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Germany to tighten antitrust law

June 13, 2022

The German government is planning to expand the powers of its antitrust authorities. Recent measures to compensate for rising gasoline prices have turned into a profit windfall for oil companies.

Symbolfoto Benzinpreis | Tankstelle Berlin
Image: Sebastian Gabsch/Geisler/picture alliance

German Economy Minister Robert Habeck has moved to empower Germany's antitrust authorities to take disproportionate profits from companies that agree on prices across markets.

The plans, unveiled on the ministry website on Sunday, include measures making it easier to break up cartel-like structures, skim off excess profits, and make investigations more wide-ranging.

The minister's move follows criticism of the government's attempts to reduce gasoline prices for German motorists. Gas prices in Germany have been rising significantly since the start of Russia's war on Ukraine, with all five major companies (Shell, BP-Aral, Esso, Jet, and Total) raising them in parallel with one another. The German government slashed taxes on gasoline and diesel for three months as of June 1, but analyses — and plenty of anecdotes on social media — suggest that prices haven't really been sinking.

Robert Habeck
German Economy Minister Robert Habeck wants to empower Germany's antitrust authoritiesImage: Tobias Schwarz/AFP

Helping the oil companies, not the drivers

In theory, the three-month tax cut should have reduced prices at the gas stations by up to €0.35 ($0.37) per liter, costing the German taxpayer an estimated €3 billion. But that has definitely not happened. Plenty of critics, Habeck among them, have accused the big oil companies in Germany of simply pocketing a tax-funded windfall.

Estimates vary, but the German economy minister guesses that half of the savings are being passed onto consumers, while one economist, Johannes Schwanitz of the FH University of Applied Science in Münster, calculated that the oil companies are keeping more than two-thirds of the tax break for themselves.

According to an analysis provided for the Welt am Sonntag newspaper, Schwanitz worked out that only 10 cents of the 35-cent savings on E5 petrol are going to drivers at the pump. The oil companies are making hundreds of millions of euros in extra profits, the economist said.

Two parties in the government coalition — Habeck's Greens and the Free Democrats led by Finance Minister Christian Lindner — have blamed each other for what is widely seen as a bad idea in the first place, with Habeck now using the opportunity to present his antitrust reforms.

The main point of Habeck's plan is to allow authorities to intervene in markets dominated by a few major companies even if there is no violation of competition law.

Proving that high fuel prices have been agreed among companies has traditionally been almost impossible, as the companies can simply work in parallel, copying each other's prices, the ministry said. By raising the threat of breaking up companies — even if only as a last resort — the ministry is hoping that the relatively few companies in the fuel market will be forced to compete with each other.

Michael Bergmann, an antitrust expert at the Berlin-based law firm Raue, said the implication of this measure is fairly drastic: "Decartelization would mean: 'We're going to take Esso, for example, and force them to sell some of their gas stations,'" he told DW. But whereas up until now this sanction could only be used if antitrust law had actually been broken, Habeck's initiative effectively means punishing a company simply for being too successful in a market that has too few competitors.

But how would this work in practice? Which of the big players would have to sell? And who to? And how does one measure whether a particular market has become too uncompetitive? "These are unbelievably difficult questions that the economy ministry is asking itself now too," said Bergmann. "I don't know how this is supposed to work."

There would also likely be legal challenges to any attempts by the authorities to use its sanctions, as the law guarantees a company's right to expand, and property rights are protected by the Basic Law, Germany's constitution.

Another main point of Habeck's plan is lowering the legal hurdles that allow antitrust authorities to skim off excess profits. Up until now, the ministry said, such a measure required complex and resource-consuming analyses of a company's finances and evidence that the law had already been broken — hurdles that have never yet been cleared. The ministry hopes that lowering the proof requirements will send a signal to the markets and force companies to preemptively ensure they are not breaking the law.

Taking on the big guns

The third plank of Habeck's plan involves giving sector-wide investigations more force, by allowing antitrust authorities to tailor new regulations directly out of such investigations. Again, the idea is to bring in new rules even if a violation of the law has not yet been proven.

Watchdogs in civil society have welcomed the ministry's initiative. "We need sharper instruments for the federal competition authority sooner rather than later so that the oil industry cannot abuse its market power and make excessive profits," Max Bank, spokesman for LobbyControl told DW in a statement.

He also warned that in several essential industries — including food, agriculture, finance, and internet platforms — too few companies control too much of the market. Bank said that tougher cartel policy was "not just good for consumers. It is good and important for democracy."

But Bergmann suspects that, once the ramifications of Habeck's initiative have worked their way into an actual draft law, the minister's bark will turn out worse than his bite. "The ministry has stuck its neck out a long way," he said. "I would guess that we won't see a law as drastic as has been presented here."

In fact, that may have been the point: "I read this as a threat specifically aimed at the oil sector, and less as a political statement from Habeck that we have to reform all of the antitrust law and break open the markets," he said. "I think it's to be understood as a threat: 'If you don't lower the prices then we'll start thinking about decartelization, and you're the first sector we'd go after.'"

Edited by: Rina Goldenberg

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Benjamin Knight Kommentarbild PROVISORISCH
Ben Knight Ben Knight is a journalist in Berlin who mainly writes about German politics.@BenWernerKnight