“It’s about averting danger”: What good is the stricter antitrust law?

“It’s about security”
What good is the stricter antitrust law?

4/9/2023 5:26 p.m

The federal cabinet is launching a reform of competition law. The Bundeskartellamt should be better able to combat excessive pricesin. In the future, the authority can order various measures if competition is disrupted – illegal behavior is no longer a prerequisite for this.

Criticism of the planned tightening is hailing from the industry. Competition economist Justus Haucap, on the other hand, considers it necessary. He hopes that the Cartel Office will now take care of Deutsche Post and Deutsche Bahn, he says in an interview with ntv.de.

ntv.de: Federal Minister of Economics Robert Habeck had announced that he would create competition law with “tooth and claw”. Did he succeed?

Justus Haucap: On the whole, that’s true. However, the Bundestag has not yet approved it, and there may well be changes. However, the government draft is a significant improvement on the law that has been in force up to now. The Cartel Office is given the opportunity to intervene in markets regardless of actual abuse. And that’s good.

Why?

On the one hand, it is often difficult and very time-consuming to prove abuse. On the other hand, politicians have often reacted spontaneously in the past when they believed that something was going wrong in a market. One example is the high fuel prices last summer. The federal government reacted to this with the tank discount. This was a hasty move that was not well thought out. It makes much more sense for the Federal Cartel Office to carefully examine a market and for experts to think about how to react. Then decisions are made that are not driven by day-to-day politics or surveys, but are shaped by expertise.

You mentioned the high fuel prices. The trigger for the tightening of competition law was that the prices for petrol and diesel at filling stations continued to rise, even though oil prices fell again. The reason: lack of competition. Can this be prevented at all in the future? Because the Cartel Office can only intervene if a market has been disrupted for at least three years and will remain so for at least two years. That’s quite a long period of time.

You don’t want to intervene ad hoc, you want to change structures. It’s about solving long-term problems. If you want to solve short-term problems, you have to respond with short-term measures – like the fuel rebate, although that wasn’t a particularly good idea. If you want to change something structurally, it only makes sense if the problems are permanent.

Which sectors is the federal government targeting with the tightening?

I don’t think the federal government is keeping an eye on individual sectors. Some mineral oil companies have started to sell their gas station networks independently of the tightening. So there is already unbundling taking place without Robert Habeck. I have the faint hope that the cartel office will take care of the post and the railways. These companies are dominant. So far, this has hardly bothered politicians, after all, the railways belong entirely to the federal government and some of the postal service. So far the motto has been: competition is good – as long as it’s not about our company.

In the future, the Cartel Office should also be able to order the unbundling of companies in extreme cases. How realistic is it that there will be a breakup?

This is the last resort. Demerger does not necessarily mean break-up. This is not always about an ownership unbundling that would require the sale of parts of the company. An organizational separation is conceivable, for example. At Swiss Post, for example, it would be more transparent to separate the letter and parcel areas in accounting. As I said, demerger is the last resort. There are many other measures that the Cartel Office can take. For example, it can demand the disclosure of data or make specifications for supply relationships.

One criticism of the tightening is that the Cartel Office is now given more power to control markets politically.

Oh well. There is already the possibility to steer markets politically: the Bundestag can decide all sorts of things to achieve exactly that. The Bundeskartellamt is not a political authority. No authority is free of politics. But the Bundeskartellamt is very independent. With him, the danger is much lower that decisions are not oriented towards the matter at hand, but are politically motivated. A prerequisite for any measure that the Cartel Office wants to impose is a thorough, empirical investigation. As a scientist, I rejoice in evidence-based policies that are guided not by feelings but by facts.

Criticism comes primarily from industry. The core: An authority can sanction companies in the future, although they do not violate the law.

That’s the way it is. And that’s good. This is because companies do not have to first collude illegally in order to actually form a cartel. It is enough that they behave in this way without collusion. Then they act completely legally, but ensure inflated prices. In such a case, the Cartel Office has not been able to do anything so far. Because it would have had to prove that there was price fixing. Now it is sufficient that a market is “significantly” and “permanently” disrupted. In this way, the Cartel Office can intervene regardless of the cause and ensure more competition.

But isn’t that a massive encroachment on the rights of companies?

Yes. But sometimes it is necessary. Merger control is also a major intervention. This means that owners can be prohibited from selling their company to the buyer they want. When merger control was introduced in 1973, there was an outcry throughout the republic. But it’s about averting danger. It has to be weighed. And then the result can be: In order to keep the competition, you have to sell to someone else. In the meantime, most people should be overjoyed that there is a merger control instrument.

Jan ganger spoke to Justus Haucap