Merger reviewi Significant cases
In 2018, the FCO opened an in-depth investigation in only 12 out of approximately 1,300 concentrations that were notified. Thus, more than 99 per cent of cases were cleared during the preliminary investigation. The cases that raised competition concerns covered various industries, such as hospitals and nursing homes, folding machines, office supplies, container services and bearings. In the majority of cases the concerns of the authority were based on horizontal relations between the parties. However, the authority also addressed vertical issues such as foreclosure. In detail:
- In February 2018, the agricultural cooperatives RWZ and Langard abandoned their plans to set up a joint venture after the FCO had issued a statement of objections. After conducting intensive inquires, the FCO concluded that the proposed transaction would have resulted in market shares of up to 50 per cent on regional markets (1) for plant pots and packaging used in the horticultural industry and (2) for the entire range of horticultural supplies. Direct purchases from manufacturers or from online distributors were not considered as a viable alternative source of supply.
- The acquisition of rail wagon leasing company CIT by its competitor VTG was only cleared subject to a condition precedent. The FCO found that VTG was already the largest supplier in Europe and that CIT, one of the last few remaining medium-sized players, was a close competitor. Since VTG had already acquired several competitors in recent years, the FCO expected that the acquisition of CIT would lead to the creation of a dominant position. In order to obtain clearance, the parties agreed to sell the entire business of CIT's German and Luxemburg subsidiaries and a certain number of additional freight cars to an independent third party before implementing the proposed transaction.
- In June 2018, Horizon and Brink withdrew their merger notification following a statement of objections issued by the FCO. Both companies are manufacturers of towbars for cars and light utility vehicles. Horizon, the largest supplier and market leader as regards towbars, had wanted to acquire Brink, the third-largest supplier. The FCO raised concerns as the transaction would have eliminated Brink as a close competitor of Horizon, the market share of the merged entity would have been more than 50 per cent and there were only few alternative suppliers. Finally, the merged entity would also have had a clear technological lead.
- Another transaction that was abandoned in June 2018 after the FCO had expressed concerns was the planned acquisition of NWB by Reinplus. According to the findings of the authority, the transaction would have reduced the number of providers of refuelling (or bunkering) services to shipping vessels in the German part of the river Rhine from three to two. Moreover, in contrast to the one remaining competitor the merged entity would also have been vertically integrated in the upstream fuel trading markets.
- In July 2018, the FCO cleared the acquisition of 40 per cent of the shares in and sole control of Deutsche Gießdraht by Aurubis. Deutsche Gießdraht was a joint venture between Aurubis and Coldelco and the transaction increased Aurubis' participation to 100 per cent. Deutsche Gießdraht produced continuous cast copper rods exclusively for its parent companies, which then sold such rods to industrial processors and traders in competition with one another. Thus, as a result of the transaction Codelco would disappear from the market and no longer be a competitor of Aurubis as regards the sale of copper rods. The FCO, however, found that customers after the concentration would still have the possibility to switch to alternative suppliers as there were several domestic and foreign producers in Europe supplying rods of comparable quality.
- After conducting an in-depth investigation, the FCO cleared the acquisition of the marine cargo handling business of TTS by Cargotec. This case is noteworthy as the authority could not prohibit the transaction even though the parties apparently had a strong market position as regards the manufacture of technical ship supplies, such as ship cranes, hatch covers, winches as well as ramps, outer doors, etc. This was due to the fact that demand for such products in Germany was weak. Therefore, the FCO had to apply the 'minor markets clause', according to which the FCO shall not prohibit a concentration if the impediment to effective competition concerns one or more markets that had a sales volume of less than €15 million in the last calendar year.
- The FCO also conducted an in-depth review as regards the acquisition of Helene Müntefering-Gockeln, a waste management company operating in the Ruhr area, by Remondis, Germany's largest waste management company. The authority was concerned, inter alia, about the strong position of Remondis in the waste management markets in the Ruhr area. The FCO also examined whether the transaction could lead to a foreclosure of competitors with regard to access to sorting facilities. In this regard, it found that competitors already had sufficient capacities for sorting waste or were planning to build large enough facilities to prevent Remondis from foreclosure. In the end, after a review of around five months, in December 2018 the transaction was cleared unconditionally – in particular taking into consideration the large number of smaller competitors. The authority pointed out, however, that 'any further acquisitions may . . . have to be very closely examined'.
- In January 2019, the FCO prohibited the launch of a joint venture between the two bearing manufacturers Miba and Zollern. The authority found that the parties had a very strong position as regards the supply of plain bearings for large bore engines. The joint venture would have meant the loss of a supplier in an already highly concentrated market.
- In a case regarding hospitals and nursing homes in the Cologne area the parties withdrew their notification in December 2018 after the FCO raised competition concerns.
- Another case in which the parties withdrew their notification in January 2019 concerned the proposed acquisition of licences from National Geographic Partners by German publishing company Gruner + Jahr.
In July 2018, the FCO together with the Austrian Federal Competition Authority published their hotly anticipated joint guidance on the new transaction value thresholds that were introduced into the ARC in 2017. According to such new threshold, transactions will need to be notified to the FCO if (1) the combined worldwide turnover of all companies exceeds €500 million; (2) one of the parties has a turnover in Germany of more than €25 million; (3) neither the target nor any other undertaking concerned has a turnover in Germany of more than €5 million; (4) the value of the consideration for the transaction exceeds €400 million; and (5) the target is active in Germany to a considerable extent. The guidance provides an overview of the definition of the consideration as well as further guidance as to what is considered as substantial domestic operations.iii Outlook
The digital economy is likely to continue to be of particular interest to the FCO – also in the area of merger control. The transaction value threshold mentioned above was actually introduced in order to enable the FCO to review acquisitions of digital companies or start-ups with a high market value but low turnover, such as the acquisition of WhatsApp by Facebook in 2014, which did not meet the thresholds for a merger control filing in Germany. Another sector that is expected to come under closer scrutiny due to the new thresholds is the pharmaceutical sector. However, so far experience with the transaction value threshold and whether it actually catches the cases the authority would like to review is limited.