Germany as a Business Location under Pressure

The Monopolies Commission points out that the domestic share of value added by large German companies in the manufacturing sector has fallen significantly since 2008. Value added has grown much more strongly abroad than domestically. It sees this as a sign that corporate growth is becoming decoupled from Germany as a business location.

The BDI shares this concern. High labour and energy costs, the tax burden, a shortage of venture capital and a high level of regulation are undermining investment and innovation. The Monopolies Commission’s calls for a reduction in regulatory burdens and improved framework conditions are correct. However, in view of geopolitical risks, critical dependencies and the transition to climate neutrality, targeted measures are also required to safeguard industrial value creation and resilience.

Industrial Policy: Strengthening Competition, Taking Global Distortions into Account

The Monopolies Commission generally gives priority to horizontal measures. It argues that favourable framework conditions and effective competition are usually more appropriate than interventions in favour of individual companies or sectors. It considers vertical measures to be justified primarily in cases of market or transformation failure. Such measures should be based on transparent criteria and, at the same time, be time-limited and subject to review.

From the BDI’s perspective, competition policy is always also location policy. State subsidies, restrictions on market access and strategic dependencies alter the competitive conditions for European companies. In addition to key technologies, risks relating to critical raw materials and industrial capacities must be taken into account. Securing integrated value creation in Germany and Europe remains a priority. The criterion of market or transformation failure therefore falls short. Policies adopted by other countries that run counter to market principles or contravene WTO rules may also justify vertical industrial policy measures.

Defence Sector: Combining Market Access and System Responsibility

The Monopolies Commission does not view competition law as an obstacle to the expansion of European defence capabilities. Cooperation and mergers may be necessary, but would need to be carefully scrutinised. It warns against dependencies and difficulties in market access for smaller suppliers, and advocates greater interoperability, modular systems and better access for start-ups and small and medium-sized enterprises.

The BDI shares the objective of effective and innovation-friendly procurement. In the case of complex defence systems, cooperation and capable system integrators may be necessary to provide capabilities and to ensure integration, availability and security of supply throughout the entire life cycle. At the same time, specialised SMEs and start-ups must retain appropriate access to intermediate inputs and procurement projects.

The appropriate supplier and procurement structure depends on the specific subject of the procurement and the requirements of the armed forces. In the case of technically separable components, smaller lots can facilitate market access. For highly integrated systems, bundling may be necessary to ensure efficiency and clear system accountability. Accordingly, multi-year contracts may be appropriate for complex, large-scale systems, whilst modular contract models may be more suitable for software and other technologies with short development cycles.

Merger Control: Relief and Legal Certainty

The Monopolies Commission takes a critical view of the planned increase in turnover thresholds as part of the 12th amendment to the Act against Restraints of Competition (GWB) and, in principle, welcomes the extension of the transaction value threshold to include anticipated future domestic activity. The BDI takes a different view on both points: raising the turnover thresholds is the right move, but remains too moderate. Extending the transaction value threshold, on the other hand, increases legal uncertainty and weakens the necessary domestic link. Link: Article on the 12th GWB Amendment.

Industrial Electricity Prices: Combining broad-based and targeted Relief Measures

The Monopolies Commission sees competition risks in the existing electricity price relief measures and recommends standardising the support framework and structuring levies and charges as horizontally as possible.

The BDI advocates simple and broad-based relief measures. However, these are not sufficient for particularly electricity-intensive companies operating in an international competitive environment. Broad-based and targeted measures fulfil different functions: the subsidy for transmission network charges has a general effect, whilst the industrial electricity price provides relief specifically for energy- and trade-intensive companies. As long as Germany faces structurally higher electricity costs than key competitor locations, such relief measures are not a privilege, but serve to secure investment and value creation.

There is consensus on reducing the red tape associated with subsidies. Procedures and supporting documentation should be simplified and digitalised. However, electricity cost relief cannot be replaced by tenders for transformation services, as it primarily serves to safeguard industrial competitiveness.

Artificial Intelligence: Considering Infrastructure and Regulation together

The Monopolies Commission regards artificial intelligence as a crucial cross-cutting technology. Among other things, the Monopolies Commission proposes extending the Digital Markets Act (DMA) to include AI services. It also aims to facilitate industrial data collaborations, highlight potential dependencies through control point analyses and avoid duplicate regulation.

The BDI supports greater legal certainty for industrial data collaborations and the reduction of duplicate regulation. However, the main report fails to give sufficient weight to the importance of AI computing infrastructure. To enable German industry to realise its potential in the field of Physical AI, the expansion of computing capacity in Germany and Europe must be made a political priority. This requires faster approvals, suitable sites and grid connections, a high-performance energy infrastructure and competitive electricity prices.

Control point analysis can highlight dependencies, but it does not in itself constitute a basis for intervention. Competition law measures must continue to be based on specific conduct and proven anti-competitive effects. At the same time, companies are burdened by the cumulative burden of European and national regulations. The BDI therefore calls for the elimination of duplicate regulation and for restraint in the ex-ante regulation of fast-moving technologies.