Obsolescence – Between Entrepreneurial Freedom and Need for Regulation

The printer has a malfunction shortly after the warranty expired and has to be replaced, cellphones get slower and slower with every new update or the battery dies after only a brief period of time. The repairability is aggravated because of fixed installed batteries or expensive spare parts.

Many consumers can relate to these kind of problems and also for some politicians, “planned obsolescence“ is more than an urban legend, which has to be addressed politically. The Green party even made it part of their election campaign. They demand a reduction in value added tax on repairs from currently 19% down to 7%, in order to “fight the amount of waste produced by society“. However, it is not easy to prove planned obsolescence, the intended reduction of a product’s life span.

It’s difficult to differentiate between the usual wear and tear of a product and an intention of the producer. Obsolescence can not yet be measured by standardized criteria.

It’s a fact that consumers nowadays tend to replace their electric products more often than a few year ago. The lifetime of household appliances decreased between 2004 and 2013 from 14 to 13 years while the lifetime of notebooks shrunk between 2005 and 2013 from 6 to 5 years, according to a study of the Federal Environmental Office (UBA) in March 2015. This is connected to the popular insinuation that companies have an incentive to lower the lifetime of a product, in order to sell new versions of the product, which are often only slightly modified. Thus the question remains: Is federal regulation needed in order to protect the environment and the consumer?

Brussels at least sees it that way. In 2005 the Ecodesign directive already was put in place, which aimed to increase energy efficiency and improved sustainability. After the first amendment in 2009 there’s now a push towards the next adjustment. The EU-parliament passed a resolution in June and the respective stakeholders are preparing their lobbying campaigns.

In Germany, the issue did not play an important role during the last legislative cycle. After the above-mentioned study by the UBA, it took time until May 2017 to address the topic. The UBA published guidances to shield consumers planned obsolescence. Those suggested for example a minimum lifetime span for products, more consumer information, a mandatory warranty statement, improved repairability and also various strategies to extend the life cycle of a product.

Furthermore, the parties in Germany only addressed this topic to a certain extent. For example, the CDU/CSU is demanding harmonised EU-standards regarding product warranty, but does not support increased interference in the product design. The SPD have shown a stronger position on this subject. The Social-democrats want more transparency for the consumer and ameliorated repairability, however regulations on a minimal lifetime for all products are viewed critically by the SPD. Electric products differ too much in their life cycles and quality and common standards are very difficult to define.

For the Green and the Left, these arguments are not sufficient. They support more regulation and, in contrast to the SPD, demand a general extension of product warranty. The left goes even further and calls for a minimum lifetime of three years for all electric products. Additionally, companies should be obliged to develop products that can be repaired easily and have enough spare parts. Overall, the Greens as well as the Left call for prolonged product life cycles.

FDP and AfD are rather cautious of this subject and both have not developed stand points for this topic. It is to be assumed that both parties refuse company regulation.

Therefore, it is on the Greens to make this issue a matter of subject in the next government coalition. In this case, the demands of a lower value added tax on repairs may just be the first step. However, a participation of the Greens in a next government coalition is still uncertain just weeks before the election.

In the case of both a so-called “Jamaica coalition“ or a coalition consisting of CDU/CSU and the Greens, it will be difficult to enforce government regulation against a traditionally business-friendly CDU/CSU. Whatever wholehearted words the next coalition contract will contain, they will most likely not pass the detailed negotiations in Brussels. A fast solution like a VAT reduction on repairs could serve as a fig leaf for the next federal government.

A resumption of the grand coalition or a coalition consisting of CDU/CSU and FDP would burry the topic on the national level. And in Brussels, Germany would rather slow things down than help establishing a common solution.

POLITICAL OVERVIEW: Government and car producers hold diesel summit, Merkel still leading by a wider margin

Leading government politicians and major German car producers have agreed upon the introduction of new software upgrades which would reduce harmful emissions by up to 30% in more than 5 million affected diesel cars across Europe. The decision was made on the occasion of the so-called diesel summit the federal government has held in order to remind the ailing and pressured industry of its obligations. The decision had become necessary as bans on Diesel cars in many German cities are looming over the violation of tough environmental standards.

Before the agreement was reached, co-host Transport Minister Alexander Dobrindt had already sent strong signals that he would be satisfied with a comparatively industry-friendly correction and thus contradicted his colleague Barbara Hendricks, who had called for more far-reaching changes. The Environment Minister made no secret of her intention to use the scandal for promoting a serious emissions cut of up to 30%. “There is still a possible gap, which must be closed“, Hendricks said and promised to carefully monitor future developments in the field. Meanwhile, industry representatives like the German Car Manufacturer’s Association (VdA) signaled a certain remorse and announced that they would learn from their mistakes. However, they preserved their tough stance on free software updates being fully sufficient and only laid out plans to align these updates with new incentives for customers to trade in particularly old and environmentally harmful vehicles.

While the diesel scandal dominates Germany’s political landscape for the moment, there are almost no election-related repercussions or ramifications on the horizon. On the contrary, Chancellor Merkel has successfully stabilised her CDU/CSU’s polling numbers at around 40% with the main rival SPD far behind at 22% and the minor parties FDP, Greens, AfD and the Left all competing in a neck-to-neck race with 8% each. These are devastating numbers for the Social Democrats’ lead candidate and former saviour Martin Schulz who was almost universally predicted to become a major obstacle for another four years of Merkel rule just a few months ago – and who is now on his way to essentially undercut Frank-Walter Steinmeier’s historically low 2009 result of 23.0%. Even worse, Mr Schulz has tried almost every tool modern-day party politics can provide, from agenda setting to strategic surprises (c.f. the SPD’s vote in favor of same-sex marriage) and personal attacks against the Chancellor and her governing style. But nothing of it has worked so far.

German party positions on platform regulation: Much ado about nothing?

For quite some time, the assessment that the peculiarities of the digital world will not only significantly trigger social changes and alter communication patterns but also readjust the very relationship between the economic and the political system has been elevated to the ranks of a commonplace. Hate speech and liability legislation, monopolies and market power – the topics directly or indirectly affected from digitization’s victory march are truly legion. In Europe, antitrust authorities and government agencies have become particularly engaged in the regulation of digital platforms, having displayed a remarkable tendency to sanction companies over the course of the last years. This was for instance the case when the European Commission decided to hand out a hefty $ 2.7 Billion fine to Google Inc., a move which was afterwards bolstered by a Commission report naming platform power as a main obstacle in completing the Digital Single Market.

However, this urge is not necessarily reflected by Germany’s governing coalition of CDU/CSU and SPD which seeks to put European regulation pieces into practice (c.f. KOM(2016) 356 concerning the Sharing Economy) but shies away from expanding, strengthening or complementing them on the national level. Even the recent passing of the ninth amendment on the federal competition law (that constituted the outline of a platform-related cartel law for the first time) was mainly based on  the already existing European Directive 2014/104/EU. Similarly, CDU and CSU also refrain from  prominently mentioning platform regulation plans in their common election manifesto; instead  they are occupying themselves with complaining that „most of these platforms (…) are located in the U.S. and China and not in Europe.“ Thus, the parties’ main focus on the platform industry is not so much a regulatory one but rather rooted in making Europe’s digital economy able to compete. The SPD has taken a slightly more combative stance on the issue but still remains torn between its implicit wish for social change and the promotion of digital liberties on the one hand and the necessity to regulate problematic web developments on the other hand. For instance, the SPD-controlled federal ministries for Economic Affairs and Energy (BMWi), of Labour and Social Affairs (BMAS) and of Justice and Consumer Protection (BMJV) recently published a joint report identifying and analyzing various trends, chances and challenges that may emerge from a more and more digitized world. The BMWi has broadened the report’s insights by also issuing the so-called White Paper on Digital Platforms which sincerely tries to combine a high level of entrepreneurial freedom with a clear framework but lacks convincing and feasible solutions for a whole plethora of contentious issues.

While the country’s major parties are struggling for a coherent platform policy, the often marginalized opposition parties have strongly spoken out in favor of a much stricter regulation policy. The Greens as well as the Left are inclined to support the societal implications of platform services, particularly as far as shifts in the fields of mobility (car sharing) and media usage are concerned, but they remain highly skeptical on pressing issues like privacy protection and power concentration. „We (…) are ready to stand up against seemingly unassailable IT corporations“, the Greens’ election manifesto quite passionately enunciated. And the Left’s MEP Fabio de Masi declared with regard to the fiscal dimension of platform business models:

„Major companies (…) are hiding their fortunes in tax havens all around the globe. Made up license fees or fictional interest payments are systematically used by Apple, Google and the like to shift  their profits across national borders.“

Surprisingly, the economically liberal FDP – which currently finds itself in a promising position to return to the Bundestag in September – has also adopted a decidedly more critical position than in the past. In a recent interview, party chairman and lead candidate Christian Lindner condemned the ramifications of what he labeled as unbridled „Silicon Valley platform capitalism“ and welcomed the European Commission’s aggressive approach. The unexpected nature of these remarks has sparked some concerns among industry representatives as well as within the CDU/CSU which remain the FDP’s most likely coalition partners. However, the liberal’s skepticism towards the economic implications of platform services is still more or less limited to its leader’s remarks and one should not draw hasty conclusions over what could be nothing more than mere campaign rhetorics. At the end of the day, every future administration’s platform policy will ultimately come down to the allocation of ministries, the details of the coalition treaty negotiations and the largely unpredictable government dynamics that may evolve afterwards. It’s not improbable that FDP or Greens would at least attempt to steer their conservative coalition partners in another direction and put more emphasis on the subject – but it’s hard to assess if that would be enough for serious change.

POLITICAL OVERVIEW: European Court of Justice rules on migration crisis, German automobile industry suspected of cartel formation

In a ruling which may have far-reaching consequences on the future handling of refugees, the European Court of Justice upheld a countries’ right to deport asylum-seekers to the first EU county they enter. The court ruled that the EU’s Dublin regulation, under which refugees must seek asylum in the first member state they enter, still applied during the unprecedented inflow in late 2015. Yet, the court also ruled that Germany acted not in violation of the regulation when it did not return refugees to the member states they first entered.

The decision reaches Germany as Martin Schulz’ has begun to attack Chancellor Merkel on her performance on migration. Schulz attacked Merkel on the grounds that a repeat of the situation in 2015 should never happen again. Several public appearances with strong words from the SPD candidate resulted in heavy handed replies and accusations from the conservative CDU, but also some of the oppositional parties that condemned the obvious campaign move.

Overall, the situation of Schulz couldn’t be any worse. None of his big campaign moves have worked out and recognition for his policy positions has been very very limited. With so little success, him resorting to attacking Merkel on the migration issue looks desperate and doomed to fail. Poll numbers reflecting his latest comments aren’t in yet, but initial reactions don’t seem too positive.

After both Daimler and Volkswagen issued voluntary declarations concerning agreements between the five industry giants VW, Porsche, Audi, BMW and Daimler that could violate competition rules, the European commission is investigating. In the declarations Daimler and Volkswagen admitted to coordinating their strategies concerning technology, delivery and markets in several working groups. According to experts the companies will face extensive penalty payments. Green party politicians have called for a special meeting of the Transport committee for transparency on the „manipulations of the automobile cartel.“ According to the FDP party leader Christian Lindner the suspicions are shocking and a confirmation of the suspicions should not remain without consequences.

Automobile industry leaders currently are refraining from any public comment political leaders from the German government are also not acting tough on the issue, yet. Still, Minister for Transport Alexander Dobrindt has been increasingly hawkish on Diesel-gate, the use of so-called defeat devices in diesel engines that allow to cheat in exhaust fumes testing. Just today, Dobrindt banned the current version of Porsche’s flagship SUV model Cayenne from registration in Germany, effectively halting the sale of the car type. Similar bans on models from other producers might follow shortly.

For Angela Merkel, the situation could spell trouble, as it reflects badly on the amount of influence the car industry had politically, particularly on the CDU/CSU part of the government.

Political Overview: German-Turkish relations face new pressure, Berlin enchanted by Royal visit, CSU publishes “Bayern Plan“

The already tense relationship between Germany and Turkey has suffered another major blow this week with Turkish police forces arresting six human right activists, including a German citizen, they accuse of supporting violent terrorist groups in the Kurdish areas. German politicians across the political spectrum have voiced harsh criticism on the Turkish government’s course of action and called it “a politically motivated farce“ as well as a clear violation of the rule of law. Chancellor Merkel, who used to be quite reluctant in the past in an effort to not damage her work relation with Turkish President Erdogan more than necessary, expressed “major concerns“ and demanded the immediate and unconditional release of those arrested. Foreign minister Sigmar Gabriel, SPD, even announced that Germany would need to reconsider its entire Turkey policy since “the most absurd things“ seem to be possible now and Turkey is no longer the trustworthy ally of the past.

While a tough stance on Turkey remains a largely undisputed issue in German party politics, the country’s gatekeeper position and its ability to significantly curb refugee flows from the Middle East are still valuable assets. For the conservative CSU, this kind of dependency should be abolished  rather sooner than later and replaced by a tougher national border regime and less immigration. In their recently published “Bayern Plan“ (a composition of ideas either too radical for the common election manifesto or too specific), the CSU puts great emphasis on exactly this kind of domestic security issues, fighting for potential AfD voters who feel disenfranchised by the political mainstream. Again, they embrace their infamous “Obergrenze“ (upper limit) for asylum seekers and the very concept of a German “Leitkultur“ (lead culture) as a guiding principle for integration and community. Since there will be Bavarian state parliament elections in 2018, the CSU needs to satisfy its conservative clientele and the “Bayern Plan’s“ content may provide a helpful tool in this regard.

Political Overview: Varying reactions to G20 summit, government increases legislative transparency, SPD further falling behind in polls

The Hamburg G20 summit has come to an end and sparked a wide range of different reactions among German political actors on both domestic and international issues. On the one hand, the violent riots caused by far-left extremists have unsettled politicians of all major parties who have collectively condemned them and announced forceful legal reactions. Olaf Scholz, Hamburg’s current mayor and a potential contender for the SPD leadership position in the future, even warned perpetrators of “severe consequences that are awaiting them“ while defending the use of force by the city’s police. On the other hand, the summit’s content itself has led to various reactions with the CDU/CSU praising both published communiqués as signs of Merkel’s global leadership skills and the oppositional Greens and Left downplaying most of the results, calling them not courageous and resolute enough to actually bring change.

Meanwhile, the federal government has announced plans to make all draft bills and corresponding lobby statements of the last legislative period available to the public. This idea, that would affect up to 600 laws with approximately 17,000 single documents, is widely recognised as the government’s response to the so-called #GläserneGesetze (transparent law) campaign which has gained quite some steam in recent months. Referring to the contested “Informationsfreiheitsgesetz“ (freedom of information act), the campaign has sent more than 1,600 requests to obtain information, thus significantly hampering the administration’s capability to act. However, it is uncertain if a future government will maintain this transparency-centred approach after the upcoming federal elections.

Concerning said elections, the once hopeful SPD has suffered another blow in a recently published series of polls that saw the Social Democrats and their lead candidate Martin Schulz with further decreasing numbers at 22% (Forsa, -1) and 23% (Infratest dimap, -1). This comes at least partially as a surprise since the party’s bold decision to revolt against their coalition partner and push for full same-sex marriage legislation was widely hailed as an equally clever and courageous piece of policy making. With the CDU/CSU still achieving 39%, the Left having climbed up to 9% and the FDP, Greens and AfD trio running neck-on-neck at 8%, Mr Schulz’s chances to create a viable path to the chancellorship seem to get worse by the day.

Political Overview: G20 meeting taking place in Hamburg, CDU presents election program, Merkel heading into summer recess with huge poll lead

Angela Merkel will host the annual G20 meeting in Hamburg this weekend, welcoming state leaders from the world’s most important economies in Germany to discuss a whole plethora of urgent world affairs. Topics on the agenda include for instance the most recent diplomatic incidents concerning Qatar, the ongoing civil war in Syria, potential threats posed by digitisation and large-scaled hacker attacks and future prospects for the African continent. More than 19,000 policemen have been deployed to protect the chancellor’s high-profile guests since at least two major protest marches have been announced, one of them including well-known militants that are particularly  likely to use violence. For world leaders, the summit itself is widely considered an expedient platform to familiarise themselves with each other and to address major challenges as a seemingly unified bloc. However, Ms Merkel may also take the opportunity to distinguish her calm leadership approach from the more impulsive style of U.S. President Trump and his Turkish colleague Erdogan, thus strengthening her own role as a global key player.

Domestically, the chancellor is maintaining a strong position as well. Together with CSU chairman and Bavarian Minister-President Horst Seehofer, Ms Merkel has just presented their parties’ election manifesto, labelling it „a great opportunity to dream a little bit about the future.“ With not even 80 pages, the CDU/CSU’s program is not particularly extensive but still aiming at a great number of different subjects: More housing construction projects, lower unemployment figures and taxes, increased investments in the fields of research and education and a more restrictive asylum policy are all mentioned in the text. However, the refugee crisis has lost its topical dominance with even Mr Seehofer stating that his infamous „Obergrenze“ (upper limit) won’t play any further role for the election campaign. „It’s alright. There is not a single point where we had a serious content-related dispute“, he proclaimed. Since Ms Merkel is still leading in the most recent GMS (06.07., 39% to 23%), Forsa (05.07., 39% to 23%) and Forschungsgruppe Wahlen (07.07., 40% to 24%) polls by double digits, the CDU/CSU’s manifesto will most probably serve as the foundation of a potential coalition treaty with either the FDP or the Greens – maybe even with both.

Political Overview: Bundestag approves same-sex marriage, Schulz attacks Merkel, CDU Wirtschaftstag showcases U.S.-German dissonances on trade

In a historic vote, a strong majority of Bundestag MPS has approved same-sex marriage (393 MPs voted in favour, 226 against) on Friday, making Germany the twelfth European nation and the twenty-third worldwide to fully allow and recognise the “marriage for all“. Previously, Greens, FDP and SPD have voiced sharpe criticism on the CDU/CSUs stance on the subject, declaring same-sex marriage a non-negotiable precondition for entering a Merkel-led coalition after the upcoming federal elections in September. Things started to gain steam when Ms Merkel subsequently called the question one “of conscience“, thus enabling SPD lead candidate Martin Schulz to call for a  successful last minute vote. Political commentators remain divided over the question if the hasty vote on the issue was based on Ms Merkel’s intention to take a crucial topic with approval ratings of more than 80 percent off of the agenda or if the chancellor was tactically outsmarted by her parliamentarian opponents. In any case, the fact that much more CDU/CSU MPs than expected supported the bill – despite the confusion surrounding its introduction – may serve as a strong indicator of growing intra-party comfort with the issue.

Just shortly before, Mr Schulz has dominated the headlines with his sharp attack on Ms Merkel who he accused of “assaulting democracy“ by dangerously depoliticising Germany’s political discourse. After harsh criticism, Mr Schulz has defended his claims and reiterated his plan to replace the Merkel administration as a hole instead of just entering another grand coalition. However, Mr Schulz is still running low in the polls with the most recent Forsa projection giving his SPD a mere 23.0% – a result that would match the party’s historical 2009 defeat. 

Meanwhile, the Wirtschaftstag, a yearly convention held and organised by the CDU’s Economic Council, has shown new cracks in the already strained relationship between the U.S. and Germany. Ms Merkel and U.S. Commerce Secretary Wilbur Ross presented quite divergent visions of how future trade exchange could look like with Mr Ross heavily lamenting Germany’s and Europe’s trade surplus, a topic more and more shaping up as a recurring pattern of criticism the Trump administration seeks to put emphasis on. On the other hand, Ms Merkel demanded a reform of European competition law to deal with the challenges mostly U.S.-based digital platform are providing for the local European markets. According to Merkel, digitisation will bring together different industry sectors in an unprecedented way but the current legal provision are not yet suited to handle the possible implications of such a developments. 

Political Overview: British negotiation capability questioned, SPD earns mixed reactions for tax plans, FDP rising to new heights

Almost exactly twelve months after the infamous referendum of June 2016, EU lead negotiator Michel Barnier and his UK counterpart David Davis have formally begun Brexit negotiation talks in Brussel, thereby opening up the latest chapter of the British withdrawal from the European institutions. Meanwhile, German politicians have voiced strong criticism against the UK’s negotiation stance which appears to be all too vague, erratic and additionally weakened by the recent parliamentarian elections’ political turmoil and the subsequent government reshuffle. „A negotiation partner not knowing his own goals is a difficult partner“, German MEP Elmar Brok noticed – a position that was quickly seconded by Foreign Minister Sigmar Gabriel and SPD lead candidate Martin Schulz. Both SPD politicians called for „British realism“ and clear yet reasonable negotiation demands.

Previously, Mr Schulz has unveiled his tax plans which would not only see top income but also corporate tax rates rising. Consequently, reactions varied between staunch opposition and cautious praise: the President of the Federation of German Industries (BDI), Dieter Kempf, didn’t withhold criticism and accused the SPD of knowingly hampering the economy. Contrasting this position, economists from the SPD-leaning German Institute for Economic Research (DIW) praised the plans as a reasonable and feasible balancing act between appeasing the party base and reassuring the corporate world that a Schulz chancellorship might only seek comparatively moderate changes. Yet, there is no hint that embracing the issue might save Mr Schulz from his quickly deteriorating poll numbers and generally poor chances to replace Ms Merkel.

This is even more the case since another party is already rising in the polls and creating the kind of momentum the SPD has lost since the May 2017 state elections: the FDP. Germany’s liberals have been revitalised by an energetic campaign and the increasing popularity of party chairman Christian Lindner who is widely considered to be young, smart and well-spoken enough to successfully reshape the party’s unfavourable image. With recent FDP numbers steadily oscillating between 8.0% (Forsa) and 10.5% (Allensbach), the chances of a CDU/CSU-FDP coalition have also been elevated to the rank of a serious theoretical possibility. For Ms Merkel, it would be another power option to use as a bargaining chip in possible coalition negotiations. For Mr Schulz, It’s another burden to overcome.

Political Overview: Merkel addresses digital summit, Gabriel warns of Qatar repercussions, Jamaica coalition in Schleswig-Holstein agreed

Considerable progress has taken place in transforming Germany into a digital society but further digitisation efforts could be jeopardised by rising sentiments of complacency among corporations. This is the core of politicians’ and experts’ joint assessment at the recently held 2017 Digital summit in Ludwigshafen, Germany’s most important platform to exchange high-level views on the subject and its various implications.

This year’s conference had a remarkably broad focus with issues reaching from regulative strategies to the transformative power of workplace digitisation. In her keynote address, Chancellor Merkel put special emphasis on underscoring the important role small and medium-sized enterprises are supposed to play in the future, at least if they don’t want to get marginalised by powerful platform providers already making use of Big Data. Also highlighted were the necessity of a better legal framework to ensure competition and support innovation and the call for better cooperation structures between relevant actors on the national as well as on the European level.

German Foreign Minister Sigmar Gabriel has warned of perils and insecurities emerging from the severe crisis between Qatar and the fourteen countries that have fully or partially cut diplomatic ties with the emirate. „There’s serious danger of this dispute turning into a full-fledged war“, Gabriel said, a war which would greatly hamper future efforts to stabilise the region and to balance out the effects of its smouldering Sunni-Shia divide. Gabriel also spoke out in favour of a more restrictive arms export policy that would increase transparency and parliamentarian involvement.

Meanwhile, the long-awaited Jamaica coalition between CDU, FDP and Greens has been formed in Schleswig-Holstein, elevating Germany’s northernmost state to a pioneer position since only the Saarland has ever experimented with this combination. CDU lead candidate Daniel Günther is expected to head the coalition as Minister-President while Green key figure Robert Habeck will remain in charge of an enlarged environment department. The coalition is widely seen as a rehearsal to test a more and more popular power option for the upcoming federal elections in September.