German Federal Cartel Office (“FCO”) makes use of new investigative powers, including in the digital economy and the German waste management sector

1. Alphabet as of paramount significance for competition across markets

In its most recent decision, the FCO found that Google offered a variety of services across markets and benefited from reciprocal effects of their product range and services. Google also has access to a broad and deep collection of data and can improve their standing on the market without being feared further by the activities of their competitors.

One aspect in the overall assessment was Google's market share of over 80% in the national search engine market and the fact that Google is the most relevant provider of search-bound advertising. In addition, Google has a high number of daily and monthly active users.

The FCO put special emphasis on the fact that Google shows a high level of vertical integration, that their services are connected with each other and that Google can make use of pre-installation agreements when distributing their smartphone operating system “Android”, therefore increasing their market reach further. All this provides Google, in the view of the FCO, with the opportunity to further strengthen its position across markets by directing customers from one service to another or by promoting within one service its other services, thus setting up an entire eco-system for digital services that is of paramount importance not only for end users but also for other service providers building on Google’s infrastructure and services when providing their own services.

According to the FCO, if taken together, the above also leads to Google accumulating large amount of data, which, considering its financial strength, enables it to run, improve, expand and develop its services even further.

2. Rethmann Group expected to be first target of FCO’s new powers to investigate string acquisitions?

Also, with the latest amendment to the ARC last year (see above), the German legislator broadened the FCO’s powers to investigate mergers that would not be otherwise caught by the country’s general merger thresholds but are nevertheless considered harmful to competition because “it can be expected that by future acquisitions competition on the market is significantly impeded” (“string acquisitions”), see Sec. 39a ARC. The new law applies to acquisitions of any target with sales of more than EUR 2 million in the last financial year, more than two-thirds of which in Germany. Rethmann Group, a German waste management and recycling company, is the first case to which the new merger rules are being applied in Germany.

As a first step, on 19 January 2022 the FCO therefore opened a sector inquiry into the waste management & recycling sector in Germany to investigate whether market structure(s) in this sector are such that competition can be harmed by string acquisitions, see Sec. 39a (3) ARC. If this sector inquiry confirms the concerns voiced by the FCO (and relating mainly to the fact that the waste management & recycling sector in Germany is fragmented with many small and medium-sized players, characterized by regional markets and municipalities as trading partners), in a second step, and under the conditions stated above, Rethmann Group can be obliged to notify any and all future acquisitions.

The FCO started the inquiry by interviewing the 15 most important competitors of Rethmann Group in the areas of household waste, residual waste, organic waste and paper, cardboard and cardboard packaging and will also investigate the processing of packaging and waste glass.

We will of course keep you updated on the findings of the sector inquiry and possible further steps of the FCO.

For more information please contact Dr. Stephan Waldheim and Maren Steiert.