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Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
The legal basis of German merger control is the Act against Restraints of Competition. In addition, the Federal Cartel Office (FCO) has issued several guidelines and notices for the interpretation and practice of merger control. Most of these documents are also available in English on the FCO's website at www.bundeskartellamt.de.
What is the relevant authority?
The German authority in charge of merger control enforcement is the Federal Cartel Office (FCO), which is based in Bonn. It falls under the Federal Ministry of Economy and Technology, but operates independently and free from political orders. The FCO enforces competition law through 13 independent decision boards, nine of which handle merger cases.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
The following types of transaction are considered to be concentrations and are subject to German merger control (Section 37 of the Act against Restraints of Competition):
- the acquisition of all or a substantial part of the assets of another undertaking;
- the acquisition of (direct or indirect) control over another undertaking or parts thereof by one or several undertakings;
- the acquisition of shares in another undertaking leading to a situation where the purchaser holds 25% (or more) or 50% (or more) of the shares or voting rights; and
- any other combination of undertakings that enables one or several of them to exercise (directly or indirectly) a competitively significant influence on another undertaking.
- The notion of a ‘substantial part’ of the assets is broad and determined more by the assets' importance to the seller's market position than by the mere quantity.
The concept of ‘control’ resembles its counterpart in the EU merger control regime. It encompasses rights, contracts or any other means which, either separately or in combination and with regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on the activities of an undertaking – particularly on its assets or managing bodies.
Share acquisitions exceeding the relevant thresholds are subject to merger control, irrespective of whether the purchaser gains control. This means that acquisitions of minority shareholdings can be subject to merger control in Germany.
‘Any other combination’ covers acquisitions of minority shareholdings below the 25% threshold where additional factors de facto grant the purchaser influence over the undertaking's activities in a manner which is comparable to someone holding 25% or more of the shares. Examples of additional factors are the right to nominate members of the board of directors and certain veto rights.
Do thresholds apply to determine when a transaction is caught by the legislation?
Under Section 35 of the Act against Restraints of Competition, German merger control applies where:
- the combined aggregate worldwide turnover of all participating undertakings exceeds €500 million;
- at least one participating undertaking has a turnover in Germany exceeding €25 million; and
- at least one further participating undertaking has a turnover in Germany exceeding €5 million; or, alternatively to this third threshold, the transaction value amounts to more than €400 million and the target undertaking has significant activities in Germany.
In contrast, German merger control does not apply where:
- the above thresholds are not satisfied;
- the transaction falls within the scope of the EU merger control regime;
- the transaction meets the conditions of the de minimis clause – a transaction is considered to be de minimis where:
- one party to the transaction has a worldwide turnover of less than €10 million;
- this party is not a controlled undertaking; and
- the transaction is not reportable due to the transaction value; or
- all participating undertakings are members of a saving or cooperative banks association and primarily provide services for members of that association.
Turnover is calculated by reference to the net consolidated group sales of the participating undertakings in the financial year before the transaction. Value added tax and intra-group sales are excluded. Special rules for turnover calculation apply for:
- trading in goods – the turnover is multiplied by 0.75;
- print media, radio and television broadcasting – the turnover is multiplied by eight;
- financial institutions – the financial income is relevant; and
- insurance companies – the premium income is relevant.
Transaction value includes the purchase price and any liabilities assumed by the purchaser. ‘Significant activities in Germany’ are activities that do not yet account for significant turnovers but indicate a high competitive potential. Both notions are explained in more detail in the FCO's Guidance on Transaction Value Thresholds.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
The Federal Cartel Office is generally open to informal and confidential discussions on jurisdictional and substantive questions. However, pre-notification consultations with the FCO are not standard practice and are done only in more complex cases.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
Foreign-to-foreign mergers are subject to the German merger control regime if the relevant jurisdictional thresholds are satisfied and the transaction has an effect in Germany. This assessment is straightforward in the following cases:
- The jurisdictional thresholds are not met – the transaction is not subject to German merger control.
- The jurisdictional thresholds are met and only two undertakings are involved – German merger control applies. The domestic effects have already been established by the fact that both undertakings have significant turnovers (or activities) in Germany.
A more detailed local impact test is necessary in all other cases, typically concerning joint ventures. Whether the transaction has an ‘appreciable effect’ within Germany must be examined. The fact that all jurisdictional thresholds are met already gives a strong indication that the transaction has an appreciable effect in Germany. However, foreign joint ventures may still fall outside the Federal Cartel Office’s (FCO) jurisdiction if they have no significant activities within Germany (and no plans to start such activities in the foreseeable future) and if the parent companies are not competitors with significant market shares on either the joint venture’s market or the respective upstream or downstream markets.
For details see "Guidance on domestic effects in merger control", published by the FCO in September 2014. The document is available in English on the FCO's website at www.bundeskartellamt.de.
What types of joint venture are caught by the legislation?
A joint venture must be notified to the Federal Cartel Office (FCO) irrespective of whether it is set up as a full-function or a non-full function joint venture. Instead, the general rules on the notion of concentration and thresholds apply. Accordingly, every creation of a joint venture or transfer of shares in a joint venture resulting in two or more shareholders holding 25% or more of the shares or voting rights constitutes a joint venture and is deemed a concentration of the parent undertakings on the markets in which the joint venture is active.
If the parent companies are competitors, joint ventures may also be reviewed by the FCO as restrictive practices (Section 1 of the Act against Restraint on Competition). This is sometimes done in a separate administrative procedure which is not subject to the strict time limits of the merger control regime. This may lead to a situation where the transaction is cleared under the merger control procedure but subsequently blocked under the general cartel prohibition.
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