First practical experiences with the private enforcement of the German ‘tipping paragraph’ (Sec. 20(3a) Competition Act)Click here to read the full article online
There is consensus in the economic literature that in multi-sided digital markets, platforms are more prone to reach a so-called ‘tipping point’ than in traditional markets of the ‘old economy’. This is notably due to the presence of positive network effects which often create a natural tendency for market concentration. If network effects are sufficiently strong and not effectively counterbalanced by other factors (such as multi-homing), users are naturally drawn toward the platform or network with the highest number of users. This article provides an overview of recently enacted Sec. 20(3a) of the German Competition Act, dubbed the ‘tipping paragraph, which is intended specifically to reduce the risk of “tipping” in multi-sided platform markets. The article focuses on four noteworthy decisions applying the new provision in practice, which help guide the provision’s future interpretation by the courts.