On 28 September 2016, the German government proposed legislation to amend the Act Against Restraints of Competition (GWB) for the ninth time. Presuming that it will pass the further steps required, the proposed amendment is going to expand the merger control for mergers and acquisitions of start-ups, particularly of internet companies. In the future, the turnover of the merged or acquired companies is no longer the only relevant aspect. As well as turnover, the size of the transaction is to determine whether the merger control thresholds are triggered. If the purchase price is to be 400m Euros or higher, the transaction or merger is going to be examined by the German Cartel Office.
This is particularly important for cases in which young start-ups are the target of other companies. These start-ups often do not generate the turnover required to trigger merger control but are already valued highly by investors and other companies. Consequently, the German Cartel Office has not been able to control mergers of such start-ups in the past — even if the acquiring company was a leader in the relevant market. For example, when Facebook bought the instant-messaging-service WhatsApp the Cartel Office was not able to control the merger for potential damaging effects to the market. This is what the German Government intends to prevent in the future by adding the new provision to the Act Against Restraints of Competition. As a consequence, mergers and acquisitions of start-ups might become more difficult. Similar reforms are also being considered by the European Commission in its recently announced review of the EU Merger Regulation.
New provisions on civil proceedings to claim damages caused by cartels
Additionally, the proposed amendment is also going to implement the EU Directive 2014/104 which is essentially simplifying procedures for consumers as well as other companies who have suffered damages caused by a cartel to receive compensation.
Corporate group liability
A third major change to the Act Against Restraints of Competition is the introduction of a corporate group liability. In the past, corporate groups have been able to avoid fines by intelligently restructuring their companies. However, the now proposed amendment makes parent companies liable for fines imposed by the Cartel Office if they had formed a business entity (“wirtschaftliche Einheit”) with its subsidiaries at the time of the offence. Consequently, even if only one of its subsidiaries has been involved in a cartel, the parent company is very likely to be held liable for any fines if it had owned 100 percent of the shares or formed a joint venture.