Judgment sheds light on joint ventures under the country’s merger control*

Austrian merger control continues to capture non-full-function joint ventures. Joint ventures covered by merger control are sheltered against parallel assessment under the Austrian rules against anticompetitive agreements (no dual control).

1. Case Background

The case featured the merger of the logistics units of two Austrian press wholesalers into a newly-created 50:50 joint venture (JV). Following the merger, the parents of the JV were to remain competitors on the market for press wholesaling, while the JV would handle the logistical processes for the parents going forward. The JV was undisputedly non-full-functional, as it was set up to serve primarily the parents’ businesses.

The transaction was notified to the Austrian Federal Competition Authority and cleared following a phase II investigation subject to commitments. Upon clearance, the country’s Supreme Court (Court) was called upon to decide on a number of questions concerning the assessment of joint ventures under Austrian merger control. The debate also touched upon issues such as the delineation of merger control from the rules on anticompetitive agreements and the treatment of spill-over effects.

2. The Court’s judgment

The Court upheld the prevailing practice that Austrian merger control captures the formation of non-full-function joint ventures. It then reflected upon the assessment of joint ventures under Austrian merger control.

The Court held that the full-function concentration test, which largely mirrors the test under EU merger control, covers only genuinely new formations of joint ventures. Conversely, the acquisition of control (control test) and the acquisition of a shareholding of 25% or more (25%+ test) in an existing undertaking does not require the target to be full-functional. The Court recognized that these concentration tests (control test / 25%+ test) also cover the formation of a joint venture in which one or more of the parents contributes an existing business to the joint venture, irrespective of whether the joint venture will be full-function.

Since the parties contributed their respective logistics units (i.e. equipment, facilities and employees) to the JV, the Court found that the transaction qualifies as a concentration under the control test / 25%+ test.

The Court then considered whether on top of the assessment under merger control (dominance test), the JV could also be tested under the rules against anti-competitive agreements (restriction of competition test). The Court found that the merger control rules take primacy over the rules on anti-competitive agreements of the Austrian Competition Act. It thereby recognized that there is no dual-control (Doppelkontrolle) of non full-function joint ventures under Austrian competition law. Hence, an examination under merger control excludes a parallel assessment of the merger under the rules on anticompetitive agreements. Rather, all market effects arising inherently from the merger are covered by the approval and cannot be tackled (in parallel) under the rules against anticompetitive agreements.

This also extends to spill-over effects, i.e. negative competitive effects arising from the merger on markets in which the parents continue to remain active. By this token, the Austrian Supreme Court pointed out that spill-over effects are to be assessed in the merger proceedings and therefore are also covered by the merger approval. In the absence of a distinct spill-over test under Austrian law (unlike on EU-level), spill-overs need to be assessed under the dominance test.

3. Conclusion

The Court confirms the wide reach of Austrian merger control in joint venture settings. In practice, a variety of constellations are captured which typically would lack full-function, such as joint purchasing, production or selling entities. It remains to be seen whether the legislative initiative under way on EU-level to capture non-controlling minority shareholdings will reduce the scope of the Austrian joint venture test through the back door by broadening the reach of EU merger control.