Germany's Cartel Office Targets Amazon with New Competition Tool

Germany’s Federal Cartel Office (FCO) has initiated proceedings against e-commerce leader Amazon, leveraging a recently implemented competition regulation.

The FCO is assessing whether Amazon holds “paramount significance for competition across markets,” as defined by the German Competition Act’s amendment, known as the GWB Digitalisation Act, which took effect in January.

Enhanced Powers for Proactive Intervention

Section 19a of the GWB empowers the FCO to intervene earlier and more effectively against the practices of major digital corporations.

This provision allows the authority to prohibit anti-competitive behaviors, such as self-preferencing, tying strategies used to penetrate new markets unfairly, and the creation of barriers to entry through data control.

The FCO currently has two other investigations underway concerning Amazon’s pricing practices on its Marketplace and agreements with brand manufacturers regarding third-party seller restrictions.

A determination of “paramount significance” would allow the FCO to proactively address and prevent potentially anti-competitive actions by Amazon.

Amazon has been contacted for a statement regarding the FCO’s latest action. Update: An Amazon spokesperson has responded.

This marks the second instance of the Bundeskartellamt applying the new law to a major technology company.

Facebook Also Under Scrutiny

In January, the authority extended an existing proceeding against Facebook, concerning the linking of Oculus use to Facebook accounts, to determine if the social media giant meets the criteria of “paramount significance.”

FCO President Andreas Mundt stated that the FCO has previously addressed issues with Amazon, achieving improvements for Marketplace sellers, and that these new powers in abuse control are now being applied.

He emphasized that Amazon’s extensive ecosystem, spanning multiple markets, could represent an “almost unchallengeable position of economic power.”

“If we find that the company does have such a market position, we could take early action against and prohibit possible anti-competitive practices by Amazon,” Mundt added.

Previous Comments on Facebook

In January, Mundt offered stronger commentary regarding Facebook, characterizing its social networking ecosystem as aligning with the new digital law’s requirements for proactive intervention.

He suggested that Facebook’s strong market presence, encompassing Facebook, WhatsApp, and Instagram, could qualify it for such a designation.

The FCO’s assessment of whether Facebook falls under the law is still in progress. The FCO also has a case against Facebook’s data “superprofiling” pending before Europe’s highest court.

Broader Trends in Competition Law

The Bundeskartellamt’s efforts to gain more proactive powers reflect planned updates to pan-European Union competition law, specifically the Digital Markets Act (DMA).

The DMA will require large internet intermediaries to adhere to specific behavioral rules established by Brussels, with substantial penalties for non-compliance.

Lawmakers across Europe are revising competition regulations to effectively address digital markets, which are susceptible to anti-competitive dynamics like network effects and market tipping.

The challenge lies in the lengthy pace of competition investigations compared to the rapid evolution and market dominance of digital businesses.

EU and UK Approaches

EU lawmakers initially considered a new competition tool for digital markets but ultimately opted for the ex ante regime outlined in the DMA.

However, the DMA is still undergoing debate and is likely years away from full implementation.

This situation could give Germany’s FCO a significant role in regulating Big Tech in the interim.

The U.K., operating outside the EU, is also developing a pro-competition regime for Big Tech, establishing a dedicated unit, the DMU, within the Competition and Markets Authority.

The U.K.’s approach, while similar to the EU’s DMA, will involve bespoke provisions for each platform identified as having “strategic market status.”