The German Competition Authority holds that a Big Tech company is an undertaking of paramount significance for competition across markets and consequently, is subject to the provisions for large digital companies under the Competition Act (Apple)

Apple also subject to provisions for large digital companies under Section 19a GWB*

Bonn, 5 April 2023: The Bundeskartellamt decided that Apple Inc. based in Cupertino, USA, is an undertaking of paramount significance for competition across markets. Apple and its subsidiaries are thus subject to extended abuse control pursuant to Section 19a of the German Competition Act (GWB).

Section 19a GWB came into force in January 2021 as part of an amendment to the competition act. In a two-step approach the Bundeskartellamt can prohibit companies which are of paramount significance for competition across markets from engaging in anti-competitive practices.

Andreas Mundt, President of the Bundeskartellamt: “Apple has an economic position of power across markets which gives rise to a scope of action that is not sufficiently controlled by competition. Based on its mobile end devices such as the iPhone, 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. With its proprietary products iOS and the App Store, Apple holds a key position for competition as well as for gaining access to the ecosystem and Apple customers. This decision enables us to specifically take action against and effectively prohibit anticompetitive practices.

With regard to specific practices employed by Apple, the Bundeskartellamt is examining Apple’s tracking rules and the App Tracking Transparency Framework in another proceeding (press release of 14 June 2022). In particular, the authority is looking into the initial suspicion that these rules could favour Apple’s own offers and/or impede other companies. So far, no decision has been taken on initiating further proceedings against Apple.

Apple’s significance across markets

With its worldwide turnover of around 400 billion USD and a profit of almost 100 billion USD generated in the 2022 business year, Apple is among the top-selling and most profitable companies in the world. On the one hand, Apple covers the entire value chain relating to high-quality mobile digital end devices, partly also developing its own central components, such as processors. On the other hand, Apple develops the software for these devices itself, especially their mobile operating systems, such as iOS. The same applies to the platform for mobile software distribution on the devices, the App Store. Apple’s offer is complemented by a number of other hardware, software and service products.

Apple’s iPhone continuously generates more than 50 per cent of the technology corporation’s turnover. The company holds a dominant, or at least powerful, position on all vertically related levels based on its smartphones, tablets and smart watches as well as proprietary operating systems and the App Store, the only digital distribution platform for apps and other software products available to both app publishers and users on Apple devices.

Based on this tight proprietary vertical structure and an installed base of more than 2 billion active devices worldwide, Apple is active in many ways on market levels and business areas that are linked to each other and is therefore in a position to tie its users to its complex ecosystem on a long-term basis. This is associated with a strong power to set rules for third parties, above all for app developers. Apple controls access to Apple customers and shapes this access based on its rules and economic framework conditions. This outstanding position is accompanied by an extraordinary level of resources. Apple not only has great financial means at its disposal but can also make use of its wide user base and the strong market value of the “Apple” brand. The company uses its resources to expand its ecosystem, either by investing heavily in R&D, continuously increasing its number of staff in pioneering business areas, or acquiring companies especially focusing on technologies for the expansion of business areas or the improvement of existing services or products. The company also has privileged access to data relevant for competition. This structurally ensured presence across markets makes it easier for Apple to safeguard its ecosystem and to expand its activities into new business areas, such as the advertising business.

Apple’s paramount significance for competition across markets within the meaning of Section 19a(1) GWB gives the company a position of power which allows for a scope of action across markets that is not sufficiently controlled by competition.

The validity of the Bundeskartellamt’s decision is limited to five years in accordance with statutory provisions. Within this period Apple is subject to special abuse control by the Bundeskartellamt in Germany as set out in Section 19a(2) GWB.

The Bundeskartellamt has today also published a case summary of its decision, which can be accessed (in German) here.

Information on Section 19a GWB

In January 2021, the 10th amendment to the German Competition Act (GWB Digitalisation Act) entered into force. A key new provision (Section 19a GWB) enables the Bundeskartellamt to intervene early and more effectively, in particular against the practices of large digital companies. Prior to the proceeding against Apple concluded today, the Bundeskartellamt had already determined the paramount significance across markets of Alphabet/Google, Meta/Facebook and Amazon (see press releases of 5 January 2022, 4 May 2022 and 6 July 2022). Another determination proceeding has been initiated against Microsoft (see press release of 28 March 2023).

Further proceedings based on the new provisions which refer to specific practices are also ongoing, for example against Google/Alphabet (press releases of 21 June 2022, 4 June 2021 and 12 January 2022 and 25 May 2021), Meta/Facebook (see press release of 28 January 2021) and Amazon (see press release of 14 November 2022).

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

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German Competition Authority, The German Competition Authority holds that a Big Tech company is an undertaking of paramount significance for competition across markets and consequently, is subject to the provisions for large digital companies under the Competition Act (Apple), 5 April 2023, e-Competitions April 2023, Art. N° 112028

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