Comparison Websites in the focus of the German Federal Cartel Office

The competence of the German Federal Cartel Office (Bundeskartellamt, FCO) in the area of consumer protection may soon become significantly broader. This would provide the FCO with a completely new role as a consumer protection agency. This could significantly change the enforcement of consumer protection regulations in Germany, such as the German Act against Unfair Competition (UWG).

Sector Inquiry into Comparison Portals

In October 2017, the FCO launched a sector inquiry into online comparison websites. In recent years, comparison websites have gained in economic importance as they are used by a large number of consumers to compare different offers. In April 2019, the final report was published. Since then, the public discussion about whether and to what extent the competence of the FCO in the area of consumer protection should be broadened has significantly intensified. , It is currently of more interest than ever due to the upcoming 10th Amendment of the German Act against Restraints of Competition (GWB).

The Starting Point: The 9th Amendment of the German GWB

The sector inquiry into comparison websites was performed on the basis of new competence in the area of consumer protection, which has been given to the FCO for the first time in 2017 in the context of the 9th Amendment of the German GWB. Since then, the FCO can get involved in consumer protection disputes as a so-called amicus curiae (Sec. 90 VI GWB). Furthermore, it was also given the right to initiate so-called sector inquiries if there is a reasonable suspicion of significant, permanent, or repeated violations of consumer protection regulations, the manner or scope of which impacts upon the interests of a large number of consumers (Sec. 32 e V, VI GWB). In the context of the sector inquiry into comparison portals, the FCO has made use of this new competence for the first time. Two additional sector inquiries ensued, one into Smart TVs (link to: https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2017/13_12_2017_SU_SmartTV.html?nn=3591568) in December 2017 and most recently in May 2019 another into online user reviews.

This shows that the FCO is certainly willing to take a new position in consumer protection.

To Date, No Enforcement Competence for the FCO

Although the FCO has already been given new competence in the area of consumer protection, this is currently still limited to inquiries into and the detection of structural deficits in certain industries. Sector inquiries are not targeted against individual companies nor do they follow up a concrete suspicion of a violation, their purpose is to thoroughly examine the conditions on a specific market such as comparison portals.

As part of the sector inquiry into comparison portals, the FCO sent structure surveys to 152 portals, for example, which asked questions about the portals‘ key data. Participation was voluntary. Then, 36 portals were selected. These were asked in a formal decision requesting information to complete 50 industry surveys and to submit information. The undertakings were required to complete the surveys. Any incomplete or wrong answers could have been subject to a fine. In addition, the FCO talked to market participants. Following a first consultation paper in December 2018 the final report, which lists numerous concerns, was published in April 2019. In addition to certain misleading practices, the FCO also criticized enforcement deficits.

However, the FCO does not yet have the power to eliminate the violations of rights it detects by official decree. This may change soon.

Expansion of the FCO Enforcement Competence

There are already first indications in the consultation paper on the sector inquiry into comparison portals that the FCO would welcome further legal enforcement competences when it comes to consumer protection on an administrative level. The President of the FCO, Andreas Mundt, also commented on this in a press release on the 2018 end of the year review of the FCO accordingly: „I think it would make sense if our authority were not only able to uncover but also remedy deficiencies in this area.

Consequently, the FCO fully agrees with the so-called Professor’s Opinion, which the German Federal Ministry for Economic Affairs and Energy had commissioned in 2018. The objective was to determine the extent to which consumer protection laws (especially the Act against Unfair Competition (UWG) but also the laws governing General Terms and Conditions) should be enforced more by German government authorities than previously. The study came to the conclusion that there are enforcement deficits in Germany in the enforcement of consumer protection laws, which had been handled up to that point predominately under private law and had therefore been effective only inter partes („private enforcement“). The authors of this study therefore recommend partially expanding the competence of the FCO in the existing consumer law.

Some of the new competences of the FCO that are proposed in the area of consumer protection are:

  • extension of investigative powers / requests for information;
  • ability to impose fines;
  • ability to issue orders to cease and desist.

Tailwind from the “New Deal for Consumers”

Proponents for the expansion of the official competence are getting additional support from the EU. What should be mentioned here in particular is the „New Deal for Consumers„. This set of measures was presented by the European Commission in April 2018 to strengthen consumer rights and their enforcement. The set of measures provides, for example, a strengthening of the enforcement capabilities of government agencies by specifying the sanctions.

Summary

It is therefore quite likely that the German legislature will soon give further consumer protection enforcement competence to the FCO. This would provide the government agency with a completely new scope of action and would make it a new consumer protection player in the market.

Whether such a change in paradigm in the enforcement of consumer protection laws in Germany is absolutely necessary, however, warrants a critical look. As the Professor’s Opinion has confirmed as well, consumer protection in Germany is overall quite good and operational. The „private enforcement“ by competitors and consumer/competition associations is working well. Since the final report on the sector inquiry into comparison websites, significantly increased activity by various associations, such as Wettbewerbszentrale (Institution of the economy for fair competition), was noticed as well. Issues that the FCO had referred to in general as problematic when it comes to comparison portals are now specifically addressed and warned against as a result of the sector inquiry. It appears as though some of the associations are systematically addressing the list of deficiencies that the FCO had compiled. In doing so, the competences awarded to the FCO already by the 9th GWB Amendment contributed to a noticeably improved enforcement of the law. It should also be taken into consideration that parallel competences and parallel proceedings with different rules of procedure (civil proceedings/administrative proceedings) do not necessarily contribute to legal clarity and legal certainty. There is the risk that different types of proceedings may lead to different decisions. In addition, competition law and consumer protection law do not always have the same objective either. This may result in a conflict of interest within the FCO. If the investigative powers of the FCO are expanded, a close eye has to be kept on the protection of trade secrets, which cannot be undermined.

If, therefore, the competences of the FCO were to be expanded indeed, this should be of a partial nature at the most and should be done with caution and sensitivity. Any over-enforcement should be avoided.