Federal Cartel Office: Apple also classified as "undertaking of paramount significance for competition across markets" | Fieldfisher
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Federal Cartel Office: Apple also classified as "undertaking of paramount significance for competition across markets"

14/04/2023

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Germany

On 5 April 2023, the Federal Cartel Office (Bundeskartellamt; FCO) found that Apple Inc. (Apple) is a "undertaking of paramount significance for competition across markets ". As a result, the company is subject to an extended abuse control under Section 19a of the German Act Against Restraints of Competition (ARC). For more details on the decision, please see below.

 

The decision

With a global turnover of around USD 400 billion and a profit of almost USD 100 billion in the financial year 2022, Apple is one of the strongest-selling and most profitable companies in the world. The company bundles the entire value chain around high-quality mobile digital devices largely in-house. At the same time, Apple develops the software for these devices as well as the platform for mobile software distribution on the devices, the App Store, itself. The offering is complemented by a range of other hardware, software and service products, as well as increasing streaming and subscription services. The "one-stop shop" principle allows Apple an extensive amount of control over the acquisition and subsequent use of devices and services, and has given Apple a special competitive position.

This ecosystem has led the BKartA to classify Apple as an undertaking of paramount significance for competition across markets.

In particular, the "proprietary vertical structure" and the large active device base of more than two billion units worldwide, as well as the fact that Apple is active in a multitude of interlinked market levels and business areas and is thus able to bind its customers to its complex ecosystem in the long term, were decisive for the decision. Simultaneously, this market power leads to a pronounced regulatory power vis-à-vis third parties, especially app developers.

"Apple has a economic position of power across markets, which gives rise to a scope of action that is not sufficiently controlled by competition.. […] Apple operates a wide-ranging digital ecosystem which is of great importance to competition not only in Germany, but also throughout Europe and the world.," comments Andreas Mundt, President of the BKartA.

According to the German Times (DIE ZEIT), Apple has announced that it will appeal the BKartA's decision. The company argues that the authority's assessment neglects the value of a business model that focuses on user privacy and security.
 

Objective and background of Section 19a ARC

On the basis of the classification as a company with outstanding cross-market significance for competition, the BKartA can specifically target practices that threaten competition and effectively prevent them. With the help of Section 19a ARC, which was introduced in the course of the 10th amendment of the ARC in 2021, the BKartA can impose measures in favour of competition against large companies in the digital economy more quickly and effectively. The overriding goal is to ensure the functioning of competition despite the gatekeeper position of large tech companies.

In addition to Apple, Google's parent company Alphabet was already classified as an undertaking of paramount significance for competition across markets in January 2022, as were Meta and Amazon later last year. Amazon, like Apple, does not want to accept this classification – the respective appeal is pending before the Federal Supreme Court. Furthermore, an investigation has been initiated against Microsoft.
 

Comment

The BKartA's decision was predictable after all as it is a consistent continuation of the stricter approach towards the large tech companies. Section 19a ARC, which is still relatively new, is thus being put to noticeably lively use by the authority. It remains to be seen what concrete measures the BKartA will take to protect competition on the basis of the classification. The BKartA has already initiated proceedings under Section 19a para. 2 GWB with regard to Apple's tracking rules. Apple has announced its intention to take legal action against the classification as an undertaking of paramount significance for competition across markets. The legal process in this case leads directly to the Federal Supreme Court. Since the appeal does not have a suspensive effect, the FCO can in principle already issue orders pursuant to Section 19a para. 2 ARC against Apple in the meantime.
 

Sources:

Bundeskartellamt: Apple also subject to provisions for large digital companies under Section 19a GWB
Bundeskartellamt: Apple case report (German version only) 
Bundeskartellamt: Press release re initiation of investigation under Section 19a (1) ARC
Fieldfisher: 10th Amendment of the German ARC
DIE ZEIT: FCO puts Apple under closer scrutiny (German version only)

 

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