Populism or panacea
Will stricter antitrust laws make gasoline cheap?
By Max Borowski
06/15/2022, 08:16 am
Satisfied economists, appalled lawyers: Economics Minister Robert Habeck sparked a controversy with his initiative to tighten antitrust law. Is his planned legal reform likely to ensure more competition and lower prices at German petrol stations? The most important questions and answers:
What exactly is this antitrust law?
In order for a market economy to function and for prices to be formed freely from supply and demand, there must be competition. However, when large companies or those forming a cartel have a particularly strong or even dominant position in a market, they can eliminate competition and drive prices in a direction that is favorable to them and unfavorable to customers. Therefore, cartels – with a few exceptions – and the abuse of market power are prohibited in Germany. The authority responsible for this is the Federal Cartel Office. The Federal Network Agency is also responsible for monitoring competition in some sectors. The Bundeskartellamt can impose penalties for violations of competition law, prohibit mergers of companies or order the demerger of companies. A prerequisite for such measures is proof of violations of the law.
Why should antitrust law be changed?
For years there has been unease about the development of fuel prices at filling stations. Not only from the point of view of many motorists and politicians, they are usually too high. Prices are also moving in a manner that many experts consider suspicious. The big mineral oil companies almost always change their prices exactly in step. They don’t seem to want to compete with each other. In addition, fuel prices have recently decoupled from crude oil prices on the world market, and the profits of the corporations that operate both the large gas station networks in Germany and the majority of the refineries have obviously risen sharply. But: Although the cartel office has been dealing with the industry for many years, it has not been able to prove any violation of the law so far. For this reason, the competition watchdogs should in future be able to take action against companies without tangible evidence if, in their opinion, competition in an industry is not running properly. In the future, the burden of proof should lie with the companies, who have to prove that they are not abusing their market power.
What exactly is to be changed?
Among other things, the Cartel Office is to be given extended investigative powers for its so-called sector investigations. Profits from oligopolies, such as those on the fuel market, should be able to be skimmed off more easily without illegal price fixing having to be proven. According to information from “Spiegel”, the Federal Ministry of Economics and Technology wants to provide for an “abuse-free unbundling option” as an “ultima ratio”. That means breaking up dominant companies, even if they have not demonstrably abused their market power. In the case of the petroleum industry, this would mean that a company could eventually be forced to sell all or part of either its network of filling stations or its holdings in refineries in order to create more competition in the industry.
Will the tightening of antitrust laws lead to lower fuel prices?
The tightening of the law can only have a positive effect on prices for consumers if prices are actually currently distorted by restrictions on competition. But that’s just a suspicion so far. There are indications that other factors may be at least partly responsible for the recent decoupling of gasoline prices from crude oil prices. The net fuel prices – ie without the taxes and levies that vary from country to country – are roughly in line with those in other European countries. In the US, the price of gasoline has risen to a record high. This speaks against the fact that, especially in Germany, a cartel is driving up the price.
If it works, when can we expect lower fuel prices?
The Federal Ministry of Economics has not even officially submitted a draft for the amendment to the law. It will probably be a long time before the new rules are passed and come into force. After that, the Cartel Office would have to start with the implementation. If measures were to be taken against the mineral oil companies, they would probably object. Corresponding legal proceedings could take years. The antitrust reform will hardly lead to any short-term relief for consumers in the current crisis, but will only strengthen competition in the long term.
What do the experts say about this?
Many economists welcome the move. Many consider the controversial “tank rebate” or the repeatedly demanded extra taxation of so-called “excess profits” to be interventions that impede the functioning of the market. Effective competition control, on the other hand, would ensure falling prices in the interests of consumers in the long term by strengthening market forces. That is “exactly the right way,” praised Justus Haucap, competition economist and former chairman of the monopolies commission, to ARD.
What speaks against the plans?
Critics say the new competencies for the Cartel Office go too far. The general manager of the German trade association, Stefan Genth, warned against the editorial network Germany of a “blank check” for the competition guardians as well as “arbitrary and politically motivated decisions.” Instead of more, the tightening could even lead to less competition. “If market power that has been achieved by one’s own efforts and has not been abused is generally suspected by the legislator per se, this can dampen the commitment of companies on the market from the outset,” said Genth. The head of the employer-oriented Institute of German Business, Michael Hüther, considers the antitrust reform after the flop of the tank discount to be another possible failure: “It borders on arbitrariness if the minister wants to adapt antitrust law without real evidence of misconduct on the part of companies Arguments based on feelings don’t work.”
Criticism also comes from lawyers. In an interview with the “Legal Tribune Online”, the competition law expert Florian C. Haus called the planned more effective skimming of benefits “antitrust populism”. Law professor and competition lawyer Torsten Körber emphasized to the specialist portal that antitrust law is “not a means of general price supervision and certainly not a panacea to compensate for errors in other laws.” Wanting to break up the mineral oil companies without proof of abuse is not realistic even with the change in the law and is “pure theater thunder,” said Körber.