German merger control jurisdictional thresholds revised

Recent changes to German competition law have heralded in Spring for corporate and antitrust lawyers engaged in multi-jurisdictional mergers.

The German merger regime has long presented a thorn in the flesh of lawyers engaged in so-called "foreign-to-foreign mergers" affecting German territory. The rules operated whereby if only one party to a transaction were to have a worldwide annual turnover of more than EUR 500 million and more than EUR 25 million in Germany, the mandatory notification requirement of the transaction would nonetheless be engaged even where the other party had minor activities only in Germany.

To illustrate: a company engaged globally in, say, the high-tech industry, with an eccentric chair person aspiring to take over a pretzel stube in Munich would fall within the mandatory notification requirement.

Quite rightly, in the absence of a reasonable "effects doctrine" (see below) companies in such a situation would be loathe not to file on the basis of lack of effect on the German market. A "pro forma" filing to the Federal Cartel Office (Bundeskartellamt (BKA)) would thus be the order of the day.

Concerns as to confidentiality would also arise, when pre-notification of a deal was appropriate, due perhaps to a deal being subject to a condition precedent of clearance by the BKA. The fact of notification (but not the actual filing) is posted on the BKA's website; and the BKA may proactively investigate a notified acquisition by making enquiries in the marketplace.

Against that backdrop, it is welcome news indeed that a third prong has been added to the jurisdic-tional requirement for mandatory filing. In summary, this means that when either the target (or indeed, the acquiring entity) has a German turnover of less than EUR 5 million, notification will no longer be required.

Summary of new turnover thresholds

Thus, the new rules as adopted on March 25, 2009, provide that notification to the BKA will be mandatory where:

  • the combined worldwide turnover of all the parties exceeds EUR 500 million;
  • at least one of the parties has a turnover in Germany exceeding EUR 25 million; and
  • another party has a turnover in Germany exceeding EUR 5 million[1].

This amendment now brings Germany into the fold of the majority of merger control regimes which require that at least two parties to a transaction produce domestic turnover. The German legislator has acknowledged that the new approach is consistent with the International Competition Net-work's Recommended Practices for Merger Notification Procedures 2002 and with the Organisation for Economic Co-operation and Development's (OECD) Recommendation of the Council on Merger Review 2005[2].

It is speculated that this revision is likely to reduce the number of German filings by up to a third[3].

De minimis provisions remain in place

Finally, de minimis provisions remain in force. Thus, even where the new thresholds are met, an acquisition will still be exempt from notification where:

  • the target is an independent company[4] and had a worldwide turnover of less than EUR 10 million in the last business year (s35(2) no.1 GWB); or
  • the market is "de minimis" i.e. whether the market(s) affected is one which has been in exis-tence for at least five years and has a turnover of less than EUR 15 million for the previous cal-endar year (s35(2) no.2 GWB).

In this way, emerging markets will not be deemed to be de minimis.

With a dedicated IP office in Munich and an international reach, Wragge & Co offers clients cutting-edge legal services and multi-jurisdictional solutions. Led by partner Dr. Michael Schneider, and supported by German and US-qualified director Dr. Alexander Bayer, the Munich-based team helps clients achieve fast and cost-effective results in Germany - Europe's biggest and busiest IP jurisdic-tion and further afield. Expertise includes patent, utility model, and employee's invention matters, trademark, design, copyright, unfair competition and antitrust law.