On 5th October 2015, the German competition authority, the Bundeskartellamt (“BKartA”), announced that the two largest organic dairies in the country, Andechser Molkerei Scheitz GmbH (“Andechser”) and Molkerei Söbbeke GmbH (“Söbbeke”), will separate from each other and compete again in the future. They were previously companies within the French dairy group Savencia, formerly known as Bongrain. Savencia chose to withdraw from Andechser after allegations that the acquisition by Savencia of Söbbeke in 2011 had been notified to the BKartA incorrectly and incompletely and that the deal should have been blocked.
The case concerns high-quality products and highlights that companies should beware of German merger control.
Bongrain, a manufacturer of several well-known non-organic cheeses, acquired a stake in Andechser Molkerei in 1999. From 2011 it also took over Söbbeke. Whilst it notified the acquisition, according to the BKartA it made incorrect and misleading statements. When the BKartA found out, it opened a divestiture procedure. In its investigation, the BKartA confirmed that conventional and organic dairy products belonged to different product markets and that Andechser and Söbbeke exceeded combined market shares of 50% on several relevant markets, such as organic fruit yoghurt, organic plain yoghurt, organic fruit quark and organic drinks. In its preliminary findings, the BKartA assumed that the transaction caused a significant impediment to effective competition.
The BKartA accuses Savencia of failing to correctly describe the market situation in the 2011 notification, and maintains that statements regarding the shareholder rights of Savencia in Andechser were incomplete. Even on requests for information during the merger control procedure, the BKartA argues that Savencia submitted incorrect sales figures.
The President of the BKartA, Andreas Mundt, remarked: “Companies which notify the Bundeskartellamt of a merger are obliged to submit comprehensive and above all correct information. […] If it later becomes apparent that a company has not fulfilled these duties, the authority has effective means at its disposal to reinstate the legitimate state of affairs at a later date. A divestiture proceeding can also end in the Bundeskartellamt ordering the merger to be reversed.”
- The fact that Savencia withdrew from Andechser quickly suggests that it wished to put an end to the procedure silently and to avoid a formal decision on divestiture. It is not known whether the BKartA will impose a fine following the divestiture procedure. The current fining guidelines do not expressly apply to merger control-related infringements. As the allegations by the BKartA against Savencia are very serious, and the infringement had a considerable “gain and harm potential”, then given the (likely) dominant position of Andechser and Söbbeke, a fine could reach millions of Euros and set a precedent for future violations of merger control rules.
- Court precedents and legal doctrine are unanimous in that merger control rules are in the public interest only and do not provide a cause of action to private parties for damages. If customers of Andechser and Söbbeke or consumers wish to claim damages, they will need considerable legal creativity, perhaps by arguing and establishing that Andechser, Söbbeke and Savencia engaged in illicit concerted practices to raise prices or abused a dominant position by exploiting customers and overpricing products when they were, so-to-speak, wrongfully affiliated.
- The BKartA has made it clear that product markets for organic and conventional food are distinct. The European Commission maintained this approach in the Friesland/Campina merger case in 2008. As a consequence, producers and resellers of organic groceries can have high market shares, although their revenues may be relatively low and their products may be niche.
- It is noteworthy that Savencia had a share of only slightly below 25% in Andechser Molkerei Scheitz GmbH. Under German law, in addition to acquisition of control or of a majority share, the acquisition of 25% of shares and “any combination of undertakings enabling the exercise of a material competitive influence on another undertaking” are a “concentration” and give rise to filing and non-completion obligations if the companies involved exceed the turnover thresholds. In the case at hand, it is not publicly known what shareholder rights Savencia held in Andechser. The acquisition of minority shareholdings must always be checked with respect to German merger control. It is open whether, following the White Paper of the European Commission “Towards more effective EU merger control”, published and opened for consultation in 2014, a regime for reviewing such acquisitions of minority shareholdings will be introduced on a European Union level as well.