In a recent case (Decision 16 Ok 9/01 of December 17 2001), Austrian company W wished to acquire 100% of the share capital of Austrian publisher L. The relevant market was the Austrian market of juridical literature in the areas of law, economics and taxes, in which the target company held a share of between 18% and 22%. The acquirer was not active in the market but its parent company (Dutch company W International) had a 40% shareholding in Austrian publisher M, which had a relevant market share of between 30% and 35%.

According to the Austrian Cartel Act, the direct or indirect acquisition of shares resulting in a shareholding of at least 25% constitutes a merger. Furthermore, companies that are connected by a shareholding of at least 25% constitute one entity for the purpose of turnover calculation, which is necessary to establish whether the act's turnover thresholds are met.

At first instance the Cartel Court held that the fact that one company has a direct or indirect shareholding of at least 25% in another company also establishes that internal competition between the companies does not exist. Consequently, W's acquisition of L was prohibited outright, as L and M would be viewed as a single entity after the merger, having a market share of around 50% (thus creating/strengthening a dominant position).

The Supreme Court partly overruled the first instance decision. Its reasoning was as follows:

  • W and M constitute one entity for the purpose of turnover calculation, since indirect as well as direct shareholdings of at least 25% suffice for the establishment of one entity if all companies are active in the same market.
  • The ascribing of turnover figures must be distinguished from the issue of whether the acquisition of a shareholding of at least 25% only constitutes a merger within the meaning of the Cartel Act, if (additionally) dominating influence may be exerted. Shareholdings of at least 25% automatically imply a possibility of exerting economic influence and may be the basis for a mutual arrangement of interests. This is assumed particularly if, in addition to a minority shareholding, the articles of association grant special information, codetermination and/or control rights. However, actual possibility of control need not be proved - the mere existence of a minority shareholding suffices.
  • The possibility of exerting influence should be examined only when assessing whether the merger creates or strengthens a dominant position. Its basis must be a cartel law notion of control, which determines whether W may enforce its own interests in M's decisions on material market and competition strategies. It is not necessary to prove that influence is actually exerted - proof of the possibility suffices.

The Cartel Act provides that the Cartel Court must issue its merger decision within five months of notification being filed. However, the act provides no fixed timescale where the Cartel Court's decision is revoked by the Supreme Court and reverted for further factual research. The Supreme Court has ruled (by analogy to the EU Merger Regulation, among others) that in such cases the full five-month period recommences upon receipt of the Supreme Court's decision by the Cartel Court.

For further information on this topic please contact Dieter Hauck, Bernhard Köck or Martin Nepraunik at Preslmayr & Partners by telephone (+431 533 16 95) or by fax (+431 535 56 86) or by email ([email protected] or [email protected] or [email protected]).