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Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
The main statutes governing merger review in Austria are:
- the Cartel Act (BGBl I 61/2005) as amended by the Cartel and Competition Law Amendment Act (BGBl I 13/2013), which contains the main substantive body of rules; and
- the Competition Act 2002 as amended, which establishes and determines the investigatory powers of the Federal Competition Authority (FCA).
If the merger has an EU dimension, the European Commission has sole jurisdiction according to Article 1 of the EU Merger Control Regulation (139/2004). The regulation prevails over the Austrian provisions under the ‘one-stop shop’ principle – that is, no notification is necessary in Austria.
However, the Cartel Act contains specific rules on media mergers. In view of the exemption from the one-stop shop principle pursuant to Article 21(4) of the EU Merger Regulation, media mergers require a filing to both the European Commission and the FCA if the relevant thresholds are triggered.
What is the relevant authority?
In Austria, concentrations must be notified to the FCA and the so-called ‘official parties’, namely the FCA and the federal cartel prosecutor (FCP). The FCA is an independent body that administratively belongs to the Ministry of Economics, while the FCP reports to the federal minister of justice.
The FCA and the FCP assess notifications in Phase I of the proceedings. Should a notification raise competition concerns, they can apply to the Cartel Court to open Phase II proceedings. Cartel Court decisions may be appealed before the Supreme Cartel Court.
Finally, the Competition Commission is an advisory body that may give non-binding recommendations to the FCA as to whether to apply for an in-depth investigation of a notified merger.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
Merger control applies to all ‘concentrations’ within the meaning of the Cartel Act and which meet the qualification of the concentration. Certain relevant thresholds apply.
While most European merger control regimes cover only transactions that give rise to a change in a company’s control structure, Austrian merger control also catches transactions that do not give rise to a change of control. Pursuant to Section 7 of the Cartel Act, the following types of transaction are notifiable:
- the acquisition of an undertaking or part of an undertaking;
- the acquisition of rights with regard to the business of other undertakings (eg, certain contracts for the lease or management of the business);
- the direct or indirect acquisition of 25% or more or 50% or more of the shares or voting rights in an undertaking;
- cross-directorships (acts that bring about the identity of at least half of the members of the executive board or the supervisory board in two or more undertakings);
- any acquisition of a direct or indirect controlling influence over another undertaking; and
- the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity.
However, internal reorganisations are not notifiable. In addition, similar to the EU Merger Regulation, the Cartel Act provides for certain exceptions in the case of acquisitions by credit institutions and investment funds.
Do thresholds apply to determine when a transaction is caught by the legislation?
The types of transaction set out above will be notifiable if the parties meet the jurisdictional thresholds of Austrian merger control. Jurisdiction is determined based on the turnover achieved by the undertakings concerned (usually the acquirer and target, including the whole group turnover) in the last business year. The Austrian competition authorities have jurisdiction over a transaction if:
- the undertakings concerned achieved a combined global turnover of more than €300 million;
- the undertakings concerned achieved a combined turnover of more than €30 million in Austria; and
- at least two of the undertakings concerned each had a global turnover of more than €5 million.
If only one of the undertakings concerned has an Austrian turnover of more than €5 million, and the combined worldwide turnover of the other undertakings concerned does not exceed €30 million, the transaction will be exempt from the filing requirement.
While this exemption excludes some transactions (notably, acquisitions by Austrian firms of small foreign businesses) from the otherwise broad filing requirement, Austrian merger control nevertheless catches many transactions that seem incapable of producing domestic effects. If there is no effect on Austria, no notification is required; however, the application of the effects doctrine is very narrow in Austria.
In order to calculate turnover under the Austrian merger control regime, the whole group turnover must be taken into account but, other than under the EU Merger Regulation regime, all undertakings connected with a shares or voting rights of at least 25% must be taken into account with 100% of their turnover, irrespective of joint or sole control in association with this shareholding. Thus, in some cases, the group turnover relevant under Austrian merger control law can be substantially higher than the consolidated turnover.
Special turnover calculation rules also apply in the media sector. Depending on the activities of the undertakings concerned (eg, newspapers, publishers or news agencies), the respective turnover must be multiplied by a factor of 20 or 200.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
The FCA and the FCP can be approached in a quite informal way in terms of both jurisdiction and substance. However, in general, specific guidance in most cases is given only after substantial information has been submitted. For questions of jurisdiction, in many cases the view is taken that if there are doubts over the effects on Austria, a notification should be filed. Thus, in cases with time constraints it may be advisable to make a precautionary filing. In any case, pre-notification talks are increasing. In 2015 the FCA reported 31 pre-notification talks out of 366 notifications.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
Section 24(2) of the Cartel Act confirms that the effects doctrine applies to all areas of competition law, including merger control. According to the doctrine, a concentration is not subject to Austrian merger control if it has no effect on the domestic market. Hence, even if it meets the turnover thresholds, a transaction does not require notification if it has no domestic effect. However, the applicable thresholds exemption described above was designed specifically to avoid the capture of transactions which are unlikely to have an effect on Austria. Thus, the effects doctrine is applied only where the lack of effect in Austria is particularly clear cut. The FCA and FCP often take a strict approach – that is, they construe the effects doctrine narrowly. They often hold that the abstract possibility of a potential impairment of competitive conditions in Austria is sufficient to constitute domestic effect. For example, this would be the case where the relevant market is European wide, with Austria being part of this market, even though there are no actual sales in Austria.
What types of joint venture are caught by the legislation?
In line with Article 3 of the EU Merger Regulation, the creation of a full-function joint venture is subject to merger control. Austrian merger control rules catch both concentrative and cooperative full-function joint ventures.
In addition, the concept of full functionality corresponds with EU merger rules: a joint venture is deemed to be full-function if it will perform, on an ongoing basis, all functions of an independent economic entity – that is, it must:
- possess sufficient resources;
- be established permanently; and
- not only fulfil auxiliary functions for or depend on the business relations to its founders.
Moreover, it is a precondition that control over the joint venture is (legally or actually) jointly exercised by the parent undertakings.
However, the creation of a non-full-function joint venture could constitute a notifiable transaction if the assets contributed to the joint venture are considered to be substantial parts of undertakings. In this case, the transaction would qualify as a concentration within the meaning of the Austrian merger control regime if each parent company of the joint venture acquired shares or voting rights of at least 25% or 50%, respectively, or control over a part of an undertaking previously solely owned or controlled by the other parent company.
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