Framework

Germany’s Section 19a of the Act against Restraints of Competition (GWB), effective since January 2021, provides the Federal Cartel Office (Bundeskartellamt or FCO) with enhanced powers to regulate large digital companies. The law targets undertakings deemed to possess “paramount significance for competition across markets” (PCMS), evaluated based on factors including market dominance, financial strength, vertical integration, access to data, and their role as ecosystem gatekeepers. It operates via a two-step process: First, the FCO formally designates a company as having PCMS status for five years. Second, the FCO can prohibit that designated company from engaging in specific practices listed in the law. These prohibited practices include self-preferencing its own services, using tactics to impede competitors, leveraging data access to create entry barriers, conditioning services on broad data use agreements without sufficient user choice, or hindering interoperability. Significantly, the FCO can prohibit these actions without proving they have caused anti-competitive harm in a specific instance; the burden falls on the designated company to prove its conduct is objectively justified.[1]  

Implications for U.S. Technology Companies

The primary targets and subjects of designation under Section 19a GWB have been major U.S. technology companies, including Alphabet (Google), Amazon, Apple, Meta (Facebook), and Microsoft.[2] For these firms, the law translates directly into negative consequences. They face heightened regulatory scrutiny and the constant threat of proactive interventions into their core business operations and platform designs, even without evidence of specific harm. The need to potentially re-engineer services to avoid presumed violations of the listed practices (like self-preferencing or data integration) imposes significant compliance costs and operational complexity. Furthermore, the requirement to objectively justify challenged practices shifts the legal burden onto the U.S. companies. Ongoing FCO investigations into specific conduct—such as Google’s data processing and automotive services, Amazon’s marketplace practices, and Apple’s app store policies—add further uncertainty and potential disruption to their operations in a key European market.  

How China Benefits

While Section 19a GWB is presented as a tool for ensuring fair competition within Germany and Europe, its disproportionate impact on leading U.S. technology firms can yield strategic advantages for adversaries, particularly China.[3] By imposing substantial regulatory costs, operational constraints, and potential barriers to innovation specifically on the leading American players, the German law can weaken their global competitiveness and divert resources from innovation toward compliance. This weakening of major U.S. tech companies, which are primary global competitors to Chinese firms, potentially creates market openings and reduces competitive pressure worldwide. As U.S. firms become more constrained by fragmented and burdensome regulations in key markets like Germany, state-backed or less encumbered firms from China may find increased opportunities to expand their own technological influence, ecosystems, and global market share.

Endnotes