On July 12th 2016, the Higher Regional Court of Düsseldorf by way of temporary injunction suspended the Ministerial Authorisation for the takeover of Kaiser’s Tengelmann by EDEKA, and thereby stopped the merger-proceedings between the two supermarket chains.
EDEKA, Germany’s biggest food retailing company since 2006, received a severe blow in its latest attempt to acquire its competitor Kaiser’s Tengelmann. The previous attempt in 2015 saw the German Federal Cartel Office (FCO, Bundeskartellamt) ban the takeover after it had come to the conclusion that the takeover would create a dominant position for EDEKA in certain market segments.
Although the monopoly commission of the German government argued in favour of the decision of the FCO, in March 2016 German Minister for Economic Affairs Sigmar Gabriel overruled the decision under Sec. 42 German Competition Act by ways of Ministerial Authorisation. This sporadically used instrument (only 9 Ministerial Authorizations were granted since 1973), enabled the minister to allow the amalgamation of the two companies subject to conditions. The result of the conditions imposed on the takeover would secure 16,000 jobs at Kaiser’s Tengelmann and therefore the market-concentration was justified by an overriding public interest.
With its ruling, the Higher Regional Court of Düsseldorf found the Ministerial Authorisation to be unlawful in several ways.
The Court argued that Minister Gabriel was not allowed to grant the authorisation due to his behavior during the takeover-negotiations which gave rise to a suspicion of bias and a lack of neutrality. In the decisive period of the negotiations, Minister Gabriel had taken part in two conversations with the CEO of EDEKA and a co-owner of Kaiser’s Tengelmann. Neither of the contents of these meetings were put on record, nor were the other parties to the proceeding, such as the EDEKA-competitor REWE, included in the negotiations. The Court argued that the procedure was therefore not fair, transparent or objective approval.
Furthermore, the Minister Gabriel’s projections regarding the preservation of 16,000 jobs appear to be built on an insufficient factual basis. The Court found it was doubtful whether the ancillary provisions to the Ministerial Authorisation were fit to preserve the jobs at Kaiser’s Tengelmann to the notified amount and duration. However, the considerations of Minister Gabriel did not sufficiently take into account how far the ancillary provisions regarding the employment situation at Kaiser’s Tengelmann would be compensated by staff reductions at EDEKA as acquiring entity. Without such considerations, the decision did not take into account all relevant aspects and therefore did not meet the legal requirements of German Competition Law. Finally, as a result of Art. 9 of the German Constitution (Grundgesetz), the preservation of the worker’s collective rights did not constitute an overriding public interest.
The ruling of the Higher Regional Court not only means a major setback for the efforts of EDEKA to aquire Kaiser’s Tengelmann, it also has a profound impact on the political reputation of the Minister of Economic Affairs. It is unsurprising that EDEKA, as well as Minister Gabriel, have decided to appeal the Court’s decision.