{"id":7522,"date":"2022-04-22T21:15:53","date_gmt":"2022-04-22T19:15:53","guid":{"rendered":"https:\/\/www.d-kart.de\/?p=7522"},"modified":"2022-04-22T21:15:55","modified_gmt":"2022-04-22T19:15:55","slug":"agenda-2025-hello-mandated-unbundling-my-old-friend","status":"publish","type":"post","link":"https:\/\/www.d-kart.de\/en\/blog\/2022\/04\/22\/agenda-2025-hello-mandated-unbundling-my-old-friend\/","title":{"rendered":"AGENDA 2025: Hello, mandated unbundling, my old friend."},"content":{"rendered":"\n

This article is part of the D\u2019Kart Spotlights: AGENDA 2025, in which experts from academia and practice comment on aspects of the Competition Policy Agenda presented by the Federal Ministry of Economic Affairs and Climate Action (BMWK). The contributions already published can be found\u00a0here<\/a>.<\/p><\/blockquote>\n\n\n\n

In item 9 of the agenda, the BMWK announces\u00a0that it will advocate in the long term for an abuse-independent unbundling option at the European level as a last resort in entrenched markets. Juliane Mendelsohn<\/strong> addresses this recurring topic.<\/em><\/p>\n\n\n\n

Amidst a war and still meandering through a pandemic, the (new) Federal Ministry for Economic Affairs and Climate Action has taken on the third great challenge of our time: to adjust our economic order towards one that is more in tune with digital reality, fairer, more sustainable, and perhaps even less concentrated\u2026 Looking at the history of German competition policy, the\u00a0long term commitment<\/a>\u00a0to establishing mandated unbundling as a ultima ratio at the EU level is hardly surprising and yet the digital reality itself may be writing entirely new parameters of this debate.\u00a0\u00a0<\/p>\n\n\n\n

The history of divestiture (German version)\u00a0<\/strong><\/h2>\n\n\n\n

The debate on the introduction of mandated unbundling is no foreigner to German competition law and has featured several amendments since the first introduction of the German competition law act (Gesetz gegen Wettbewerbsbeschr\u00e4nkungen, GWB<\/em>) in 1958. In fact, German competition law or \u201ccartel law\u201d (Kartellrecht<\/em>) succeeded a landscape of cartels and the divestiture of war time industry giants such as IG Farben. While these break-ups had political reasons and sook to\u00a0eliminate Germany\u2019s war potential (II. B. Protocol Potsdam Conference, 1945)<\/a>, much of the legacy of the European social market economy find its impetus in these, which, as Jens-Uwe Franck and Martin Peitz\u00a0write,\u00a0<\/a>served as \u201ca powerful beacon to herald in the new paradigm of guaranteeing competition by means of regulatory intervention \u2013 if necessary, also by intervention in the market structure<\/em>.\u201d<\/p>\n\n\n\n

At the dawn of the GWB and of ordoliberal thinking the \u201cJosten Entwurf\u201d of 1946 included the unbundling of powerful entities (Machtgebilde<\/em>) along the lines of previous mergers or where separable economic entities could be identified.In the late 1970\u2019s the academic and political debate re-emerged: Under the auspices of Erhard Kantzenbach, the German competition scholar,\u00a0Werner M\u00f6schel<\/a>, weighted the pros and cons of unbundling and the\u00a03rd<\/sup>\u00a0special report<\/a>\u00a0of the German\u00a0Monopokommission<\/a>\u00a0(an independent competition policy think tank) came out principally in favour of unbundling as last resort.\u00a0The almost identical discussion returned with the (liberal) \u201cRhiel Entwurf\u201d in 2007 and an amendment to introduce unbundling and other structural remedies was considered at length and ultimately supported by the Monopolkommission\u2019s\u00a058th<\/sup>\u00a0report<\/a>\u00a0in 2010. While this proposal too was never written into law, it clarified the scope, rationale, and conditions for mandated unbundling, which\u00a0took the shape of an instrument for a dominant or a group of dominant undertakings in a market of general economic importance where, for structural reasons, effective competition could no longer be established.<\/p>\n\n\n\n

There are several reasons why unbundling never became a competition law tool: property rights concerns, technical complexities and the fear of lengthy and\u00a0crippling law suits<\/a>. The short history of German divestiture would, however, be incomplete without the mention of the unbundling of German energy giants (E.ON<\/a>\u00a0and later RWE) per commitment decisions of the European Commission in 2008 and the use of competition law remedies to achieve regulatory goals.\u00a0<\/p>\n\n\n\n

Beyond a couple of notable exceptions, it was not entirely clear which undertakings should have been broken in 2010 \u2013 the German post perhaps? This may be different today and the German Green party has been floating the idea of breaking up \u201cGoogle & Co\u201d (now Alphabet, alias Big Tech)\u00a0since 2016<\/a>\u00a0and this political rhetoric not quieted down entirely since.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

This time is different?\u00a0<\/strong><\/h2>\n\n\n\n

While the current proposal to introduce mandated unbundling sounds like\u00a0old rhetoric<\/a>\u00a0(or in German an old hat – \u201cein alter Hut\u201d), it is set into a Zeitgeist filled with Angst over the power of Big Tech, an\u00a0FTC<\/a>\u00a0that is pleading for the breakup of Meta (in its entirety) and a\u00a0CMA<\/a>\u00a0that has ordered the divestiture of Facebook and Giphy as a remedy with \u201cno alternatives\u201d.\u00a0<\/p>\n\n\n\n

1. Size<\/h2>\n\n\n\n

The Big Tech giants aren\u2019t just large in any meaningful sense of the word, their size and reach go far beyond anything competition and antitrust laws have grappled with before. From\u00a0Google Shopping<\/a>\u00a0to\u00a0FTC v Facebook<\/a>, competition authorities have had\u00a0little problems\u00a0<\/a>establishing their super dominance in certain markets. But many Big Tech entities aren\u2019t just dominant in one market or even across several markets, their power is far more far reaching and pervasive. Recent research on \u201cmodern bigness\u201d ascribes social, political and even normative aspects to the power of Big Tech. Beyond political influence and an ever greater invasion of private spaces, these entities have the\u00a0\u201cpower to shape current and future normality, normativity, markets, behaviour, and truth.\u201d<\/a>\u00a0While such normative harms and those arising from the accumulation of users and data driven network effects are not always easy to identify, the persistence and omnipresence of Big Tech is novel and possibly the largest concern of greater competition policy in years to come.\u00a0\u00a0<\/p>\n\n\n\n

2. General economic importance & structural reasons<\/strong><\/h2>\n\n\n\n

As could be seen during the couple of hours that Facebook and Instagram were down (globally) in\u00a0October 2021<\/a>, when it comes to the digital world, the tech giants are not\u00a0\u00a0only of general importance to the economy \u2013\u00a0they are the economy<\/em>, or rather form the backbone of large segments of the digital world. Serving not only as key players, but as its \u201cgatekeepers<\/a>\u201d, however also means that markets are perhaps no longer just controlled by forces such as supply and demand, but have been fine-tuned to the rationale and interest of these few, big players. Digital gatekeepers do not rest on natural monopolies, but as the DMA identifies, the digital economy has its own structures, structures that can \u201ctipp\u201d towards closed or incontestable ecosystems that in turn may ultimately only allow the few to thrive and many newcomers to falter.\u00a0<\/p>\n\n\n\n

3. The idea that internal growth trumps growth by merger & the pernicious effects of \u201cunscrambling eggs\u201d<\/strong><\/h2>\n\n\n\n

One of the truisms of structural approaches and remedies, is that internal growth is more solid and more virtuous than expansion of an undertaking by merger or acquisition. At the same time competition theorists and policy makers have always warned against the bad precedent of ex post merger control (or the later correction of bad merger decisions such as\u00a0Facebook\/WhatsApp<\/a>). Over the past decade, however, strategic mergers and \u201cbuying instead of developing\u201d (and even\u00a0\u201cbuy or bury\u201d<\/a>) have become an essential component of Big Tech\u2019s\u00a0\u201cplaybooks\u201d<\/a>. Thus, both the FTC and CMA seem to be revaluating these doctrines and highlight the competitive advantages that would result from breaking up Facebook along the lines of previous mergers.\u00a0\u00a0<\/p>\n\n\n\n

4. Time<\/h2>\n\n\n\n

How long does it take for markets to become incontestable? Is it even a matter of time or do other factors play a role too? Digital markets are notoriously disruptive and perhaps the players\u00a0themselves still believe<\/a>\u00a0that they can be displaced by the next internet fad or \u201cbig thing\u201d in only a matter of months: the same way Facebook overtook MySpace around\u00a02007<\/a>, but that was 15 years ago \u2013 an entire generation in time.\u00a0<\/p>\n\n\n\n

Divestitures themselves are complex, costly, and lengthy. The ambition and indeed promise of a divestiture must, however, be to re-establish market forces in a manner that would allow unconstrained competition to flourish for a couple of decades thereafter. Since the rules of digital competition are changing and many tech giants face competition lawsuits and regulation, the alternative is decades of monitoring of the enforcement of behaviour remedies and regulatory intervention.\u00a0<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

5. The need for an ultima ratio<\/strong><\/h2>\n\n\n\n

I am a fan of the DMA, but, like many rules and regulations, the DMA\u00a0may<\/a> <\/a>fail.<\/a>\u00a0It may fail to sufficiently reign in its gatekeepers, and it may fail at the larger aim of making digital markets systemically more contestable and fairer. The draft DMA included structural remedies as an ultima ratio for this very reason (Art. 16 DMA). This ultima ratio is also needed as a tool in larger competition policy to secure and re-establish competition and autonomy when all other means and tools have failed and decade-long \u201cplaybooks\u201d have played out to the detriment of consumers.\u00a0<\/p>\n\n\n\n

Last,\u00a0risk<\/strong>\u00a0\u2013 of systemic failure, of surveillance, of authoritarian tendencies \u2013 is a word seldomly used in competition policy. But there is always a risk \u2013 a price to pay \u2013 for power and super concentration. And save any larger political or economic crisis, we will only have to pay this price with our autonomy.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Jun.-Prof. Dr. Juliane Mendelsohn is the head of the Department for Law and Economics of Digitization at Technische Universit\u00e4t Ilmenau. In her research she focuses on private power and the digital transformation in Competition and Private Law.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

This article is part of the D\u2019Kart Spotlights: AGENDA 2025, in which experts from academia and practice comment on aspects of the Competition Policy Agenda presented by the Federal Ministry of Economic Affairs and Climate Action (BMWK). The contributions already published can be found\u00a0here. In item 9 of the agenda, the BMWK announces\u00a0that it will advocate in the long term for an abuse-independent unbundling option at the European level as a last resort in entrenched markets. Juliane Mendelsohn addresses this…<\/p>\n

Read More Read More<\/span><\/a><\/p>\n","protected":false},"author":11,"featured_media":7525,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[422],"tags":[354,427],"class_list":["post-7522","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agenda-2025","tag-dma","tag-entflechtung"],"translation":{"provider":"WPGlobus","version":"3.0.0","language":"en","enabled_languages":["de","en"],"languages":{"de":{"title":true,"content":true,"excerpt":false},"en":{"title":true,"content":true,"excerpt":false}}},"_links":{"self":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts\/7522","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/comments?post=7522"}],"version-history":[{"count":11,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts\/7522\/revisions"}],"predecessor-version":[{"id":7545,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/posts\/7522\/revisions\/7545"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/media\/7525"}],"wp:attachment":[{"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/media?parent=7522"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/categories?post=7522"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.d-kart.de\/en\/wp-json\/wp\/v2\/tags?post=7522"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}