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Adblocking Software Not Illegal “Aggressive Business Practice,” Says German Appellate Court

Antitrust Copyright Reports

OLG München, Aug. 17, 2017, U 2225/15 Kart, slip opinion hosted by

OLG München, Aug. 17, 2017, U 2184/15 Kart, slip opinion hosted by

OLG München, Aug. 17, 2017, U 1917/16 Kart; full-text not yet available.

In three separate appeals cases this summer, the second-instance court in Munich, Germany ruled for Eyeo GmbH, the makers of the popular adblocking software, Adblock Plus. This trio of cases is significant because while Eyeo has scored several victories in German courts at the trial level, the company lost the one appellate case previously decided.

In that case, the appellate court in Cologne agreed with the lower courts that Adblock Plus did not constitute “unfair competition” under The German Act Against Unfair Competition, or Gesetz gegen den unlauteren Wettbewerb (“UWG”). Distinct from antitrust law, the UWG is meant to act as a broad shield against undesirable business practices. The German trial courts and the Cologne appellate court, noted that while adblocking software may dent publishers’ revenues, they are not undesirable because they provide a valuable service to their users and that the burden is on publishers to respond to this new business reality with innovation, not litigation.

However, reviewing the case de novo, the Cologne appellate court found a way to grant the publisher-plaintiffs relief under Section 4a of the UWG, a newly adopted provision prohibiting aggressive business practices. It ruled that by charging a fee for large commercial publishers to participate in its whitelisting service, Eyeo directly linked its gain with publishers’ loss. This relationship dynamic, combined with a finding that Adblock Plus so severely influenced the publishers’ business that it coerced them into signing up for the whitelisting service, constituted an aggressive business practice, according to the court. Importantly, the Cologne court held that the interests of third parties, such as regular internet users, should not be taken into account for Section 4a analyses.

The Munich court has now come out the other way in all three cases, ruling that Eyeo’s whitelisting service for Adblock Plus is not an aggressive business practice because the publishers have a wide range of alternatives to paying for the service, including blocking Adblock Plus users or instituting a paywall. Moreover, the plaintiffs lose on the threshold question of whether Adblock Plus has a dominant position. While plaintiffs allege that Adblock Plus has a 95% share of the adblocker market, the court held that the relevant market is not the population of users of adblocking software, but the population of users of the publishers’ websites. Even in Germany, where the use of adblocking software is much more prevalent than in some other countries, only 24.7% of users use an adblocker, and only 4.32% of users use Adblock Plus specifically. This falls far short of the 30% prevalence required for a presumption of dominance as defined in Section 18 Paragraphs 3 and 4 of the Gesetz gegen Wettbewerbsbeschränkungen, Germany’s antitrust law.

While these cases are likely not the final word on the legality of adblocking in Germany or the world, they have attracted significant attention because they suggest courts in and out of Germany will uphold the legality of adblocking software. The run of cases in Germany have now clearly, albeit not unanimously, come out on the side of adblockers, despite German law being more paternalist when it comes to scrutinizing business practices than the law in many other countries, including the United States.

David Meyer for ZDNet provides an overview of the latest litigation. Adblock Plus’s own blog has a post discussing the case. Russell A. Miller, JB Stombock Professor of Law at Washington & Lee University, discusses the legal aspects of the case in a guest post on the Technology & Marketing Law Blog. Miller has written a draft paper analyzing the previous German cases and exploring what they suggest about how American courts would rule in a similar case.

Andrew J. Lu is a 2L student at Harvard Law School.