monopolies Commission found that market concentration in food supply chains has reached problematic levels—with consequences for consumers and farmers.
New exceptions have been introduced for cooperation among broadcasters. A new exception to the cartel prohibition has been included in the draft for both private and public broadcasters. It was not yet included in the first public draft. The exception is intended to strengthen radio and television broadcasters in their cross-media competition with major online platforms. What would be more important here, however, is the effective enforcement of digital regulations against major tech companies such as Google.
Additional Recommendations
We regret that the current draft of the 12th amendment to the GWB is narrower in scope than the plans developed by the “traffic light” coalition during the last legislative session. In particular, the issue of sustainability—an area where we continue to see a need for action—is missing. Antitrust law should make it possible to combat the externalization of social and environmental costs as an abuse of market power.
In addition, in our statement, we proposed two changes based on our work on food supply chains and the power of supermarkets.
The GWB contains a rule that prohibits companies with significant market power from selling products below their purchase price. However, according to a recent ruling, this rule does not apply when supermarkets and discount stores manufacture a product themselves. Therefore, the rule should be expanded to cover sales below production cost.
We also support the Monopoly Commission’s recommendation that associations be able to have an unfair business practice classified as abusive. This would be a helpful step toward strengthening antitrust enforcement—particularly in cases where affected companies fear retaliation from market-dominant players.
You can read our full statement here
Photo: The Federal Ministry of Economics in Berlin, photographed by Jörg Zägel, license: Creative Commons BY-SA 3.0
