How does government regulation promote competition?

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In Germany, freedom of economic competition is protected by two laws: the Act against Restraints of Competition (GWB) (PDF, 163 KB) and the Act against Unfair Competition (UWG). Both laws pursue different protection goals.

The GWB aims to protect competition as an institution and is intended to ensure freedom of competition as a general interest, so that there is no threat of restrictions or exclusion of the economic activity and decision-making freedom of competitors. The GWB is the basic work of antitrust laws in Germany. Some sectors of the economy such as telecommunications, postal services, rail transport and energy supply, however, have area-specific features and are regulated in more specific laws.

In addition to the GWB, the UWG and its subsidiary laws are also intended to offer protection against unfair and unlawful competitive acts by individuals. One also speaks of fair trading law, because the behavior of the individual competitors in the market should be "decent" and honest. The Federal Ministry of Justice and Consumer Protection (BMJV) is responsible for the UWG.

An information paper (PDF, 81 KB) summarizes the most important aspects of national antitrust and competition law.

The core pillars of the GWB

The GWB anchors the principle of the free market economy in a law. It consists of three core pillars: the ban on cartels, abuse control and merger control. The aim is to preserve free competition as a guarantee for the prosperity and efficiency of our society by preventing competition restrictions. Companies participating in the competition should not have any possibility of negatively influencing the competition. You can find out more about this here.

A competition law for the digital economy

The GWB is constantly being revised so that it can react appropriately to changing economic circumstances. The 9th amendment to the Act against Restraints of Competition (GWB) (PDF, 163 KB) therefore came into force on June 9, 2017. This was the first adaptation of competition law to digitization, which enables the Federal Cartel Office to also take into account phenomena such as network and economies of scale or access to competition-relevant data when examining the market dominance of companies. With the GWB Digitization Act (10th GWB amendment), national competition law is to be further modernized and adapted to digitization. The aim of the draft is, among other things, to make the rules of the game for dominant platforms more stringent by tightening abuse control and at the same time to increase the opportunities for innovation as well as market and data access for competitors. In order to make European competition law fit for the challenges of the digital markets in particular, the Federal Government set up the “Commission Competition Law 4.0” in September 2018. The Commission has dealt with the competition policy issues arising from the advancing development of the data economy, the spread of platform markets and “Industry 4.0”. In September 2019, the Commission presented its final report. Learn more.

European competition law

The German competition order is not only determined by German law, but also by regulations at EU level. European antitrust law is essential for the functioning of the common European internal market. The European Commission, or in particular the Directorate-General for Competition, is responsible for enforcing the competition rules, which is the reason for the Commission's important position in terms of competition policy.

The European competition framework is determined in particular by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Article 101 TFEU includes the prohibition of cartels, i.e. agreements and concerted practices that are likely to affect trade between the Member States and which have the object or effect of restricting or distorting competition. This comprehensive ban relates to horizontal and vertical restrictions, but can be restricted by the Commission through so-called Block Exemption Regulations (BER) under Article 101 (3) TFEU. Article 102 TFEU prohibits the abuse of a dominant market position and thus targets unilateral acts by companies, so-called abuse of exploitation or hindrance. The third pillar of European competition policy is merger control, which is also carried out by the European Commission. The legal basis for this is the Merger Regulation.

German antitrust regulations must not run counter to the purpose of Union antitrust law, which is why the GWB is largely based on the antitrust law of the European Union. A synchronization of the regulations is of immense importance with a view to the common market in the European Union and the everyday cross-border commercial traffic. If there is an impairment of trade between the member states (keyword: intergovernmentalism), the provisions of European antitrust law are applied either alone or together with national antitrust law.

You can find out more about European competition law here.

Monopoly Commission

The Monopolies Commission is an independent advisory body that advises the Federal Government and the legislative bodies in the areas of competition policy, competition law and regulation. The Monopolies Commission mainly prepares expert opinions on a legal basis, on behalf of the Federal Government, in the process of ministerial approval or on its own initiative.

Statutory provisions include, for example, the “main report” that appears every two years and regular reports on the development of competition in the railways and telecommunications markets. In the main report, the level of corporate concentration is assessed in terms of economic and competition policy and legally recognized. The Monopolies Commission also analyzes individual sectors such as the transport or service sector.

A list of the special reports can be found here.

General pricing law

Price law also makes an important contribution to well-functioning competition: in our economic system, prices are generally freely formed on the basis of supply and demand from market participants. Nonetheless, pricing standards must be complied with. A distinction is made between the material and the formal price law: The material price law (e.g. fixed book prices) regulates the content - i.e. the determination and amount of prices - and monitors whether agreements made are effective and adhered to. In doing so, it intervenes in free pricing for social, competition policy or other reasons.

The formal price law - also known as the price regulation law - regulates the form, i.e. the way in which prices are awarded and announced. It is regulated, among other things, by the Price Indication Ordinance.

Further information on general pricing law is available here.