On 6 April 2017 the Austrian Parliament adopted significant amendments to the Austrian merger control system, introducing a transaction value test that extends the reach of Austrian merger control.
Current Test: The current Austrian jurisdictional test is based solely on turnover. A mandatory notification requirement is triggered if:
- combined worldwide turnover of undertakings concerned > EUR 300 m; and
- combined Austrian turnover of undertakings concerned > EUR 30 m; and
- each of at least two undertakings concerned worldwide turnover > EUR 5 m.
- only one undertaking concerned has a domestic turnover > EUR 5 m; and
- the other undertakings combined worldwide turnover < EUR 30 m.
New (additional) Test: Effective from 1 November 2017, the amendments introduce an additional test. Even if the above criteria of the Current Test are not met, a transaction requires pre-merger approval provided the following four cumulative conditions are fulfilled:
- combined worldwide turnover of the undertakings > EUR 300 m;
- combined Austrian turnover of the undertakings > EUR 15 m;
- the "value of consideration" for the transaction > EUR 200 m; and
- the target has significant activities in Austria (local nexus).
Background: The test was introduced in response to the competition policy challenges for merger control arising from the digital age. It aims to capture high value transactions in the IT / life sciences space that might escape notification due to the target's lack of revenues. The legislative initiative runs parallel to the current consultation at the EU level to amend the jurisdictional thresholds of EU merger control (steered by the Facebook/WhatsApp jurisdictional saga). There is also some obvious parallelism to Germany, where a similar test was tabled and is in the legislative pipeline. The Adidas buyout of the Austrian Runtastic app (deal value: EUR 220 million), which escaped Austrian merger control, also might have played a role in the legislator's considerations.
The actual novelty of the amendment is the transaction value test. This newly introduced concept somewhat resembles the transaction size test in the USA. The explanatory notes to the law refer to the value of the consideration for the transaction, which is supposed to encompass all assets and other monetary values that the seller receives as consideration for the transaction. It also includes the value of financial liabilities that the purchaser takes over as part of the transaction.
However, the real difficulties will come from the local nexus test, which requires the target to have significant activities in Austria, as there is little to no guidance about what actually constitutes significant activities. Lack of local revenues is not sufficient to fall outside the test. According to the explanatory notes, a local presence in Austria would suffice to establish a nexus. In the absence of a local presence the number of users (monthly active users) or the access frequency to a website (unique visits) might be a proxy to test the significance of the local activities. The legislator, however, did not volunteer to quantify this further.
Practical implications: The test will extend the already broad reach of Austrian merger control. The lowering of the domestic threshold (EUR 15 m) will likely lead to an influx of additional cases into the jurisdictional scope of Austrian merger control. In its impact assessment the legislator assumed that the new test will capture approximately five cases per year, which seems rather on the low end. Notably, the test will apply equally to transactions in the brick and mortar world. Much will depend on how the Austrian Competition Agencies will deal with the local nexus test.