DRAFT WORK IN PROGRESSlaw.haifa.ac.il/images/ASCOLA/Podszun.pdfDRAFT – WORK IN PROGRESS THE INSTITUTIONAL TRIANGLE: HOW TO REFORM COMPETITION LAW LESSONS FROM THE GERMAN EXPERIENCE

DRAFT – WORK IN PROGRESS

THE INSTITUTIONAL TRIANGLE: HOW TO REFORM COMPETITION LAW

LESSONS FROM THE GERMAN EXPERIENCE

Rupprecht Podszun

Abstract

There is widespread consensus among progressive competition law scholars that an-

titrust law is in need of an update or even a substantial reform with a view to the data

economy. Germany is seen as a pioneering jurisdiction in this regard: Cases like the

Amazon investigation and the Facebook data case were path-breaking, the 10th

amendment of the competition act is seen as the first legislative reaction to calls for

a reform. In this paper, the research question is: What is to learn from the German

experience for other reform projects? After giving an overview of key developments

for an international audience, I turn to the roles of three actors in this process: en-

forcers, policy-makers and courts. Their roles are crucial for success. In analysing

their roles I draw on a model provided by Douglass C. North on institutional change

and combine it with the endogenous factors of competition law as a distinct field with

its own peculiarities. The aim of this paper is thus to identify the incentives, biases

and contingencies of important actors. It also provides some ideas for the conditions

of success of such reforms. Ultimately, I wish to raise the awareness of competition

law scholars that reform does not only need substantive rules, but that we need to

take account of the procedural and institutional settings in our field.

Podszun, Draft: How to reform competition law, 2020, p. 2

Introduction

In 2020, the German government stepped forward with an encompassing proposal to

reform the competition act (Gesetz gegen Wettbewerbsbeschränkungen, GWB) with

a view to the digital economy.1 With the pioneering proposal, Germany is the first

major jurisdiction to transform the international calls for change into legal rules. The

studies on reforming competition law, like the EU Special Advisers’ Report, the Fur-

man Report, the German study on modernising abuse, the German report by Kom-

mission Wettbewerbsrecht 4.0 or the Australian report, are explicitly referenced in

the government’s proposal.2 Read together, these studies evoke the impression that

there is an internationally shared “feeling” that “something has to be done”. What

then, and this is the research question of this paper, are the conditions that positively

impact the implementation of legal change in the field of competition law? Put dif-

ferently: What is to learn from the German experience for other competition law re-

form projects?

The ambition of this paper is to analyse the changes from an institutional perspective,

drawing on Douglass North’s sketch of a model. This paper does not deal in detail

with the substantive changes as such, but instead tries to explore some of the condi-

tions of change in competition law. Obviously, changes in laws are a very complex

process, so I will only highlight a couple of features of the German reform process

that may be interesting to note – not least with a view to the implementation of

changes on the European level. My aim is to identify hypotheses that may be tested

in larger research projects or at least through observation in other jurisdictions.

I will first briefly give an overview of the changes planned (I). Then I will introduce

the ideas by North as a reference point for institutional analysis (II). Starting from

there I focus on the process of establishing a framework for digital competition in

Germany and highlight institutional features (III). Reviewing the results of this pro-

cess reveals the role of different actors (IV). Finally, I draw conclusions – with a brief

prospect on European competition law (V).

1 Referentenentwurf des Bundesministeriums für Wirtschaft und Energie, GWB-Digitalisierungsge-

setz, 24.1.2020, available at https://www.bmwi.de/Redaktion/DE/Downloads/G/gwb-digitalisie-rungsgesetz-referentenentwurf.pdf. 2 The government’s document refers to „Modernisierung der Missbrauchsaufsicht für marktmächtige

Unternehmen“ (Schweitzer/Haucap/Kerber/Welker, 2018); the report by the government commis-

sion „Kommission Wettbewerbsrecht 4.0“, 2019; Furman/Coyle/Fletcher/McAuley/Marsden, „Un-

locking digital competition“; Report of the Digital Competition Expert Panel, 2019; Crémer/de

Montjoye/Schweitzer, Competition policy for the digital era, 2019; Australian Competition & Con-

sumer Commission, Digital Platforms Inquiry, Final Report 2019.


I. Changes for digital competition law proposed by the German

government – an overview

The German Ministry of Economics and Energy introduced a draft bill for the reform

of the German competition act (GWB) in January 2020. A first version had already

been leaked in autumn 2019. According to the Ministry, “the present draft contributes

to the creation of a digital regulatory framework.”3 I focus on the changes related to

the digital economy. Other aspects of the draft bill include changes in merger control

and the implementation of the ECNplus-directive.

1. Market power and superior bargaining power

The draft bill contains specific new rules for assessing the market position of under-

takings. Firstly, operators of intermediary services are expressly mentioned as under-

takings that may be addressed through the abuse provisions (section 18 (3a)). This

follows a recommendation of the study on modernisation of abuse provision by Heike

Schweitzer, Justus Haucap, Wolfgang Kerber and Robert Welker, commissioned by

the Ministry in preparation of the law.4 The major shift is to establish intermediaries

as a special category of undertaking that functions according to different rules.

The draft bill also states that access to data may influence the market position and is

thus a factor to be taken into account when establishing dominance (section 18 (3)).

While authorities may have taken access to data into account before, this change is

still interesting: Firstly, it further breaks the link of dominance to market shares, and

secondly it makes clear that access to data now is a universally important feature –

not just for “digital undertakings”.

Germany has extensive provisions for superior bargaining power in section 20. The

provision which is often cited in private enforcement is significantly expanded.

Other than before, companies may now also rely on section 20 (1) even though they

are small- or medium-sized companies. The remaining criterion now is an “asym-

metry of power”, something that more traditional large German companies may have

vis-à-vis Google and the like. Again, this follows a recommendation of the prepara-

tory study.5

3 Draft 2020 bill (GWB-E) p.1. For first reviews of the draft bill cf. Podszun/Brauckmann, Ger-

many’s Pressing Ahead: The Proposal for a Reformed Competition Act, in: Competition Policy In-ternational, available at https://www.competitionpolicyinternational.com/germanys-pressing-ahead-

the-proposal-for-a-reformed-competition-act/. 4 Schweitzer /Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, available at https://www.bmwi.de/Redaktion/DE/Publikationen/Wirtschaft/mo-

dernisierung-der-missbrauchsaufsicht-fuer-marktmaechtige-unternehmen.pdf. 5 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, p. 56.


It is noteworthy that the explanatory memorandum justifies this change with a move

from protecting the German Mittelstand to protecting competition as a process:

“Section 20 (1) is not primarily intended to protect small and medium-sized busi-

nesses, but to protect competition as a process and an institution. (...) The extension

of the scope of protection applies to all sectors of the economy, not only to the digital

economy, but a particularly great benefit of this change for competition is to be ex-

pected there. (…) Section 20 (1) may thus be of particular importance, for example,

in the case of obstruction strategies for digital platforms with a gatekeeper position,

because large enterprises may also be dependent on such platforms.”6

Dependency, according to section 20 (1a) of the new draft, may also stem from an

asymmetry in access to data: If a company depends on access to data of another com-

pany, this may suffice to establish dependency.

2. Abusive practices

The draft bill also contains new rules for abusive practices. In section 19 (1) (equiv-

alent to Art. 102 TFEU), a new wording suggests that the causal link between domi-

nance and the abusive practice does not need to be interpreted in a strict sense.7 This

may be a reaction to the Facebook decision of the Düsseldorf Higher Regional Court

that i.a. stated that causality had not been established.8

In section 20 (1) sentence 2 a new provision on exclusion states that intermediaries

may not impede other companies when they act as gatekeepers for supply and sales

markets.

With section 20 (3a) the legislator suggests a provision aimed at containing the “tip-

ping” of markets. According to this provision, it is a violation of competition law if

a platform or social network “impedes the independent attainment of distinctive pos-

itive network effects by competitors and thereby creates a serious risk that competi-

tion on the merits is restricted to a not inconsiderable extent.”

The notion of impediment seems to be rather broad and cover many exclusionary or

lock-in practices. The situation may have been modelled with a view to the role of

Amazon vis-à-vis retailers that are active on the Amazon marketplace.9

In section 19 (2) No. 4, the equivalent to Art. 102 TFEU, the draft amendment aims

at easing the essential-facility-rule. The definition of “essential facility” is now ex-

plicitly extended to include data, or networks. This is supplemented by the rule in

6 Draft 2020 bill (GWB-E) p. 81. 7 Cf. the Explanatory memorandum of the draft bill in annex to the draft bill, p. 72. 8 OLG Düsseldorf, 26.8.2019 – VI-Kart 1/19 (V) – Facebook/Bundeskartellamt, recital 37, 46 f. 9 Cf. the investigation of the EU Commission on Amazon, case AT.40462 - Amazon Marketplace,

press release https://ec.europa.eu/commission/presscorner/detail/en/IP_19_4291.


section 20 (1a) according to which undertakings may be in a superior bargaining

position if others depend on access to data. The impediment of access is seen as ex-

clusionary behaviour under this rule, i.e. the data-rich company has to open up access

– even if the data had not yet been commercialised.

3. Regulating GAFA

The most remarkable and some say: revolutionary change is a new rule in section

19a of the draft bill that implements a competition-oriented regulation for “undertak-

ings with paramount significance for competition across markets” (UPSCAM). The

cross-market significance of a company is the defining criterion for applicability, and

it only applies to companies that are active on multi-sided markets or with networks.

The rule clearly targets companies like Google, Amazon, Facebook or Apple

(GAFA). To establish this significance several factors are mentioned: dominance,

financial strength, access to resources, vertical integration, activities on other related

markets, access to data and “the importance of its activities for third parties’ access

to supply and sales markets and its related influence on third parties’ business activ-

ities”. This can be interpreted as meaning that the undertaking in question must have

a gatekeeping position or operate a digital ecosystem.

The Bundeskartellamt decides by order whether a company is an UPSCAM. If this

has been established, the undertaking in question is subject to a specific regulatory

regime. The Bundeskartellamt may take an order prohibiting the following practices:

• discrimination in intermediary services;

• impediment of competition in markets where the UPSCAM is not yet domi-

nant;

• use of data for making market entry more difficult;

• demand of terms and conditions that allow the use of data of others;

• impediment of data portability;

• withholding information from other companies about their success in mar-

kets.

Undertakings may prove that the behaviour in question is justified, yet they carry the

burden of proof for this. The agency may not just work with plain prohibitions but

also with interim measures and remedies for section 19a.

Para 3 clarifies that Sections 19 and 20 GWB remain unaffected in their entirety.

Conversely, any conclusion to the effect that conduct not prohibited under paragraph

2 would thus also be permitted under sections 19 and 20 of the act is also excluded.

The rule is on the defining line of sectoral regulatory rules on the one hand and stand-

ard competition law on the other. The rule has three decisive new features: It broad-

ens the scope of application of abuse provisions beyond the market dominance

threshold. It enables the competition authority to prescribe behaviour for the future


without a previous violation of competition law. It explicitly shifts the burden of

proof for the justification of such behaviour.

This certainly stimulates the imagination of people that favour a sturdier approach in

enforcement.

II. Analysing institutional change – the model provided by North

Douglass C. North, one of the eminent thinkers who helped to establish New Institu-

tional Economics as a school of thought, presented a sketch of a framework in 1991

for the analysis of institutional change.10 For this paper, this framework serves as a

blueprint to analyse competition law reforms in Germany. North did not see the

framework as a complete theory or model, but rather as providing the elements nec-

essary for analysis.

Key to the analysis of North and other authors in the same institutional and evolu-

tionary vein (such as Nelson Winter, Carsten Hermann-Pillath, or – with a strong link

to competition analysis – Wolfgang Kerber)11 is their focus on change. The institu-

tional and evolutionary models help explain the dynamics in society, the change. This

was one of the major contributions of these authors to the field of economics (where

they come from), namely to add a dynamic perspective to the explanation of how

scarce resources are distributed. Change is the focus of this paper so that their frame-

work may give guidance for the analysis. While North typically focusses on eco-

nomic processes in his work, he himself uses the framework to analyse American

economic history, including landmark judgments and new laws. He is careful to

stress that the framework may be applied to polity as well as to economy.12 North’s

approach has been developed further in many publications by other authors.13 For the

purposes of this paper it shall suffice to rely on the basic model of North.

10 North, Institutions, Institutional Change and Economic Performance, Cambridge University Press

1991; cf. North, Institutional Change: A Framework of Analysis, University Library of Munich,

Economic History 9412001, 1994, available at econwpa.ub.uni-muenchen.de/econ-wp/eh/pa-

pers/9412/9412001.pdf. The paper builds on North’s book. 11 Nelson/Winter, An Evolutionary Theory of Economic Change, 1982; Hermann-Pillath, Grundriß der Evolutionsokonomik, 2002; Kerber, Evolutionary Competition. Theoretical and Institutional

Foundations of the Institutional Framework for Competition, 1994. 12 North, Institutional Change, 1994, p. 9 ff. 13 For an overview cf. Kingston/Caballero, Comparing theories of institutional change, Journal of

Institutional Economics (2009), 5: 2, 151; Thelen/Conran, Institutional Change, in: The Oxford

Handbook of Historical Institutionalism, edited by Orfeo Fioretos, Tulia G. Falleti, and Adam

Sheingate (2016).


1. Institutions

The framework serves to analyse institutional change. Institutions are defined by

North as „rules of the game in a society or, more formally, […] the humanly devised

constraints that shape human interaction.“14 Institutions and other elements, such as

technology, budget or power “determine the choices that individuals make that shape

the performance of societies and economies over time.”15

Formal rules, i.e. laws, are part of the definition of institution: “Institutions consist

of formal rules, informal constraints (norms of behaviour, conventions, and self-im-

posed codes of conduct) and the enforcement characteristics of both.”16 Institutions

are thus defined as “the rules of the game” in society. Interestingly, North mentions

enforcement as a distinct and equally important part of the institutional framework.

Several institutions that interlock are seen as structures; the structures together form

the “order” of a society, the framework for interaction of the members of society.17

The abuse provisions in competition law are institutions according to this model.

Together with the rules on enforcement, the setup of the enforcement agency, the

body of law that serves as precedent, the guidelines by the authority, the compliance

requirements in companies and other institutions they form the structure of antitrust.

This structure together with other rules on markets and corporate behaviour and law

enforcement form the legal market order.

(With the institutional model, the different aspects of the “order” are stripped of their

intrinsic legal characteristics. This helps to understand the design as such.)

Neither institutions, nor structures, nor the “order” should be seen as static: They are

constantly evolving through all the coordinative processes (transactions) going on in

society and the feedback effects from these. This is in the line of thinking of Hayek

who spoke of “spontaneous orders” established in markets, yet it reaches beyond the

approach to markets.18 Just like markets society and the political and legal framework

are altered with every single move made by an actor.

In the view of institutional economists, society consists of different organisations and

actors who cooperate through transactions. Organisations, the players in the game of

society are “groups of individuals engaged in purposive activity”, e.g. as companies

or political parties. They follow an objective purpose (e.g. profit maximisation or

winning elections) while individual actors follow their subjective purposes and may

14 North, Institutions, Institutional Change and Economic Performance, 1991, p. 3. 15 North, Institutional Change, 1994, p. 2. 16 North, Institutional Change, 1994, p. 2. 17 Cf. Hermann-Pillath, Evolutionsökonomik, 2002, p. 267. 18 Hayek, Recht, Gesetz und Freiheit, 2003, p. 117, 260.


have their very own mind-sets. The complexity of societies today means that no sin-

gle actor can change institutions on its own – this is part of democracy.19

Living together in society is a constant process structured through transactions. The

notion of transaction is not confined to economic transactions in the market sense,

but encompasses every exchange and coordination in society including political ex-

changes, elections, or similar. Using the word “transaction” for this opens the room

for the analysis according to costs. Change in society is brought about by transactions

(i.e. exchanges of actors), and the frequency and impact of such transaction depends

on transaction costs. At this point, North’s model directly relates to the works of

scholars like Ronald Coase or Oliver Williamson.20

2. Institutional changes as a result of perceived opportunities

So, how are institutions changed? This is the question North is primarily interested

in, and he identifies “the entrepreneur” as the agent of change. Entrepreneurs (not

confined to an economic meaning) are the decision-makers in organisation. The de-

cision-makers follow subjective purposes and their decisions are influenced by their

perceptions of how to make choices. Choice exists when opportunities arise – oppor-

tunities for change that promise to make the decision-maker better off. Such oppor-

tunities may arise from external sources or the internal acquisition of new skills

through learning. These influences change the perception of opportunities to gain at

the margin for actors. Entrepreneurs take the chance and try to change the institution

that binds them to another path.

Accordingly, a social norm may be altered when decision-makers perceive the op-

portunities to gain at the margins when altering the institutional frameworks for new

transactions. Such changes can be brought about through entering into new transac-

tions or through altering conditions to certain transactions. For instance, a munici-

pality may decide to offer new residents free child care facilities. This may prompt a

company to move its offices to that municipality. The institution is changed; the

transaction serves as a confirmation, stabilisation and booster to this change.

Changes to formal rules however require the intervention of the competent bodies.

For example, judges may change the interpretation of a rule in certain cases and

thereby change the formal framework for organisations and actors, i.e. shift the gains

from A to B, through their decisions. Legislators may introduce new formal rules.

19 Cf. Hayek, Recht, Gesetz und Freiheit, 2003, S. 46; cf. Amstutz, Evolutorisches Wirtschaftsrecht,

2001, p. 33 ff. 20 Coase, The Problem of Social Cost, Journal of Law and Economics Vol. 3 (October 1960) 1–44;

Williamson, The Economics of Organization, The American Journal of Sociology, 87 (3) 548 ff.

(1981).


Even such changes to formal rules will often come about “subconsciously” (a term

that North reserves for changes to informal constraints). Yet, in my experience, it is

equally possible that changes in the law, e.g. by a court, “occur gradually and some-

times quite subconsciously as individuals evolve alternative patterns of behaviour

consistent with their newly perceived evaluation of costs and benefits”.21 It is a

widely known phenomenon, for instance, that actors devise work-arounds of formal

rules that they see as unfit for their latest purposes. A common example is the con-

tractual agreement to supersede formal rules given by the state with rules negotiated

by the parties.

3. The role of information

Change may also be interpreted as a consequence of new information entering the

system. The order (as shaped by structures and institutions) provides the information

for actors what to expect if they enter into certain transactions. Institutions therefore

reduce uncertainty and provide the information what to expect from certain behav-

iour.22 This is the stabilising, anti-change effect of an order. Usually, some institu-

tions, structures and orders are also enshrined in formal rules that are difficult to

change – laws, for instance. This institutional design serves to reduce uncertainty and

keep actors in a situation of equality: The setup provides information that the actors

need to coordinate their actions.23 A stable and well-protected framework can thus

reduce conflicts and foster efficiency.

This works as long as the information provided through the order is not out of touch

with either external events or the learning in society. Institutions, these humanly de-

vised constraints, may come at odds with new information that is discovered or flows

into the system. If there is new information, this may enable certain actors to enter

into different, more profitable transactions which in turn may lead to an alteration of

institutions – society is a constant learning experience with high dynamics.

Processing information is a key quality for making choices, and information asym-

metries, incomplete or inaccurate information lead to higher costs of transacting and

thus to imperfect markets and institutions.24 In politics, North observes (in 1994!)

that incomplete information means that ideological stereotypes prevail as underpin-

nings for the subjective models of perception of choices by individuals, and thus,

choices result in unproductive institutions and organisations.25 This makes the role

of ideas, ideologies and shaping opinions so important: since people shape the insti-

tutions according to their models of perception.

21 North, Institutional Change, 1994, p. 6. 22 Cf. North, Institutions, Institutional Change and Economic Performance, 1991, p. 69. 23 Cf. North, Institutions, Institutional Change and Economic Performance, 1991, p. 6 f. 24 Cf. North, Institutional Change, 1994, p. 17. 25 North, Institutional Change, 1994, p. 19.


Striving for better information leads to competition in the fora of society. It is obvious

that two icons of 20th century economics, Schumpeter and Hayek, are combined in

this model of understanding change. Kerber/Budzinski consequently describe com-

petition (and thus the coordination in society) as a research process in which actors

try to gain more information in order to reduce their costs in transactions.26

Such perceptions are subject to constant learning and feedback effects, so that the

system is a complex one. The perception is also subject to biases, bounded rationality

and mental models – otherwise it would be possible to exactly calculate gains and

losses. Yet, humans do not act as rational behaviours all the time, be it for lack of

information or personal tastes and biases. (To recognise this was a major contribution

at the outset of the New Institutional Economics.)

While information is the source of change, it still needs to translate into potential

opportunities for actors. These arise when actors acquire new skills (“learning”) to

process and use information, or when external influences or shocks shatter the insti-

tutions so that old information is no longer valid. Actors accordingly become agents

of change when they are able to profit from new information, be it through changes

in the circumstances or in their individual possibilities.

(The free and non-discriminating flow of information and the provision of learning

opportunities is thus an important value for a society that respects the equality of its

members.)

4. Path dependency

A prime feature of change and its direction is path dependency. The notion of path

dependency highlights that change usually stays on a given path that has been prede-

termined before the actual change has occurred. First decisions for one option may

have an exponential impact at a later stage through paving the path of further deci-

sions.27 With each step it becomes more difficult to change to another path. This is

why diversity of paths is often regarded as a key quality for the appropriate changes

when external influences change the picture: The flexibility to react is higher if you

have not yet invested heavily into one particular reaction pattern only.

North explains why diversity and flexibility are often reduced which makes it harder

to change institutions: “The political and economic organizations that have come into

existence in consequence of the institutional matrix typically have a stake in perpet-

uating the existing framework.”28 It is path dependency – or put differently – the

26 Cf. Kerber in: von Delhaes/Fehl, Dimensionen des Wettbewerbs, 1997, p. 29, 49 f.; Budzinski,

Evolutionary Theory of Competition, 2004, p. 7 f. 27 Cf. North, Economic Performance Through Time, 84 American Economic Review 359 (1994);

Liebowitz/ Margolis, Path Dependence, Lock-In, and History, 11 Journal of Law, Economics and

Organization, 205 (1995). 28 North, Institutional Change, 1994, p. 7.


preservation of privileges that makes institutional changes hard to achieve. Organi-

zations also act with „organizational routine.“29

In consequence the process of change is often an incremental one: “The reason is that

economies of scope, the complementarities, and the network externalities that arise

from a given institutional matrix of formal rules, informal constraints, and enforce-

ment characteristics will typically bias costs and benefits in favour of choices con-

sistent with the existing framework. (…) Therefore (…) institutional change will oc-

cur at those margins considered most pliable in the context of the bargaining power

of interested parties.”30

5. Disruptive changes

While the elements described so far are typical for incremental change, the dominant

pattern of change, there are situations in which revolutionary (or: disruptive) institu-

tional changes occur. The starting point is the weakening of power of existing organ-

isations and the rise of new organisations with a different objective pursuit through

external changes or unanticipated consequences of previous actions. In such a situa-

tion, certain actors may step forward who take the freedom (as North says) or the

better information they possess and use the opportunity to achieve a more favourable

institutional framework for their organizations or personal actions. In such a situation

one would usually expect some trading of the affected parties (i.e. political compro-

mise). Yet, where institutions to mediate the conflict are lacking or bargaining power

is so unevenly distributed that the incumbent actor does not stand a chance revolu-

tionary changes to the framework may occur. Disruption then is the outcome of an

order that lost the ability to compromise.

“However”, North concludes, “revolutionary change is never as revolutionary as its

rhetoric would have us believe.”31 He offers two explanations for this effect: Firstly,

utopian ideals clash with harsh realities after revolutionary changes. Secondly, “for-

mal rules may change over night, but informal constraints do not”.32 This incon-

sistency is resolved “by some restructuring of the overall constraints – in both direc-

tions – to produce a new equilibrium that is far less revolutionary than the rhetoric.”33

29 Nelson/Winter, An Evolutionary Theory of Economic Change, 1982, S. 400. 30 North, Institutional Change, 1994, p. 6. 31 North, Institutional Change, 1994, p. 8. 32 North, Institutional Change, 1994, p. 8. 33 North, Institutional Change, 1994, p. 9.


III. The reform process from an institutional perspective

The competition act is an institution in the sense of North, and as a formal rule it is

an institution that is particularly hard to change. Laws are stable institutions that are

protected from change through the mechanisms of the law-making process so as to

provide a structure for transactions and to contribute to the order. This makes market

participants rely on the validity of the institution. Consequently, they are able to as-

sess their opportunities in markets accordingly and can enter into transactions in con-

fidence since they comply with the formal rules. This reduction of uncertainty is often

called “legal certainty” or “legal stability”. Legal certainty and stability can thus also

be interpreted as blocks to change.

This means that the drivers for change must be particularly strong. So, what were the

drivers of change of this institution in Germany in the 2020 reform of the competition

act?

Formally, the rules are changed by Parliament; Parliament in turn is influenced by

public opinion. Another important actor in Germany is the Bundeskartellamt, the

Federal Cartel Office, which has a strong voice in public and is well connected to the

Ministry and policy-makers, too. Stakeholders that are particularly strong in compe-

tition advocacy are the business associations representing the core companies of the

German economy, mostly more traditional industrial players.

According to the North model, change occurs when actors see opportunities to gain

at the margin, and this is typically the case if they gather new skills, get new infor-

mation or perceive external developments that change their position.

1. The external “shock”

The external “shock” that changed the perception of actors was, of course, the digit-

isation of industries and markets with the rise of new online companies and digital

gatekeepers like Amazon or Google.

For the more traditional German business elite, comprising industries like automo-

tive, steel, pharma or machines, digitisation changed their opportunities in markets

for the worse. At least this was the predominant perception. The perception (spurred

by information) is the relevant aspect since the actors in markets decide on the basis

of information on their future choices. This is an inherently insecure bet, largely

shaped by the perception of the order and the structures. Bounded rationality, biases,

misinformation and misjudgement all play a role.

For companies fearing to lose their position as international market leaders a change

of formal rules is a promising perspective. It may shift the starting positions and

choices to those who now feel insecure in their past choices.


This perception in industry circles was vital for creating an atmosphere of change in

Germany. The major business associations got involved in governmental commis-

sions or consultations on how to adapt the regulatory framework in the digital econ-

omy.

At the same time or even earlier than that, scepticism had set in regarding activities

of big online firms like Google. This debate was pushed forward through the intro-

duction of a (in the end fruitless) press publisher right for the use of snippets in ser-

vices like Google News. Two very influential newspaper managers, the head of pub-

lishing Axel Springer (leading tabloid Bild) and the editor of the most important con-

servative broadsheet newspaper Frankfurter Allgemeine Zeitung, published widely

perceived articles in favour of taming the Silicon Valley companies ahead of time

when compared with the international debate.34 (Media companies were the first to

be hit by digitisation, in particular through the loss of ads to online. Accordingly,

they were, from on early point on, particularly adaptive to change and used their

reach to influence the debate.)

With the two leading German conservative newspapers the field was perfectly well

prepared for convincing conservative politicians who are traditionally less interven-

tionist than the more progressive parliamentarians.

The governing grand coalition of Christian Democrats and Social Democrats was

further pushed into a reform of competition law by a respected and highly committed

politician from the Green party who kept advocating for a tougher stance. Apart from

convictions (allegedly, these may play a role in politics), she had reason to believe

that she would gain with calling for a tougher regime since this approach was largely

supported by leftish and green NGOs. (An alliance of NGOs called for “Reducing

corporate power”).35 So, political pressure came from two angles to the government

coalition, evoking the impression that doing nothing would be a choice that endan-

gers the current position.

The first hypothesis from this view on the legislative process is that the external

shock of digitisation may have triggered political activity by certain actors. This was

the prerequisite for change. Three more aspects stand out:

- It is decisive to change perceptions. Information conveyed by the media play

a decisive role in this process. In Germany, calls for changes in the laws fell

on fertile ground since there had been extensive media coverage of the dan-

gers of digital gatekeepers.

34 Cf. Schirrmacher, Technologischer Totalitarismus, 2015. 35 Cf. the paper by Oxfam and others, available at https://www.oxfam.de/ueber-uns/publika-

tionen/ungezaehmte-internetgiganten-gwb-digitalisierungsgesetz-tippelschritte.


- If the hypothesis on information holds true, this also means that a reduction

of media plurality, e.g. by channelling information through one gateway only,

would make the political discourse very liable to one-sidedness.

- The change of perception of politicians (who ultimately need to take the for-

mal decision to change the institution) was supported in Germany by closely

affiliated groups: conservative media and business associations on the one

side of the political spectre, leftish NGOs on the other one.

2. The Bundeskartellamt’s “new skills”

The Bundeskartellamt is a key player in law-making as regards the competition act.

The president is frequently cited by the media and has an active role in policy. The

FCO has strong connections with the Ministry of Economics and is standing practice

that there is an exchange of officers between the two institutions.

The Bundeskartellamt, as every other actor, was hit by digitisation and its impact on

the economy. It is important that the Bundeskartellamt did not only deal with Face-

book in the internationally known data abuse case. Facebook was the end of a learn-

ing process, not its beginning. The trial-and-error-process, so my hypothesis runs, is

the reason why the Bundeskartellamt became an agent of change.

The Bundeskartellamtstarted early on to deal with cases from the Internet sector, and

it dealt with these cases in a diligent way. As early as 2000, the Bundeskartellamt

decided on a B2B-online platform called Covisint where leading car manufacturers

joined forces to have a platform with suppliers.36 The 17-pages non-opposition mer-

ger decision is obviously far from today’s sophistication in such cases but already

contains many of the relevant competition-related features of digital platforms. The

same is true for a joint venture of Daimler and Deutsche Telekom from the year 2001

that was intended to provide a B2C-platform where users should be able to book

hotels, travel arrangements, buy cars etc. under the use of the established brand name

of Mercedes. (The platform was expected to be used in cars, too.) There were no

grounds to oppose that joint venture with competitors like AOL, Yahoo or Lycos, yet

the decision contains a neat description of digital B2C platforms and their functions.37

If you follow the path the Bundeskartellamt took from these first decisions on digital

platforms you find an authority that acquired the skills of dealing with digital cases

over the years – from Covisint and MB-Portal onwards. It is an impressive track

record.

36 Bundeskartellamt, 25.9.2000, B5-40/00 – Covisint. 37 Bundeskartellamt, 26.3.2001, B5-14/01,– MB-Portal.


More recently, the Bundeskartellamt engaged heavily in Internet-related case work,

also in the field of abusive practices, and also fundamental conceptual work with

many publications.

In 2013, the Bundeskartellamt took two decisions on MFN clauses: In amazon mar-

ketplace the FCO criticised amazon’s practice of forcing its users to offer the lowest

price on amazon marketplace.38 The case resulted in amazon ending this practice.

The Bundeskartellamt also went after HRS, a portal for hotel rooms that had a best

price clause with the hotels listed on the portal.

In 2015, the Bundeskartellamt founded an internal think tank in charge of developing

concepts on how to guarantee competition in the platform industry. It produced a first

working paper on platforms and networks in 2016 that sparked a lot of interest.39

Together with the preceding decisions this paved the way to a series of cases on plat-

forms, covering nearly all areas of competition law.

In the same year, the Bundeskartellamt had to evaluate two mergers of digital plat-

forms: In Parship/ElitePartner, two dating portals “married”, and the FCO devel-

oped the criteria for assessing market power of digital platforms, e.g. regarding multi-

homing.40 In the second one, two comparison portals for the housing market were

combined.41 Both cases were not challenged by the Bundeskartellamt, yet the deci-

sions are still very intensive studies of the digital economy.

The Bundeskartellamt, in 2015, also prohibited “narrow” best price clauses by hotel

portal booking.com, a case later lost in first instance in court (it is still pending with

the highest competition court in Germany).42 Regarding vertical restraints, the Bun-

deskartellamt decided in Asics that a manufacturer of sports shoes may not prohibit

resellers from using online distribution channels, e.g. search engines and online mar-

ket places.43 An abuse investigation concerned Google’s practice of using snippets

of press publishers without remuneration. The Bundeskartellamt did not find a vio-

lation of competition law here.44

The Bundeskartellamt also investigated a ticketing platform that is the market leader

in Germany for the organisation of ticket sales for concerts and other events. This led

to a ban of a vertical merger of the platform with a concert agency and the prohibition

38 Bundeskartellamt, 26.11.2013, B6-46/12 – Amazon Marketplace. 39 Bundeskartellamt, Working Paper "The Market Power of Platforms and Networks", 2016, availa-ble at https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Berichte/Think-Tank-Bericht-

Langfassung.html?nn=10321672. 40 Bundeskartellamt, 22.10.2015, B6-57/15 – Parship/ElitePartner. 41 Bundeskartellamt, 20.4.2015, B6-39/15 – Immowelt/Immonet. 42 Bundeskartellamt, 22.12.2015, B9-121/13 – Booking.com. 43 Bundeskartellamt, 26.8.2015, B2-98/11 – ASICS. 44 Bundeskartellamt, 8.9.2015, B6-126/14 – Google/VG Media u.a.


of certain practices of the platform.45 The decisions were confirmed by court.46 XOM

Metals concerned a new B2B-platform in the steel sector.47 The merger case HERE

dealt with the hub for automated driving and was not opposed by the Bun-

deskartellamt.48

In 2019, finally, the Bundeskartellamt closed the Facebook investigation with its

stunning decision (later overturned by the court in interim proceedings (further deci-

sions are pending)).49 The other top Bundeskartellamt case in 2019 concerned Ama-

zon’s terms and conditions towards retailers, including choice of law, forum, liabil-

ity, termination of business relationship and others which ultimately led to Amazon

changing its terms and conditions not only for the German market but worldwide.50

The Bundeskartellamt also published a sector inquiry on comparison portals.51

My hypothesis is: The Bundeskartellamt’s instrumental role in changing the German

competition act was built on the acquisition of new skills over years. This allowed

the Bundeskartellamt to exactly identify where it may gain at the margins from a

reform of competition or how that institution needs to be altered in order not to lose

ground in interventions.

The Bundeskartellamt had a constant learning experience from 2001 onwards with

many cases in the digital field. Understanding the Bundeskartellamt’s work as a con-

stant learning experience is an eye-opener for the conditions of success of enforce-

ment: When skills are trained again and again, when concepts are developed and

implemented on several occasions, this raises the quality of the work and it makes it

much easier to understand the shortcomings of the existing institutions/rules. The

cases enabled the Bundeskartellamt to understand the dynamic impact of companies

like Google, and the intricate balances of power in many markets affected by digital

change. With cases like XOM Metals and HERE, it also learned about the needs of

more traditional industrial companies in Germany.

The benefit of doing many cases is in line with the research on “repeat players” in

courtrooms.52 For the European Commission, this means: if there are only few cases

45 Bundeskartellamt, 23.11.2017, B6-35/17 – CTS Eventim/Four Artists; Bundeskartellamt,

4.12.2017, B6-132/14-2 – CTS Eventim Missbrauchsverfahren; 46 OLG Düsseldorf, 5.12.2018, VI-Kart 3/18 (V) – Ticketvertrieb I; OLG Düsseldorf, 3.4.2019, VI-

Kart 2/18 (V) – Ticketvertrieb II. 47 Bundeskartellamt, 27.2.2018, B5-1/18-001 – XOM Metals. 48 Bundeskartellamt, ‘BMW, Daimler and Audi can aquire Nokia's HERE mapping service’

6.10.2017, press release; Bundeskartellamt, ‘Bundeskartellamt clears participation of Intel and Na-vInfo in HERE mapping service’, 24.1.2017, press release. 49 Bundeskartellamt, 6.2.2019, B6-22/16 – Facebook; OLG Düsseldorf, 26.8.2019, VI-Kart 1/19 (V)

– Facebook/Bundeskartellamt. 50 Bundeskartellamt, 17.7.2019, B2 – 88/18 – Amazon. 51 Bundeskartellamt, ‘Sektoruntersuchung Vergleichsportale – Abschlussbericht’, 11.4.2019. 52 Cf. the seminal study by Galanter, Why the "Haves" Come out Ahead: Speculations on the Limits

of Legal Change, Law & Society Review, Vol. 9, No. 1, Litigation and Dispute Processing: Part


and you try your instruments with the most important case first (e.g. Google Shop-

ping), you are in a much harder position. Big cases need practice in smaller cases to

be successful.

The knowledge from the long list of case practice enabled the Bundeskartellamt to

give detailed input to the Ministry on reform proposals and the specific provisions

that were needed to advance the case of that organisation, i.e. to open up new choices

for the deciding case officers.

3. The role of other information

The reform process gained momentum with reports and studies flowing in. They did

two things: Firstly, they provided the necessary information for transforming the “un-

ease” with the GAFAs and the hope for a digital competitive framework into concrete

rules. Secondly, and maybe even more important, the reports shaped the perception

of the current situation in the relevant communities.

The government itself commissioned a study on the modernisation of abuse provi-

sions from scholars Heike Schweitzer, Justus Haucap, Wolfgang Kerber and Robert

Welker.53 Schweitzer also served as a Special Adviser to the EU Commissioner, to-

gether with Jacques Crémer and Alexandre-Yves de Montjoye.54 The two reports set

the scene, not so much by making specific proposals but by establishing the percep-

tion that action is required and that revolutionary changes are going on. This inter-

pretation was also vigorously put forward by Commissioner Margrethe Vestager55

who managed to paint the EU Commission as a leader in the field.

The UK report on Unlocking Digital Competition, the Report from the Stigler Center

and the Australian Report all had the common theme of a necessary update of anti-

trust rules with a focus on platform companies and data issues.56 They represented

One (Autumn, 1974), pp. 95 ff. Later the repeat player has been frequently investigated (with differ-

ent outcomes). 53 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018. 54 Cremer /Montjoye,/Schweitzer, Competition policy for the digital era, Report 2019, available at

https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf. 55 Hearings of European Commissioners-designate: Margrethe Vestager Vice-President: A Europe

fit for the digital age, available at http://www.europarl.europa.eu/Reg-

Data/etudes/BRIE/2019/640171/EPRS_BRI(2019)640171_EN.pdf, p.6 f. 56 Unlocking digital competition, Report of the Digital Competition Expert Panel, 2019, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attach-

ment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf; Stigler Committee

on Digital Platforms, Report 2019, available at https://research.chicagobooth.edu/-/media/re-

search/stigler/pdfs/digital-platforms---committee-report---stigler-cen-

ter.pdf?la=en&hash=2D23583FF8BCC560B7FEF7A81E1F95C1DDC5225E; Digital Platforms In-

quiry, Australian Competition and Consumer Commission, Report 2019, available at

https://www.accc.gov.au/system/files/Digital%20platforms%20inquiry%20-%20final%20report.pdf.


international “evidence” that this was not an off-track German idea, but was well in

line with ideas promoted in countries that are not suspects of overregulating.

The Report, finally, of a commission on “Competition Law 4.0”, again instructed by

the Ministry of Economics, ran in the same vein, even though being less outspoken

on necessary changes. Yet, the details of different proposal were not the matter of

intense public scrutiny.

In the relevant communities of practitioners and academics 2019 was the year in

which it became common understanding that the antitrust rules need a change. (My

perception is that many in these communities are still not convinced but they did not

manage to shape perceptions.) The information from the different reports was vital

for this.

Competition also encouraged agents of change in their perception that they needed

to act. All sorts of institutions, agencies etc. published proposals for new rules in

related fields, e.g. on the European level. From a political perspective this may mean

that the opportunities at the margin for organisations may be reduced. The “first

mover advantage” in public perception was only granted to stakeholders if antitrust

policy was the first field to have a fundamental reform.

The hypothesis drawn from this is that national and international reports provided the

necessary legitimacy for policy-makers to intervene in a critical field of business.

The reports provided the necessary information to shape the perception of the situa-

tion. Their value in this “framing” is probably more important than the specific de-

tails in the reports.

IV. The results of this process

Looking at the results in the draft bill more specifically reveals the different influ-

ences that were at play to shape the rules.

1. Who got what?

The international look at the German draft bill often focuses on the rules for (or rather

against) GAFAs in section 19a. When reviewing the changes in the draft bill it is

important, however, to see the two strands of thinking that were combined: One, tam-

ing the giant Silicon Valley companies; two enabling German companies to compete


in a digital economy. The first pillar of the draft bill has some connection to the sec-

ond but is more inspired by consumer protection and data protection ambitions – and

by the Bundeskartellamt’s hope for opportunity gains in cases against the GAFAs.

a) Section 19a

Section 19a57 allows the Bundeskartellamt to define special companies of paramount

significance for competition across markets (UPSCAM). Once defined, the FCO has

the possibility to give specific orders. This is close to a regulatory regime as is typical

for utilities for instance. Having said that, the acts to be prohibited for UPSCAMs

include typical exclusionary conduct. Two things make the difference: The UP-

SCAM does not necessarily need to be dominant in the relevant market. Also, the

undertakings bear the burden of proof that there is justification for the behaviour in

question.

This new rule is directed against the GAFA companies. The actor profiting most from

this is the Bundeskartellamt: One of the provisions may help directly in the ongoing

Facebook case (No. 3). No. 3 and 5 also read like providing a fall-back provision if

the European Commission fails with its Amazon investigation.

The main information for this new provision comes from the idea of companies with

“strategic market status” in the Furman Report. 58

b) Access to data

Access to data has been a major topic of discussions in Germany for some time. This

is owed to a mix of motivations. Companies need access to data for innovation, par-

ticularly in the field of Internet of Things or smart applications. German companies

seem to be particularly data-hungry in this respect – they have all it takes from a

hardware perspective, but lack the necessary data. At the same time, the Facebook

ruling and the whole controversy surrounding this pointed at the lack of consumer

sovereignty in this field and the privacy issues associated with personal data (and

regulated by the GDPR). Former head of the Social Democrats, Andrea Nahles, had

proposed a Data for all-law including the suggestion to hand out non-personal data

as a public good, oblige “data monopolies” to share, and incentivise data sharing

models.59

The draft bill provides several rules that should enable access to data for all sorts of

companies. This has no connection to the more privacy-related issues of the Face-

book case, but instead as a clear favour to (German) companies that they may profit

from. (It is not exclusively for German companies, of course.) The Commission 4.0

57 An English version of the draft rule is available at https://www.d-kart.de/wp-content/up-

loads/2019/11/RefE-GWB10-dt-engl-%C3%9Cbersicht-2019-11-15.pdf. 58 Digital Competition Expert Panel, Unlocking digital competition, 2019, (“Furman Report”), p. 9. 59 Digitaler Fortschritt durch ein Daten-für-alle-Gesetz, Andrea Nahles, available at

https://www.spd.de/fileadmin/Dokumente/Sonstiges/Daten_fuer_Alle.pdf.


had recommended easing access to data (if not exactly in the direction of the draft

bill).60 The German paper on abuse by Schweitzer et al. was more conservativein this

regard although it had dealt with it at length. It contained a recommendation however

that was implemented regarding access to data that had not yet been commercial-

ised.61 Again, the preparatory studies were of great importance.

c) Abuse

The draft bill tries to break the causal link between dominance and abuse in section

19 by a different wording. This is a clear reaction to the Bundeskartellamt losing the

Facebook case in interim proceedings at the Düsseldorf Higher Regional Court. The

bench had – inter alia – stated that there is no strict causality of dominance and ex-

ploitation of data with Facebook users.

This change is a direct answer to case practice – and the legislator weighs in in favour

of enforcement.

d) Anti-tipping-rule

In section 20 (3a) the draft bill proposes an anti-tipping rule. This is, on the one hand,

taken from the recommendations by Schweitzer/Haucap/Kerber/Welker who had

supported to close remaining gaps against exclusionary strategies that may enable

tipping.62 On the other hand, this is also a consequence of the case work in Bun-

deskartellamt cases like the dating platforms case, CTS Eventim and Facebook that

had exposed the likelihood of tipping under certain conditions.63 The rule changes

the opportunities for companies that are not likely to become the one and only oper-

ator in a platform market, and thus, at first glance, this helps German companies.

With B2B-platforms on the rise however, German industrial players hope to be in a

leadership position in these cases. This may justify the mixed reactions of business

associations.

e) Procedural changes

The draft bill foresees eased requirements for interim measures in section 32a. In the

official press statement of the Ministry, this is given a lot of room under the heading

of “speeding up” antitrust procedures. However, interim measures do not serve to

speed up proceedings (often even in the contrary), but to stop irrevocable harm to

competition.64 For competition authorities and businesses lowering the bar is not of

particular interest. Here, it is the opportunity gain for politicians themselves that may

60 Kommission Wettbewerbsrecht 4.0, Chapter V. 61 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, p. 159 f. 62 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, p. 166. 63 Cf. Explanatory memorandum to the draft bill, p. 85. 64 Podszun/Deuschle, Einstweilige Maßnahmen im Kartellrecht, WuW 2019, p. 615.


have had the upper hand: They are able to sell it to voters that they are making cum-

bersome procedures more dynamic.

Another procedural issue is a gain for business: Companies may turn to the Bun-

deskartellamt to ask for a “comfort letter” when planning cooperation. This rule in

section 32c (4) is drafted for data sharing agreements, for instance, and it provides

comfort for companies while it puts pressure on the Bundeskartellamt to decide

within six months on possibly delicate cases.

In summary, the institutional analysis gives a clearer picture of potential gains from

the changes. It turns out that the Ministry’s draft is equally driven by enforcement as

well as by creating opportunities for business.

2. Path dependency of change

For the institutional analysis it is important to try to discover the information that

shaped the perception of choices. This leads to an analysis of the features of the laws

as incremental – developed in line with institutions – or revolutionary – disrupting

existing patterns of regulation.

a) Incremental or revolutionary?

According to North, change usually happens incrementally, not in a revolutionary

way due to existing power relations. This is all the more true when formal rules (laws)

are at stake since they require change by competent bodies that currently have power

and will usually avoid change in order not to endanger their position in the power

matrix.

Some observers still dubbed the changes for digital companies as “revolutionary”, in

particular section 19a, but also rules on data access and against tipping.65

Is that just “rhetoric” as North suggests?

According to him revolutionary change is likely to occur when there is “a lack of

mediating institutions that enable conflicting parties to reach compromises that cap-

ture some of the gains from potential trades”.66 Revolution is the result of a lack of

compromise. In the current situation of debates in society with a strong polarisation,

revolutionary changes may be more frequent than before. Even in antitrust scholar-

ship, there is a profound divide between a more pro-enforcement group (sometimes

denounced as “antitrust hipsters”) and a more anti-enforcement group (sometimes

65 For example by Meyer-Lindemann, as quoted here: https://www.d-

kart.de/en/blog/2019/10/31/conference-debriefing-15-forum-unternehmensrecht-zur-10-gwb-no-

velle/; or Podszun in an interview here: https://www.juve.de/nachrichten/namenund-

nachrichten/2019/11/interview-zur-kartellrechtsreform-revolutionaere-neuregelungen. 66 North, Institutional Change, 1994, p. 8.

https://www.d-kart.de/en/blog/2019/10/31/conference-debriefing-15-forum-unternehmensrecht-zur-10-gwb-novelle/




associated with “laissez faire”).67 The debate is highly polarised and compromise

between the camps seems impossible. So revolutionary changes are well explicable

if the German legislative process does not bring the divergent camps together so as

to compromise.

At the time of writing with a draft bill tabled by the Ministry it has to be said that the

law-making process in Germany so far has been dominated by agents of change,

while the opponents of new rules did not participate actively in the debate. Whether

the rules are to be seen as revolutionary may thus depend on the discourse in Parlia-

ment.

b) Path dependency

Institutional thinkers point to path dependencies as a typical element of such reform

processes. Tracing back the current reforms to certain paths shows a couple of start-

ing points:

Firstly, the 9th amendment of the German competition act in 2017 accepted on a gen-

eral notice that platforms pose competitive problems. Criteria such as access to data

and network effects were added in the law and were made the starting point for the

analysis of market power in digital companies (see section 18 (3a) of the competition

act). These changes established a pattern of reading the changes in the digital econ-

omy that the legislator now could not alter. The changes taken in the 2017 reform

were largely inspired by the case work undertaken by the Bundeskartellamt at that

point, e.g. in cases like the one on dating platforms. To single out one more source,

it may be said that the Monopoly Commission’s expert opinion paved the way – a

scholarly piece of work by an independent think tank.68

Secondly, the rules on digital issues are strongly in the line of the report of four ex-

perts from academia who provided a study on the modernisation of abusive prac-

tice.69 Even if the concrete proposals differ in details from what these experts had

discussed it still follows their path. This study starts from the 9th amendment of the

competition act and from the other existing rules in German competition law, e.g.

section 20 with its focus on superior bargaining power. Different from preceding

studies this study was able to take account of the first two Google cases of the Euro-

pean Commission, Google Shopping and Google Android.70 It also took a deep dive

into international scholarly work and the work on data issues that had advanced in

67 Cf. Orbach, WuW 2019, p. 340. 68 Monopolkommission, Sondergutachten 68, available at https://www.monopolkommis-

sion.de/images/PDF/SG/SG68/S68_volltext.pdf. 69 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, p. 156 f. 70 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, p. 14, 20f, 101f. (das sind alle Seiten, in denen die Entscheidungen erwähnt

werden)


the meantime, e.g. on the European level with considering the European data econ-

omy.71 So, the concrete preparation of the act largely built on this very intense expert

study and on the cases.

The reform proposals by the Ministry are generated from the study that in turn takes

inspiration from the cases in public enforcement and the growing body of academic

work. In comparison with the importance of this influence, the generation of ideas in

the political space seems to be negligible. There are – to my knowledge – no major

influences stemming from political parties or even business associations or NGOs

that were of great influence. For instance, the 2016-Greenbook of the Ministry on

digital platforms, and the 2017-Whitebook do not contain any specific proposals but

largely refer to the work of the experts. Since the experts’ work was embedded in the

“mainstream” of the European pro-enforcement debate the proposed changes did not

seem to be too disruptive but in line with what was to be expected once the ground

was fertilised for a “digital update” of the act. In this regard, the changes may be seen

as an incremental development of existing rules.

3. The revolutionary rule in section 19a

This goes with one notable exception: Section 19a of the draft, the rule for digital

platforms with a paramount significance across markets. This rule significantly

changes the norm addressee in abuse control and ventures into the field of regulation.

Nothing like that can be found in case law or in the preceding study. It is only in the

Furman Report’s notion of “company with strategic market status” that the idea finds

some backing. Yet, even in the Furman Report, the concept of “strategic market sta-

tus” remains very vague.72 Such companies are loosely defined as “those in a position

to exercise market power over a gateway or bottleneck in a digital market, where they

control others’ market access”.73 In particular, there is no trace of the wording used

in section 19a (“undertaking with paramount significance for competition across

markets”). While the Furman Report suggests a “Code of Competitive Conduct”, to

be developed with the stakeholders, there is no suggestion of a list of binding prohi-

bitions and a shift of the burden of proof as envisaged in section 19a.

This rule is new. It is inspired by the Furman Report, yet it goes far beyond this

inspiration, and even in the Furman Report it is not a concept that flows from other

sources. Section 19a may be seen as a rare example of an original new rule.

71 Schweitzer/Haucap/Kerber/Welker, Modernisierung der Missbrauchsaufsicht fur marktmachtige

Unternehmen, 2018, p. 23. 72 Cf. Furman Report, paras 1.117 and 2.10. 73 Furman Report, para 2.10.


a) Only a mitigated revolution?

Even if the draft bill was put into law it is uncertain whether the change is sustainable

and able to shape and change the economy. It is an open question whether the expec-

tations of actors materialise. The implementation of change and the stabilisation of

new institutions meet with significant resistance. As North puts it: “It is not just that

the power of ideological rhetoric fades as the mental models of the constituents con-

front their utopian ideals with the harsh realities of post-revolutionary existence. For-

mal rules may change over night, but informal constraints do not.”74

The “harsh realities of post-revolutionary existence” in our context are primarily the

difficulties of administrative and court proceedings.

b) New rules and courts

Imagine section 19a would be good law. The Bundeskartellamt would need to estab-

lish that an undertaking is an addressee of the rule. With regard to the harsh conse-

quences attached to this, cumbersome yearlong investigations of the office plus chal-

lenges from the undertaking concerned are to be expected. The next step, the prohi-

bition of certain behaviour, would again require lengthy investigations. The admin-

istrative procedure would probably take years if cases like Google Shopping or Fa-

cebook are an indication for the length of proceedings.

In the draft bill, the legislator states that it is expected to have three cases in five years

under this provision, and that it may take three years to complete each case.75 Once

the Bundeskartellamt hands out a section 19a-order, the undertaking would most

probably seek redress with the courts. This is not an “informal constraint” to revolu-

tionary change, but a potential formal one – obviously, the companies have the right

to defend their position in court and to challenge the Bundeskartellamt. The case

could run from the Higher Regional Court in Düsseldorf to the German Federal Su-

preme Court. It is not entirely unconceivable that even the Constitutional Court or

the European Court of Justice may have a say in such proceedings. Such court cases

may take years.

Besides, it is very difficult to predict the outcome. The first cases will be particularly

difficult to win – since there is no clear concept that is waterproof in court (the one-

timer problem). New rules are open for interpretation. In section 19a the requirement

of “paramount significance for competition across markets” may be interpreted in

very different ways. The court could require economic evidence in different degrees.

The concept of the court may differ completely from the concept of the authority.

74 North, Institutional Change, 1994, p. 8. 75 Explanatory Memorandum, p. 68.


The Federal Supreme Court may take a different approach from the Higher Regional

Court. The standard of proof applied to section 19a may be higher or lower.

Furthermore, one of the roles of courts in the modern state is to control the admin-

istration. From an institutional perspective, courts are placed into the order to stop

radical change, to preserve the order, to slow down the dynamics of change. They are

designed in this complex way with certain procedures to preserve the order. Judges

controlling the administration are, by definition, not agents of change.

One might even go as far as to state: The rationalities of courts as an institution are

antagonistic to change – with the good reason of preserving the order against indi-

vidual attempts of change. Since change is achieved on the basis of the perception of

subjective opportunities by individual actors, courts are the stronghold for the objec-

tive interest of those who do not act or may even lose out in case of change.

Consequently, it is equally plausible that we will never see the revolution happening

at all in practice – if the Bundeskartellamt does not get a good case off the ground or

fails at courts and loses interest in pursuing the aim of section 19a any further. (The

Bundeskartellamt is free to pick abuse cases and cannot be obliged to pursue specific

matters.)

This is the price to be paid for the judicial system as a (potential) formal constraint

to administrative enforcement. North had pointed out how important enforcement is.

The Bundeskartellamt has developed a strategy to circumvent such constraints as is

shown by the 2019 Amazon case and the 2019 Facebook case. The Bundeskartellamt

fought with both companies. While Facebook took several years and ended with a

decision that was blocked in court after a few months, the Bundeskartellamt took a

decidedly different approach with Amazon.76 The company and the agency settled.

The Bundeskartellamt did not decide the case in legal terms, it did not state a viola-

tion (important for follow-on-cases) but accepted to stop the case after Amazon al-

tered its terms & conditions globally. Regarding the outcome for the market – ad hoc

changes to terms and conditions on a global scale – this strategy may prove much

more helpful than the strategy applied in Facebook.

This is a circumvention around institutions (here: the judiciary) that may be seen as

having lost their aptness for the task. The Bundeskartellamt chose a way around the

official legal way.77 Since it does not seem possible to change the formal rules, in-

formal work-arounds are invented to keep the order itself intact.

76 Bundeskartellamt, 17.07.2019, B2 – 88/18 – Amazon. 77 I do not wish to imply that the Amazon case was pursued in an “illegal” way, but from a tradi-

tional viewpoint one would expect an authority to decide a very important case with a clear state-

ment on the legal merits instead of entering into a settlement without any decision and any definite

legal assessment.


V. Conclusions

The research question of this essay is: What is to learn from the German experience

in reforming competition law rules for the digital economy for other reform projects?

To answer the question I used an institutional perspective, based on Douglass North’s

model of change.

1. The merits of an institutional perspective

The use of this perspective essentially served two goals: Firstly, the structured ap-

proach of institutional economics provided insights into the underlying structures of

law reform process. It provided a model to speak about the reform process in a struc-

tured way. Secondly, the use of this model also was the attempt to combine a lawyer’s

perspective with tools from another discipline – thereby opening up our discipline

for research with others.

The analysis of the draft bill and the process through the lenses of institutional studies

made it possible to dissect certain aspects. They do not amount to more than hypoth-

eses that would require further analysis.

2. Hypotheses on change

So, what is to learn from the German experience?

(1) The legislative process profits from preparation through a rich enforcement

practice and preparatory studies involving academics and stakeholders. The more in-

formation is available from cases and academic experts, the wider is the choice for

the government in preparing the draft bill. This makes it possible to come up with

sophisticated solutions.

(2) The enforcement practice in turn profits from a step by step approach with

the competition authority trying smaller, less significant cases first, developing the

tools to be implemented in the bigger and more important cases. If a competition

authority has only one shot at the most important target and has not practiced before,

this will not bring about good cases. Few and bad cases make bad law. Thus, enforce-

ment agencies should be encouraged to act as “repeat players”.

(3) There will not be substantial change without the perception of actors to be

better off after the reform process. This perception depends on learning new skills,

external shocks and generally the flow of information. Change is thus more likely if

important stakeholders have incentives to acquire new skills and information is

reaching all relevant parties.

(4) The analysis shows that the rules in Germany favour two stakeholders in par-

ticular: The enforcers on the one hand (Bundeskartellamt), and the traditional Ger-

man business community on the other hand. While scholars may not like stakeholder-


driven policy debates, these are fundamental for moving the reform agenda since

change only happens if there are opportunities to be exploited.

(5) Change is path-dependent. Usually, legislative changes will develop incre-

mentally from pre-existing case law or rules. This is also true for the planned amend-

ment that is in line with the previous amendment and with the mainstream of debate.

However, one particular rule, section 19a, may be seen as “revolutionary” or “dis-

ruptive”, breaking with paths that had been pursued before.

(6) The success of change in competition law often depends on the role of the

courts. Judges have their own mindset and rationalities. They are – for good reasons

– not so much embedded in the discussions and courts are protected from change.

This puts them into the position to exercise independent judicial review.

(7) In Germany, the judiciary seems to be the least adaptive group. For success it

may be key to get the judiciary on board. The Bundeskartellamt is already testing

work-arounds such as the settlement in the Amazon case where the judiciary did not

have the chance to review for lack of an official decision. This is problematic from

the perspective of separation of powers. To avoid that the judiciary lags behind, a

change in formal rules may be required.

3. Implications for European competition law

The reform process can thus be described as an interplay in the triangle of policy-

makers (stakeholders and politicians), enforcers and the judiciary. The flexibility of

these groups to embrace change is the ultimate precondition for changes to have an

effect on markets. The flow of information, the diversity of paths, and the permanent

discourse brings about the incremental change that is needed to keep an order intact

in times of permanent change.

This analysis however is a bad sign for the shaping of rules in EU competition law.

In the EU, all three groups face considerably greater difficulties embracing change

for various reasons: The Commission as the enforcer has relatively few cases and

cannot train its skills on less important cases. This means that concepts may not be

developed in the same way as is possible in a Member State. Law-makers face a

particularly cumbersome procedure before changes are implemented in rules. The

political pressure from stakeholders seems to be more diverse and harder than in

Member States. The Court, finally, sees even less cases than the national courts.

Thus, a European reform of the digital competition framework may be a very long

shot. The individual practice in the member states is thus essential for the develop-

ment of European competition law. It is up to national competition authorities to test

new policies and provide the necessary case practice for reforming competition law.

This variety of testing grounds may even provide a treasure trove of experience from

which the EU Commission can build up future cases.

Documents

DRAFT WORK IN PROGRESSlaw.haifa.ac.il/images/ASCOLA/Podszun.pdfDRAFT – WORK IN PROGRESS THE INSTITUTIONAL TRIANGLE: HOW TO REFORM COMPETITION LAW LESSONS FROM THE GERMAN EXPERIENCE