Context: It became known earlier this year that Volkswagen, Mercedes, BMW and ThyssenKrupp were seeking clearance from the Bundeskartellamt (Germany’s Federal Cartel Office (FCO)) for an Automotive Licensing Negotiation Group (ALNG) so they (and possibly others joining them) could present a united front to standard-essential patent (SEP) holders (January 30, 2024 ip fray article).
What’s new: Driven by its president’s vocal desire to break new ground in competition law, the FCO has gone off the deep and actually declared, as announced in a press release of today, its decision to condone the formation of such a purchasing cartel. There are apparently some restrictions, but the only one that the FCO mentions is that the car makers and their suppliers should not collaborate in this form with respect to standards that are specific to the automotive industry, as opposed to widely used telecommunications standards.
Direct impact: The FCO decision is outrageous because it sets a dangerous precedent for purchasing cartels that are prone to engaging in group boycott. But it doesn’t make any impact in its own right as any buyers’ cartel can be challenged in the courts of law, and Germany is just one of various jurisdictions in which those companies would need clearance. In the end it is more of a PR stunt by an agency that tries to get attention through aggressive and novel theories (which worked out well for them in connection with a “data”-based theory of harm concerning Meta’s social networks) while it generally does not get the most important cases, as those are handled by the European Commission’s Directorate-General for Competition (DG COMP). It is highly doubtful that competition enforcers in other jurisdictions will follow the FCO on this one.
Wider ramifications: The FCO has opened a can of worms. It seeks to narrow the scope of this decision by limiting it to SEPs that are implemented in cars but not specific to the automotive industry. However, this PR stunt will nevertheless embolden bad actors in other markets to coordinate purchasing decisions in ways that were traditionally considered unlawful.
During the Nokia v. Daimler dispute, the FCO made submissions to different German courts in which the agency advocated a preliminary reference to the European Court of Justice with respect to the right of automotive suppliers to exhaustive SEP licenses. Most judges rejected the FCO’s position, but in Dusseldorf, Presiding Judge Sabine Klepsch made a preliminary reference that was never decided as Nokia and Daimler settled.
If the FCO was not known to act very autonomously, one might suspect that the lobbying power of the German automotive industry contributed to today’s decision. The fact that the German economy is still to some extent dependent upon its automotive sector may have played a role, but more than anything, this is just about an agency head wanting to do something “innovative” from his point of view.
ip fray does not believe that every jurisdiction in which such a cartel would need clearance is going to follow suit. It is more likely that none of the Western world’s leading competition authorities (the U.S. FTC or DOJ, the EC’s DG COMP and the UK CMA) is going to agree with the German FCO.
Given that the FCO’s announcement does not state any compelling reason for which ALNGs should be treated differently from unlawful purchasing cartels, ip fray would merely like to point to its January 30, 2024 commentary, which includes a ski resort analogy that explains why patent pools and licensing negotiation groups cannot be compared.