In an unusual step, the German Federal Cartel Office (“Bundeskartellamt”) has put the implementation of the merger between the two supermarket chains EDEKA and Tengelmann on hold. The Bundeskartellamt imposed an interim injunction to prevent the two companies from implementing parts of the intended merger before the authority had concluded its examination proceedings.
In October 2014, EDEKA had announced its intention to acquire Tengelmann’s supermarket chain with around 16,000 employees and 451 markets. The acquisition is intended to be completed by the end of June 2015. The Bundeskartellamt started a close examination of the case which may take until 6 March 2015.
Before notifying the merger, EDEKA and Tengelmann had already agreed concrete measures on the joint purchasing and invoicing of goods as well as on changes to parts of the branch network, warehouses and meat processing plants and related staff measures. Under German law, mergers
that are subject to merger control may not be completed before either the Bundeskartellamt has cleared the transaction or the relevant waiting periods of one month (first phase) or four months (first and second phases together) after submission of a complete notification have expired without the Bundeskartellamt having prohibited the transaction.
The Bundeskartellamt clarified that the measures agreed upon by EDEKA and Tengelmann are therefore not allowed to be implemented prior to the end of the merger control proceedings. It is often complex for companies to distinguish between measures which implement the transaction and are therefore prohibited and measures which can be qualified as mere preparation measures which are allowed. Prohibited implementation measures can be the legal implementation of the transaction (e.g. the transfer of shares or assets), but also the early influence on the management or factual implementation measures such as the measures envisaged by EDEKA and Tengelmann. The Bundeskartellamt specified that the prohibition applies in any case to all restructuring measures which exceed usual restructuring measures taken by retail companies. Since advance measures to implement a transaction may lead to severe penalties, the requirements for a violation must be clearly determined.
The Bundeskartellamt imposed the interim injunction as a precautionary measure in order to ensure that the status quo is maintained for the time being and the merger can be examined in an open- ended procedure. The objective of the interim measure is to maintain the independence and competitive potential of Kaiser’s Tengelmann until the end of the merger control proceedings. The Bundeskartellamt also highlighted that suppliers, competitors and consumers must be able to rely on the fact that EDEKA and Tengelmann will not create any effects which cannot be reversed before the Bundeskartellamt’s decision.
If notifiable mergers are completed prior to clearance by the Bundeskartellamt, severe penalties may be imposed with fines of up to € 1 million or, in the case of undertakings, of up to 10 per cent of their total worldwide group turnover in the preceding business year. In the past, the Bundeskartellamt has several times imposed fines for closing a notifiable transaction prior to clearance. The fine is calculated on the basis of the turnover achieved by the company on the German market and amended by various adjustments, for instance, the likelihood of the transaction not being cleared. The case at hand is critical: In autumn 2014, the Bundeskartellamt had published a sector inquiry into the food retail sector showing that there is a highly concentrated market structure with EDEKA, Rewe, Aldi and the Schwarz Group with its Lidl and Kaufland outlets making up approximately 85% of the market.