Germany Seeks to Curb Internet Giants' Dominance

Germany, seeking to rein in Internet giants like Google and Facebook, plans to bolster the powers of its competition watchdog to prevent such companies from becoming monopolies even before they achieve scale.

The initiative, announced on Tuesday, could include blocking big players from taking over smaller rivals and follows up on a pledge by Chancellor Angela Merkel's coalition to curb big US Internet companies which, in the eyes of many German lawmakers, have become too powerful.

"My goal is to make our competition law more effective," said Economy Minister Peter Altmaier.

"In doing so we must find the right balance between the growth chances of German and European platforms and preventing the abuse of market power."

A 173-page study commissioned by Altmaier calls for the German antitrust regulator to be given powers to act before a company reaches a critical 'tipping point' on the way to becoming a monopoly - something that can happen quickly on the Internet due to the way it functions as a network.

This could, for example, include cracking down on attempts to prevent 'multihoming', where a platform company requires its business partners to work exclusively with it, but not with any of its competitors.

In a second proposal, the study's authors argue that the regulator should be able to stop big players from taking over smaller rivals as part of a strategy to sideline competitors.

Looking back
That reflects a widely held view among German policymakers that European regulators should never have waved through Facebook's takeover of photo-sharing site Instagram in 2012, and of messaging application WhatsApp two years later.

Between them, the Facebook 'family' of social networking apps now counts 2.5 billion users. Germany, Europe's largest economy, has yet to produce an Internet company of global scale.

"Looking back, it's not clear that it was the right thing to do to allow those deals," said Justus Haucap, head of the Duesseldorf Institute for Competition Economics and a co-author of the study.

Germany's antitrust watchdog expects to take action this year in an ongoing probe against Facebook after finding that the social media giant abused its market dominance to gather data on people without their knowledge or consent.

The Federal Cartel Office objects in particular to how Facebook acquires data on people from third-party apps - including WhatsApp and Instagram - and its online tracking of people who aren't even members.

Data for all
The study also proposes a new "data-for-all" law that would require dominant platform companies to share the data that fuels them - an idea already championed by Andrea Nahles, leader of the Social Democrats that co-rule with Merkel.

This would, for example, allow competitors to train their software algorithms to a similar standard to the market leader - thus reopening a monopolised market to competition.

Other lawmakers, meanwhile, argue that dominant platforms should be compelled to open up so that it would be possible, for example, to chat with a friend on a social network without being a member of it - much as email and mobile telephony work today.

This concept, known as interoperability, was not addressed by the study's authors but continues to be supported across party lines in the German parliament.

"We must support an innovative data policy and talk about new ideas - one would be to require interoperability," said Nadine Schoen, a senior lawmaker in Merkel's conservative party.

Altmaier will now set up a commission to draft reforms to Germany's competition law based on the report's recommendations.

© Thomson Reuters 2018