On April 11, 2019, the Federal Cartel Office (“FCO”) published its final report on its sector inquiry into comparison websites. This inquiry marked the first time that the FCO had analyzed a sector on the basis of its consumer protection competencies that have only recently been created. It clearly emphasized the agency’s ambition to expand its enforcement authority also into this area. Overall, the FCO came to the conclusion that several comparison portals infringed consumer rights in particular by providing misleading or incomplete information to consumers.
The German legislator granted the FCO the competence to conduct sector inquiries into potential consumer protection issues in 2017 as part of the Ninth Amendment of the German Act against Restraints of Competition (“ARC”). The FCO may investigate conditions in a specific industry sector if there is reasonable suspicion of significant, permanent or repeated infringements of consumer protection law affecting a large number of consumers (e.g., widespread infringements of the German Act Against Unfair Competition and the rules on general terms and conditions). The FCO’s new powers, however, do not include investigations against individual companies or the imposition of fines or other penalties. Nonetheless, the sector inquiries’ results may facilitate private enforcement by consumers, consumer associations or competitors.
The FCO’s newly founded consumer protection division launched its inquiry into comparison websites in October 2017, i.e., only four months after its new powers entered into force and closely followed by a second—still ongoing—sector inquiry regarding potential consumer protection issues, namely the use of consumer data by smart-TV producers, which commenced in December 2017. On May 23, 2019, the FCO further launched another sector inquiry into the authenticity and validity of user reviews on online platforms.
Scope Of The Sector Inquiry
The sector inquiry was intended to explore criticisms regarding the objectivity and transparency of comparison portals. The inquiry was conducted in two steps. After the FCO had initially identified and sent voluntary questionnaires to over 150 price comparison websites in Germany, it then issued formal requests for information to the 36 biggest and most important portals.
The sector inquiry targeted both price comparison websites, such as Booking.com and HRS, and meta-search engines, such as Momondo, in the areas of energy, telecommunications, loans, insurances, as well as hotel and flight booking.
Lack Of Transparency And Covert Advertising
The FCO identified a number of features common to many comparison websites as potential areas of concern with respect to consumer protection law:
Consumers do not receive sufficient information about the comparison websites’ actual market coverage. These often compare less than 50% of all offers on a given market, but suggest a broader coverage.
There is a lack of transparency regarding the way provision payments are made by the listed businesses and how these influence their ranking. Additionally, sponsored offers displayed above the ranked search results (“position 0”) are not always labeled as advertisements, which may amount to illegal covert advertising in the FCO’s view.
The wording of disclaimers regarding the exclusivity and limited availability of offers (e.g., “in high demand”, “best offer today”), particularly on hotel booking websites is regularly misleading or even plainly false.
The fact that a number of comparison websites share the same search databases and display identical search results is not always readily discernible. As users tend to use several websites for their searches, they may get the false impression that an offer is rated equally by seemingly independent providers.
While the FCO also investigated user review functions (i.e., in particular for comments and rating), it did not identify any significant issues in this regard. Nevertheless, the FCO listed falsified or manipulated ratings as a potential issue and emphasized the importance of a neutral presentation of user reviews.
FCO Seeking New Enforcement Powers In The Area Of Consumer Protection
Based on its conclusion that infringements of consumer protection law are widespread among comparison websites, the FCO concluded that the current German consumer protection system is insufficient: The German consumer protection system today relies almost entirely on private enforcement. It is not possible for private players to take action against conduct by digital platforms and behavior based on algorithms, as the relevant conduct is complex and cannot be proven without investigative powers and access to internal documents. Further regulation would be unsuited to the fast-paced nature and diversity of platforms.
Against this background, the FCO used its final report to campaign proactively for an expansion of its own competencies. In particular, the FCO seeks the power to conduct consumer protection related investigations against individual companies, to issue prohibition decisions, and to accept commitments. Because of its long-standing experience as the German antitrust enforcer and its expertise regarding the digital economy, the FCO considers itself to be the best candidate to assume public enforcement duties also in this respect.
The FCO obviously considered the sector inquiry as a first step on its way to becoming Germany’s consumer protection agency. While there is a good chance that the FCO’s continued advocacy in this regard may, however, eventually pay off, the German legislator’s current plans for its upcoming amendment of German competition law do not as yet earmark new enforcement powers for the FCO. In the same vein, it is still uncertain whether the revision of the EU Consumer Protection Cooperation Regulation, which requires the Member States to provide enforcement powers regarding infractions of consumer law with a union dimension, will indeed result in the creation of a genuine consumer protection agency in Germany.
 FCO Report, Sektoruntersuchung Vergleichsportale, April 11, 2019, only available in German here. A short background paper is available in English here. The FCO’s article “Consumer rights and comparison websites: Need for action”, February 4, 2019, gives a preliminary summary, available in English here.
 In principle, the FCO chose these portals based on the number of page visits and/or their revenue value.
 Meta-searchers only search price comparison websites, but do not maintain their own database and do not offer booking functions on their website.
 In particular, short references to the ranking criteria provided in the form of clickable links or mouse-overs were considered to be too vague and hidden.
 Germany does not have a genuine consumer protection authority responsible for the enforcement of consumer protection rules. Instead, enforcement lies mostly in the hands of consumers themselves and consumer associations that file civil law suits against perpetrating companies. Public authorities investigate consumer protection cases basically only if they involve criminal behavior.