Germany brings market investigation tool back on EU competition policy agenda

The proposed reform of Germany’s competition law, which expands the scope and powers of its national competition authority, could become a model for the EU, economy state secretary Sven Giegold (Greens) said.

Earlier this week, negotiators of Germany’s three-party coalition reached an agreement on the reform of its national competition law. The reform will allow the national competition authority, the Bundeskartellamt, to act upon insufficient competition in a market following a sectoral investigation where a lack of competition was found.

The potential actions the authority could take range from enabling newcomers better access to the given market to breaking up big companies as a last resort, so-called ‘structural remedies’.

Unlike before, such actions could be taken even if no illegal behaviour – such as price collusion – has been proven. This approach has sparked outrage from some businesses, who fear becoming subject to painful market interventions without violating any law.

Nevertheless, Sven Giegold, state secretary at the Economy Ministry, which had developed the proposal, says it should become a European model.

“As in Great Britain, the German Federal Cartel Office will be given more powers to intervene after a thorough sector enquiry,” Giegold said in a statement.

“Now it is the EU Commission’s turn to propose a European strengthening of competition policy, as it is being pursued internationally in many countries,” he added.

However, business representatives strongly disagree, saying that even the proposed reform in Germany could violate EU law.

The proposed reform “is no model for the EU – and even less for other member states”, Stephan Wernicke, Chief Legal Officer at the German Chamber of Commerce and Industry (DIHK), told EURACTIV.

With the proposed amendments to its national law, “Germany is no longer a pioneer of regulatory clarity and legal certainty in the interest of protection against power structures, but rather a source of impetus for the instrumentalisation and politicisation of competition law at the European level as well,” he added.

Germany proposes giving more teeth to competition authority

The German government proposed a draft law on Wednesday (5 April) to give its competition authority more powers to tackle interferences with competition, following allegations that petrol stations had artificially kept fuel prices high in 2022.

Competition policy as a tool to fight high prices

The aim to reform competition policy has gained momentum amid the wave of price increases, particularly for energy and food, which some politicians suspect hints at insufficient competition.

The German reform proposal came after fuel prices at petrol stations remained high, even after wholesale oil prices had fallen again. A subsequent market enquiry found no illegal price collusion between station operators.

At the EU level, too, lawmakers have called for a sharpened competition policy to help fight high prices, as they think insufficient competition, such as in the food sector, has enabled companies to push through cost increases to consumers and even top them up to increase their profit margin.

In market structures where consumers have difficulties in switching to another product or where there are only a few players, there was a risk that companies “add an extra bit on top of inflation, when prices are going up everywhere,” EU lawmaker René Repasi (S&D) told EURACTIV in June. 

“Because of this market structure, there is an inherent tendency to produce windfall profits,” he added.

Politicians call on competition policy to help fight high prices

As standard measures to fight inflation prove unpopular among left-leaning politicians, they are betting their hopes on competition policy to help to bring down prices, but experts warn not to overburden competition policy with political priorities.

Previous attempts at EU market investigation instruments failed

The debate evokes memories of a discussion in 2020, when the European Commission considered the idea of a “New Competition Tool”, which, similar to the German reform, would have given the Commission the possibility of market investigations and subsequent “remedies” to improve competition.

Like the current revision of the German Competition Act, “the EU Commission’s New Competition Tool was an attempt to create possibilities for state intervention below the criteria of a competition infringement: it was to become a political instrument in the hands of the EU,” Wernicke said.

Following concerns over the legal basis for such a market investigation tool, the proposal was scaled down in scope and integrated into the EU’s Digital Markets Act (DMA).

The DMA is a flagship EU law with a set of ex-ante obligations for tech companies with a dominant position in a digital market to play the role of a ‘gatekeeper’ between businesses and users.

The national law implementing the DMA in Germany already went further than the EU legislation in terms of investigative powers assigned to the Bundeskartellamt and expanding the civil liability regime to DMA violations.

“With the ‘New Competition Tool’, this was only a discussion,” Heike Schweitzer, a law professor at Humboldt University Berlin, said during a hearing in the German Bundestag in June. 

“This was never realised,” Schweitzer said, as “the decision was taken in favour of the DMA [Digital Markets Act],” which would be “much more concrete as a regulatory regime than this ‘New Competition Tool’”.

While both the German reform and the discussed ‘New Competition Tool’ saw the UK’s market investigation tool as a role model, Schweitzer cautioned against this idea, arguing that “the English tradition [in competition policy] is a completely different one and always has been”. 

Nevertheless, Schweitzer said she would “not rule out that the ‘New Competition Tool’ will be put on the agenda again at the European level”.

The New Competition Tool is dead

After rumors had been circulating in Brussels earlier this week, the Commission confirmed that the publication of the Digital Services Act and the Digital Markets Act would be pushed back to December 15th

[Edited by Luca Bertuzzi/Nathalie Weatherald]

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