Noerr Competition Day – competition and market power in the digital age

Should digital markets be more strictly regulated by antitrust law? Competition law experts warn: “This could mean that dynamic and innovation-driven markets lose their momentum and the often desired digital transformation may come to a halt,” said Dr Alexander Birnstiel, head of the Antitrust & Competition practice group of the commercial law firm Noerr. At the “Noerr Competition Day 2017” competition law experts discussed whether antitrust law is primed for meeting the challenges posed by digital markets and how market power can be determined in the digital age.

“Digitalisation fundamentally changes the markets in many areas of the economy, creates new business models and questions old ones,” said Alexander Birnstiel. The challenges are closely linked to the said network effects in the area of internet platforms, meaning the higher the number of users, the more attractive a platform. “This pull effect exerted by the large platforms inevitably leads to market power,” noted Birnstiel. “Besides, big data is of vital significance in terms of antitrust law,” added Helge Heinrich, who is an antitrust law partner at Noerr’s Brussels office. “In the internet, the currency that is used is increasingly data, not money.”

In the 9th Amendment to the German Act against Restraints of Competition (GWB) the legislator responded with a digital update to these new challenges. Accordingly, a relevant market under competition law will exist in future even if no money, but just data, is exchanged between the directly involved parties. Furthermore, takeovers of digital enterprises will have to be reviewed in advance as from a threshold of €400 million if the undertaking to be acquired achieves hardly any or only insignificant revenue.

“The review of intended takeovers in a merger control procedure is a pragmatic approach,” commented Helge Heinrich on the proposed change in law. “Subsequent market abuse proceedings are extremely complex and due to the long duration of the proceedings often also do not live up to the demands of the rapidly changing digital markets and business models.”

At the same time, the antitrust law experts warned against excessive regulatory interference, for fear of markets quickly losing dynamism. They also noted that from an economic point of view the concentration in platform markets was not inevitably detrimental. Alexander Birnstiel: “To users, for instance, low transaction costs have a pro-competitive and wealth-creating effect – the only thing that is important is that markets are kept open and users can move between various platforms.” Interventions by the legislator should be confined to guaranteeing these basic conditions.

The effects of digitalisation on antitrust law were thoroughly examined by Noerr in a comprehensive legal report: last year, Noerr prepared the opinion “Industry 4.0 – Legal Challenges of Digitalisation” on behalf of the Federal Association of the German Industry (BDI), covering all legal areas concerned.

At this year’s Noerr Competition Day more than 100 experts discussed current developments in antitrust law and the challenges of digitalisation. The event was attended by notable representatives from authorities and businesses, including Fabian Kaiser (EU Commission), Sandro Gleave (Federal Cartel Office), Jörn Eickhoff (Siemens AG), Dr Jörg Rheinländer (HUK-COBURG), Henning Lutz (E.ON SE) and Dr Achim Gronemeyer (Schaeffler AG)