Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
Substantive merger control rules, including specific rules governing media mergers, are contained in Part I, Chapter 3 of the Austrian Cartel Act 2005 (ACA).
Austrian merger control rules are enforced by the Vienna Court of Appeals as Cartel Court (acting as court of first instance) and by the Austrian Supreme Court (acting as court of appeals). The Federal Competition Authority (FCA) and the Federal Cartel Prosecutor (FCP) – together referred to as the ‘statutory parties’ – have the exclusive right to initiate proceedings for an in-depth review of merger cases (Phase II) before the Cartel Court, which is the sole adjudicator in competition law matters.
The FCA is an independent authority entrusted with the task of safeguarding conditions of effective competition. Merger notifications initially have to be submitted to the FCA, which, together with the FCP, decides whether a merger needs to be investigated in Phase II proceedings before the Cartel Court. The FCP is accountable to the Federal Minister of Justice and represents the public interest in competition matters.
The Competition Commission is an independent advisory body that can recommend that the FCA request a Phase II review of a merger case. Although such recommendation is not binding, the FCA has to publish a reasoned statement on its website if it does not intend to follow the recommendation.Scope of legislation
What kinds of mergers are caught?
Austrian merger control provisions apply to concentrations as defined in section 7 of the ACA. Each of the following constitutes a concentration:
- the acquisition by one undertaking of all, or a substantial part of, the assets of another undertaking, especially by merger or transformation;
- the acquisition of rights by one undertaking in the business of another undertaking by means of a management or lease agreement;
- the direct or indirect acquisition of shares in one undertaking by another undertaking if, as a result, a participation of 25 per cent or 50 per cent (in terms of capital or voting rights) is reached or exceeded (this is by far the most frequent type, also applying to most ‘acquisition of control’ cases);
- the establishment of interlocking directorates at the management or supervisory board level (if at least half of the management or members of the supervisory boards of two or more undertakings are identical);
- any other connection of undertakings conferring on one undertaking a direct or indirect controlling influence over another undertaking; and
- the establishment of a full-function joint venture.
Further, as the special provision on agreements between banks, particularly on mutual financial assistance in the event of a financial crisis, on common business activities or on a uniform market policy, under the Austrian Banking Act has been abandoned, such agreements now require merger clearance only if they constitute a concentration as defined above. Concentrations involving undertakings belonging to the same group as defined in the Stock Corporation Act and the Act on Limited Liability Companies are not subject to merger control.
Merger control rules do not apply if a bank temporarily acquires shares in an undertaking for the purpose of reselling them, for securing its claims against the undertaking, or in the context of a restructuring process in an insolvency scenario. The shares must be sold after one year, as soon as security is no longer required or after completion of the restructuring process. The exemption also applies to the acquisition of shares by equity participation businesses, equity fund businesses and companies whose only purpose is the acquisition of shares in other enterprises and the administration and utilisation of these shares, without directly or indirectly interfering with the administration of the respective undertaking, provided that they do not exercise their voting rights to influence the competitive conduct of the undertaking (the exercise of rights to retain the value of the investment, that is, relating to the protection of the acquirer’s financial interests, is permitted).
What types of joint ventures are caught?
The formation of a joint venture that fulfils the functions of an independent business entity on a lasting basis also constitutes a merger. In line with the EU Merger Regulation (EUMR), ‘cooperative’ joint ventures are also subject to merger control. However, unlike the EUMR in its article 2(4), the ACA does not explicitly provide for the appraisal of any anticompetitive coordination that may result from the creation of a joint venture in the merger proceedings.
Leading commentators nevertheless argue that coordinative effects of a joint venture fall to be analysed under the merger control rules (and are covered by merger clearance) to the extent that they are a necessary result of the creation of the joint venture. The Austrian courts have yet to decide on this question.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
The ACA does not contain a definition of the term ‘control’. As mentioned above, any connection of undertakings conferring on one undertaking a direct or indirect controlling influence over another undertaking is deemed to be a merger. In practice, the notion of control is applied according to the concept of the EUMR (in particular, the European Commission’s Consolidated Jurisdictional Notice). Because of the formal approach of Austrian merger control provisions, even the acquisition of a percentage of shares that does not confer control is subject to merger control: as mentioned above, an acquisition whereby a participation of 25 per cent is reached or exceeded constitutes a merger within the meaning of the ACA.Thresholds, triggers and approvals
What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?
A merger must be notified prior to its completion if, in the last business year:
- the combined worldwide turnover of all the undertakings concerned exceeded €300 million;
- the combined Austrian turnover of all the undertakings concerned exceeded €30 million; and
- the individual worldwide turnover of at least two of the undertakings concerned each exceeded €5 million.
In addition, a new notification threshold based on transaction value came into force in late 2017. This means that mergers also have to be notified if:
- the combined worldwide turnover of all the undertakings concerned exceeded €300 million;
- the combined Austrian turnover of all the undertakings concerned exceeded €15 million;
- the value of consideration exceeds €200 million; and
- the target is active in Austria to a significant extent.
This new threshold is intended to catch transactions involving early stage technology targets with a high purchase price despite low turnovers, but applies to all sectors. In 2017, two transactions were notified under the new threshold and 17 were notified in 2018, while in 26 cases pre-notification discussions were held with the authorities regarding a potential notification requirement.
In light of the practical uncertainties regarding the new threshold, the FCA developed a joint guidance paper with the German Federal Cartel Office on the transaction-value-based threshold (which was introduced in a very similar fashion in Germany). The final guidance paper was published in July 2018. Practice so far has shown that it can be difficult to assess whether the target is ‘active in Austria to a significant extent’. The guidance discusses criteria that relate to the assessment of domestic activity, local nexus of domestic activity, market relevance and significance. Domestic activity is generally not measured on the basis of domestic turnover but rather various indicators such as production facilities, branches, local sales forces, research and development activities, or (regarding the digital economy) numbers of monthly active users. Furthermore, for the new threshold to be met, the activity in Austria has to be significant. Based on its guidance paper, the FCA will generally find that there is no domestic activity if the turnover of domestic target companies is below €500,000, provided that this turnover adequately reflects the market position and the competitive potential of the target company. The FCA has encouraged companies and their advisers to reach out to the authorities and discuss the application of the new threshold in case of doubt. Moreover, the statutory parties have on several occasions pointed out that, while not mandatory, pre-notification contacts can be very helpful to obtain clearance in the context of Phase 1 review even in more challenging cases.
Even where the original thresholds (see first set of bullet points) are met, mergers are exempt from the notification obligation where the domestic turnover of only one of the undertakings concerned exceeded €5 million and where the worldwide combined turnover of the other undertakings concerned (typically the target) did not exceed €30 million (de minimis exception). It is not entirely clear whether this exemption shall also apply to the new threshold. While this has not been addressed by the available guidance paper or decision practice yet, the phrasing and the systematics of the law seem to exclude this.
The calculation of turnover is governed by section 22 of the ACA: the relevant turnover of an undertaking concerned also includes the turnover of all undertakings that are connected to it by one or more of the links that constitute a concentration within the meaning of section 7 of the ACA (in particular, by way of a shareholding of at least 25 per cent upstream or downstream).
Special rules apply to the calculation of the turnover of banks, where the sum of interest and similar revenues, proceeds from shares and participations, commission income, and income from financial transactions and other banking income has to be taken into account. With regard to insurance companies, the premium income is relevant. Specific rules apply to media mergers, where the turnover of the undertakings has to be multiplied by a factor of 200 or 20, depending on the type of activity in which the undertaking is engaged. In this context, the Cartel Court recently imposed a (comparatively low) fine for the violation of the statutory standstill obligation in a case where the turnover multiplication rules had been incorrectly applied and so no notification was made.
Mergers falling within the jurisdiction of the European Commission are not subject to Austrian merger control (‘one-stop-shop’ principle) unless the transaction constitutes a ‘media concentration’, in which case parallel notifications are required (the media merger may in such case, under Austrian merger control law, only be assessed as to whether it will impair media diversity, as permitted by article 21(4) of the EUMR).
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
If a transaction constitutes a concentration within the meaning of the ACA and exceeds the notification thresholds mentioned under question 5, filing is mandatory.
However, even if the thresholds are technically exceeded, no notification is required if a merger cannot have any effects whatsoever on the Austrian market.
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
Foreign-to-foreign mergers are subject to Austrian merger control if the turnover of the undertakings concerned exceeds the turnover thresholds and the transaction does not qualify for the de minimis exception (see questions 5 and 6). Notwithstanding the de minimis exception, the ACA still subjects a large number of foreign-to-foreign mergers to Austrian merger control, as it does not provide for a minimum Austrian turnover to be achieved by at least two parties.
Certain limits to the broad reach of the Austrian merger control provisions have, however, been recognised in case law. In its most recent judgment on the application of the Austrian merger control rules to such mergers, the Austrian Supreme Court held that merely indirect effects on competition on the domestic market were insufficient to trigger Austrian merger control. According to the court, a transaction is not notifiable if the foreign target company neither actually nor potentially (ie, in the foreseeable future) provides services in Austria. Two caveats are, however, in order.
First, the Supreme Court explicitly limited the scope of its decision to competitive effects emanating from the acquisition of foreign targets (without any turnover in the Austrian market); in cases involving the acquisition of domestic targets by foreign acquirers, the courts will therefore obviously continue to take account of indirect effects (eg, an increase of the financial strength of the merged entity on the Austrian market, or the merged entity’s IP rights portfolio).
Second, the FCA has publicly expressed its disappointment with the Supreme Court’s judgment. This implies that the authority will continue to take a very wide view of the scope of Austrian merger control. Therefore, it may still be advisable to submit a merger notification even in cases where potential effects on Austrian markets are clearly limited. Furthermore, in a recent decision the Cartel Court confirmed that to obtain formal confirmation that a transaction is not notifiable, a precautionary notification would be required, followed by a Phase II request that the court would subsequently reject (as the FCA itself does not have the power to refuse jurisdiction).
Are there also rules on foreign investment, special sectors or other relevant approvals?
Following an amendment of the Foreign Trade Act (FTA) in December 2011, according to section 25a of the FTA, certain transactions (leading to control or an investment acquisition of at least 25 per cent) relating to public security and public order, including, inter alia, services of general interest (eg, military equipment, energy supply, telecommunications services), have to be notified to the Federal Ministry of Economy, Family and Youth for approval even prior to signing. This notification requirement generally applies to acquisitions of undertakings with their registered seats in Austria being subject to the domestic rules of accounting by foreign buyers that are located outside the EU/EEA or Switzerland. The Minister has to issue a formal decision within one month after submission of the application, either clearing the proposed transaction or initiating an in-depth investigation and thereby extending the review period by a further two months.
Within this period, the Minister has either to authorise the transaction, authorise it subject to stipulations if they are necessary to avoid any serious and imminent threat to the interests of public order and public security, or refuse the authorisation if even stipulations are not sufficient to avoid such a threat. Should the Minister fail to take a formal decision within the relevant one or two-month period, the transaction may be implemented in any event.
Further, in the case of a suspicion of circumvention and of a serious and imminent threat to the interests mentioned above, the Minister has to formally impose an approval requirement with regard to certain other transactions, including also (shareholding) acquisitions of Austria-based undertakings with activities relating to public safety and order by buyers located in the EU/EEA or Switzerland. However, any such approval requirement under this section may only be imposed if it is compatible with Austria’s obligations under EU and international law. Implementation prior to approval may cause criminal penalties and, further, may render the transaction in question void.
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
There are no legal deadlines for prior notification of mergers but, as mergers subject to merger control must not be completed before clearance, notifications must be submitted well before the envisaged date for the closing of the transaction. It is possible to file a pre-merger notification even prior to the signing of the relevant agreement, provided the parties have, in principle, agreed on the structure and timing of the transaction and intend in good faith to enter into this agreement in the foreseeable future. Following a legal dispute about option rights between two potential buyers, the statutory parties have recently initiated Phase II proceedings in relation to a notified takeover in the gambling sector, to obtain a court ruling on the question of notifiability of the proposed transaction. There are no specific sanctions for not filing a notifiable merger (within a certain deadline). For sanctions for implementing a transaction prior to clearance, see question 13.
In complex cases (especially where the need for remedies may already be anticipated by the notifying parties) it can also be helpful for the parties to engage in pre-notification discussions with the statutory parties prior to formal filing. While there is no formal pre-notification procedure, the FCA’s head has recently voiced concerns with regard to a case – which had gone to Phase II – where the notifying party had failed to engage in a pre-notification contact prior to notification. For instance, in the telecoms sector it is advisable to engage in pre-notification discussions and provide the FCA/FCP with regulatory data at an early stage in Phase I. In the proceeding regarding the acquisition of Tele2 Austria, a provider of fixed line telecommunications services, by Hutchison Drei Austria, one of the major Austrian mobile telecoms operators, the parties reached out to the authorities at an early stage of the transaction process, engaging in pre-notification contacts to discuss the scope of information and data required. The case has shown that clearance within the four-week Phase I window can be obtained even in complex cases if the parties actively engage with the FCA/FCP.
Which parties are responsible for filing and are filing fees required?
Each of the undertakings concerned is entitled to file a pre-merger notification. However, usually the acquirer files the notification. Joint notifications are permissible but rare in practice. In Phase I proceedings, there is a fixed filing fee of €3,500. In Phase II proceedings, the Cartel Court sets a lump-sum fee of up to €34,000. However, in the case of a (full) in-depth review of a merger in Phase II there will usually be additional costs for the preparation of an expert’s opinion, which the notifying parties will have to pay (in the past, fees ranged between €150,000 and €300,000).
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
Generally, the waiting periods are four weeks in the case of a Phase I clearance and up to six months if proceedings for a Phase II review by the Cartel Court are initiated. However, since the 2013 amendment to the ACA the notifying party has had the right to apply for an extension of the Phase I deadline by two weeks to avoid the initiation of an in-depth investigation without reasonable concerns on the substance. This request makes sense if the FCA and the FCP can be convinced with a little more time that the transaction does not raise competition concerns or if a remedy package in Phase I is a feasible option for both the authorities and the parties. In previous years, such an extension of Phase I was sought in only few cases (usually significantly below 5 per cent of all cases).
Further, the review period for Phase II proceedings will be extended by one month upon request by the notifying party. Implementation must be suspended until clearance.
A transaction that is subject to Austrian merger control must not be implemented until:
- both statutory parties have waived their right to request a Phase II review of a merger by the Cartel Court;
- neither statutory party has requested the initiation of Phase II proceedings within the four-week period of Phase I (or six-week period in the case of an extension request); or
- if Phase II proceedings have been initiated, the issuing of a final decision of the Cartel Court whereby these proceedings are ceased, the relevant request of a statutory party is held inadmissible, or the merger is approved.
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
The implementation of a transaction that is subject to merger control is null and void if effected prior to clearance. The same applies to the underlying agreement. However, it is unclear what this means in the case of a foreign-to-foreign merger governed by foreign contract law.
In the case of an unauthorised implementation of a merger that requires pre-merger notification, the Cartel Court can, upon the request of a statutory party, impose on each party that intentionally or negligently violates the standstill obligation a fine in the amount of up to 10 per cent of the worldwide turnover achieved by that party in the last business year.
To date, the highest fine imposed by the Cartel Court for violation of the standstill obligation is €1.5 million. Fines in other cases have been significantly lower, typically ranging between €15,000 and €150,000. The Cartel Court imposed a fine of €20,000 in a case relating to the notifiable establishment of interlocking directorates at the managing board level. An unlawful completion of the concentration had been effected by formal registration of the amended representation competences at the companies’ register. When determining the fine, the court acknowledged the factual complexity of the case, the fact that joint (not sole) control had been established as well as the fact that the infringement had been voluntarily terminated by subsequent submission of a merger notification.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
Yes; sanctions for violation of the standstill obligation by early implementation of a notifiable transaction are also applied in foreign-to-foreign merger cases. In 2010, for instance, the FCA requested the Cartel Court to impose a fine against a foreign logistics company that had failed to notify its initial acquisition of a minority shareholding in a Hungarian company. After imposition of a fine of €4,500 by the Cartel Court, the FCA appealed and requested the fine to be increased to almost €5 million, largely on general turnover grounds. In its final decision issued in 2013, the Supreme Court imposed a fine of €100,000.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
In principle, any structural or behavioural undertaking is acceptable under Austrian law, including local ‘hold-separate’ agreements. However, given the lack of precedent decisions by the Supreme Court in this area, it is unclear which solutions would be considered sufficient by the Austrian authorities.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
Public takeover bids in Austria do not receive special treatment under the merger control rules. The Takeover Act regulates Austrian public takeover bids. A takeover panel has exclusive jurisdiction over all matters coming under its scope and supervises compliance with its rules.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The merger notification must contain precise and comprehensive information on all factual aspects that could give rise to the creation or strengthening of a dominant position, in particular:
- the corporate structure (direct and indirect shareholders and subsidiaries) of the undertakings concerned, including undertakings that are connected to them by one or more of the links that constitute a concentration within the meaning of section 7 of the ACA;
- the turnover (by volume and value) achieved by these undertakings in the last business year (to be provided separately for each relevant product or service market);
- the market shares of these undertakings in each relevant product or service market;
- information on general market conditions; and
- in the case of a media concentration, precise and comprehensive information on other factors that could impair media plurality.
In 2016, the Cartel Court fined an applicant €750,000 for providing inaccurate and misleading statements in the notification, which resulted in a wrong description of the proposed transaction (the transaction actually constituted another type of concentration). The Cartel Court also held that a very high standard of care was required when preparing merger notifications. Recent experience suggests that a thorough analysis of the filing structure itself is advisable in cases where transactions consist of various acquisition steps (in some cases a joint filing may be required, whereas in others separate filings may be possible or required). In the absence of specific legislation, the Austrian authorities will take into account the European Commission’s Jurisdictional Notice when assessing such issues.
The FCA has published a form for merger notifications on its website. The use of this form is not compulsory but is strongly recommended by the statutory parties.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
Upon receipt of the notification, the FCA forwards a copy of the notification to the FCP and publishes a short summary of the notification on its website (www.bwb.gv.at). This summary contains the names of the parties, a brief description of the type of the concentration (eg, merger, creation of a joint venture) and the business sectors concerned.
Within two weeks of the date of publication, third parties whose legal or economic interests are affected by the concentration (ie, competitors and customers, in particular) may submit written comments to the FCA and the FCP. Third parties do not have procedural rights and cannot challenge a clearance decision.
The Competition Commission, an independent advisory body, may recommend the FCA to request a Phase II review of the merger by the Cartel Court. Such a recommendation has to be issued within three weeks of the filing of the notification. In the event that the FCA or the FCP requests a Phase II review of the merger by the Cartel Court, the FCA will publish the request on its website.
Following the initiation of a Phase II review of the merger, the Cartel Court has five months to adopt a prohibition or clearance decision (upon request by the notifying party, the review period will be extended by one month). A decision by the Cartel Court by which a concentration is cleared subject to conditions or obligations, or both, will be published on the FCA’s website once it is final and binding. Non-confidential (full text) versions of decisions of the Cartel Court are also published in an electronic database (Ediktsdatei) run by the Federal Ministry of Justice.
What is the statutory timetable for clearance? Can it be speeded up?
If neither of the statutory parties requests the initiation of a Phase II review by the Cartel Court, clearance takes four weeks (or six weeks in the case of an extension request by the notifying party). The review period starts to run on the day of receipt of the notification by the FCA provided that the filing fee (€3,500) has been paid.
Early clearance is possible, if the transaction clearly does not raise competition concerns. However, this procedural option is only used rarely and the parties and their advisers should generally expect the full four-week review period. Early clearance will be granted in exceptional circumstances and requires that both the FCA and the FCP waive their right to apply for an in-depth review of the transaction to the Cartel Court. The earliest early clearance can be obtained is after the expiry of the two weeks for third-party comments (plus an additional three business days for comments to come in via mail).
Under the regime laid down by the ACA, the Cartel Court does not issue a confirmation of Phase I clearance. Instead, the statutory parties are obliged to inform the notifying party of the fact that they did not request the initiation of Phase II proceedings within the four-week (or six-week) period.
If a statutory party requests Phase II proceedings, the Cartel Court can issue a prohibition decision within five months of such request being made (if both statutory parties issue such requests, the date of the first request is decisive). After expiry of the five-month period (without a final decision) or, before that, after withdrawal of the respective requests by the statutory party (parties), the Cartel Court must close its review proceedings and the standstill obligation is lifted. The notifying party may apply for an extension of the five-month period by one month. According to the legislative materials, this period may be used, in particular, for remedy negotiations.
During Phase II proceedings before the Cartel Court, the statutory parties withdraw their requests only in exceptional cases, mainly if the parties offer commitments that are sufficient to remedy the competition concerns that had been identified and if the statutory parties do not insist on having such commitments fixed as conditions or obligations in a formal decision of the Cartel Court. Once Phase II proceedings before the Cartel Court have been initiated, such withdrawal is almost the only practical way to obtain a merger clearance before the end of the full review period.
Substantive assessmentSubstantive test
What is the substantive test for clearance?
A concentration will be cleared if it does not give rise to the creation or the strengthening of a dominant position. An undertaking will be considered to be dominant under the ACA if it faces no or only insignificant competition, or if it is in a superior market position as regards its competitors, customers or suppliers. The ACA provides for a number of rebuttable presumptions of dominance. The concept of collective dominance was formally introduced into the ACA with the 2013 amendment. In the assessment practice of the FCA, the ‘significant impediment of effective competition’ (SIEC) test (which has not yet been formally introduced into the ACA) has also played a role.
Single dominance will be presumed where:
- an undertaking’s market share is greater than 30 per cent;
- its market share is greater than 5 per cent, and it is facing competition from no more than two other undertakings; or
- an undertaking’s market share is greater than 5 per cent and it is one of the four largest undertakings on the relevant market that together hold at least 80 per cent of the relevant market.
Collective dominance will be presumed where:
- a group of three or fewer undertakings has a market share of at least 50 per cent; or
- a group of five or fewer undertakings has a share of at least two-thirds of the relevant market.
There is a reverse burden of proof where the above legal presumptions of dominance are met. In this context, the notifying party will have to prove that the transaction does not give rise to the creation or the strengthening of a dominant position. A concentration leading to the creation or the strengthening of a dominant position will be prohibited unless there is an improvement of competitive conditions that outweighs the disadvantages of market dominance, or the concentration is necessary to preserve or enhance the international competitiveness of the undertakings involved and is justified by national economic considerations.
A concentration that otherwise does not meet the requirements for clearance may be cleared by the Cartel Court subject to conditions and obligations. Media mergers are subject to a specific public interest regime (see article 21(4) of the EUMR). Media mergers that meet the EUMR thresholds will be assessed by the Austrian authorities as to their effect on the plurality of the media. The Cartel Act does not provide an exemption for failing firms; however, the Supreme Court has recognised the ‘failing firm defence’, which allows restructuring concentrations to be implemented even in cases where a dominant market position might be strengthened.
Overall, merger control practice in recent years has shown that the statutory parties also tend to scrutinise aspects of a case that are not directly related to the notified transaction (ie, in some cases a broader facts-based or economic approach might be applied, especially in cases with a substantive overlap in the parties’ businesses). The FCA’s head has also noted that macroeconomic issues such as employment protection may be considered in the context of the assessment.
Is there a special substantive test for joint ventures?
No.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
The test for clearance is whether the concentration will give rise to the creation or strengthening of a dominant position. Within the scope of that test, the authorities may rely, however, on a number of theories of harm (eg, vertical foreclosure, conglomerate effects, collective dominance) to prove that a dominant position would be created or strengthened by the concentration (the FCA has also raised the issue of existing structural links enhancing coordination between the acquirer and a competitor of the target). Similar to the situation at EU level prior to the entry into force of the new EUMR, it is not entirely clear whether unilateral effects in an oligopoly situation (resulting, in particular, from the elimination of a close competitor) can be brought within the dominance test.
This notwithstanding, horizontal overlaps play by far the most important role in the competition analysis carried out by the Austrian competition authorities.Non-competition issues
To what extent are non-competition issues relevant in the review process?
Non-competition considerations still play a considerable role in Austrian merger control. The ACA retains a provision allowing the Cartel Court to clear an anticompetitive merger on industrial policy grounds: a concentration having adverse effects on competition may be cleared if it is necessary to preserve or enhance the international competitiveness of the undertakings involved and is justified by national economic considerations.Economic efficiencies
To what extent does the authority take into account economic efficiencies in the review process?
The ACA provides that the Cartel Court shall clear a concentration giving rise to the creation or strengthening of a dominant position provided that there is an improvement of competitive conditions that outweighs the disadvantages of market dominance; or the concentration is necessary to preserve or enhance the international competitiveness of the undertakings involved and is justified by national economic considerations.
Under both elements of this provision, the Cartel Court has to take account of economic efficiencies. So far, however, economic efficiencies have not played an important role in the competition analysis carried out by the Austrian authorities. Where efficiencies are invoked in favour of a concentration, the party alleging the efficiencies bears the burden of proof. In practice, only opinions of economic experts are likely to be accepted as proof.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The Cartel Court will issue a prohibition decision if it considers that a concentration would lead to the creation or strengthening of a dominant position but does not lead to an improvement of competitive conditions that could outweigh the disadvantages of market dominance, and is not necessary to preserve or enhance the international competitiveness of the undertakings involved and is not justified by national economic considerations, and that the remedies offered by the parties are not sufficient to alleviate competition concerns.
Even after clearance of a transaction the Cartel Court may, upon request of a statutory party, impose proportionate measures (post-merger measures) on the parties to alleviate competition concerns if clearance was obtained on the basis of incorrect or incomplete information, or if a party violates an obligation imposed in the clearance decision.
Upon request of a statutory party, the Cartel Court may impose fines of up to 10 per cent of the worldwide turnover achieved by a party in the last business year in cases of:
- unauthorised implementation of a merger (including violations by the parties of a prohibition decision as well as violations of conditions and obligations imposed in a clearance decision); or
- violations of a post-merger measure imposed by the Cartel Court.
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
According to the ACA, the parties may offer remedies (conditions or obligations, or both) even in Phase I to convince the statutory parties not to request a Phase II review of the merger by the Cartel Court. Parties may also offer remedies later to convince the statutory parties that they should withdraw such a request or to receive a formal clearance decision from the Cartel Court should the statutory parties decide not to do so. Such remedies are binding upon the parties in that the implementation of a concentration in violation of these remedies is equivalent to a violation of the standstill obligation, which is subject to fines in the amount of up to 10 per cent of the worldwide turnover achieved by the relevant party in the last business year (see questions 9 and 12).
There are no firm rules on the type of remedies acceptable under Austrian law, so both structural remedies (eg, divestments or IP-based remedies) and behavioural remedies are suitable. The number of concentrations cleared on the basis of remedies, including divestments, has recently shown a marked increase. However, behavioural remedies still play the primary role in practice. Also, different types of remedies may be combined to fully remove competition concerns.
Since 2014, behavioural remedies have included, inter alia, a hold-separate commitment in relation to an existing indirect minority shareholding of the acquirer group and a bundling limitation for magazine advertisements, the use of mandatory public tenders (including services below the regulatory thresholds) and limitations in relation to the annual turnover of a joint venture undertaking as well as continued operation of the acquired business, including separate market presence and a commitment not to acquire further (specified) businesses in a certain area and time period.
In a case in April 2017, the parties committed themselves to granting non-discriminatory access to outdoor advertising space (along with minimum capacity and quality guarantees) to competitors at market prices for a period of five years. These commitments were designed to remedy concerns as to potential input foreclosure, while according to the Cartel Court the increased market concentration as such did not give rise to competitive concerns on the basis of negative horizontal effects, such as price increases or a decrease in quality.
The FCA has repeatedly pointed out that remedies should be practicable to implement with a manageable monitoring mechanism.
Also, according to recent statements of the FCA, adequate remedy solutions will usually aim at strengthening the position of the parties’ competitors in the relevant markets (eg, by granting network access). In an expert talk session hosted by the FCA it was also pointed out that effective reporting duties play a very important role in the case of solutions based on behavioural remedies. In this context, the FCA will particularly rely on ‘self-monitoring’ involving competing players on the relevant markets (the FCA referred to a case where a fine of €200,000 was imposed on a party for violating its remedy obligations, which had been discovered as a result of notification by one of its competitors).
There is no formal procedure applicable to remedies offered by the parties. Such remedies will be discussed informally with the statutory parties and the Cartel Court. Remedies that are offered in Phase II before the Cartel Court will usually be subject to an evaluation by an economic expert appointed by the Cartel Court (which will also have an impact on the timing of clearance).
Decisions by the Cartel Court clearing a concentration, subject to conditions and obligations, will be published on the FCA’s website once the decision is final and binding. Non-confidential (full text) versions of the Court’s decisions are published in an electronic database (Ediktsdatei) run by the Federal Ministry of Justice.
What are the basic conditions and timing issues applicable to a divestment or other remedy?
The ACA does not specify which remedies are acceptable. Consequently, a broad range of remedies is possible as long as the measures sufficiently address the competition concern that has been identified by the authorities.
There is no specific time frame in which remedies may be offered and discussed. In practice, the parties may therefore approach the authorities at any time until the end of the investigation. It is advisable, however, for a party wishing to offer remedies to approach the statutory parties as soon as the nature of their competition concerns becomes clear. In several cases, parties have been able to avoid a full Cartel Court investigation by offering remedies at a relatively early stage of the proceedings (in some cases, the statutory parties were also prepared to withdraw their applications for an in-depth review on the basis of remedy offers resulting in an early termination of the ongoing Phase II proceedings; see question 18).
The statutory parties have in some cases insisted on upfront buyer solutions where divestments were necessary. That is, they wanted to approve the acquirer of the assets to be divested before withdrawing their request for a Phase II review of the merger by the Cartel Court. However, in several recent cases the implementation of remedies was only required within a certain time period starting from clearance (eg, six months). In the case of a material change of circumstances after clearance of a transaction subject to conditions or obligations, or both, the parties may apply to the Cartel Court for their modification or removal.
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
There is only very limited experience regarding remedies in foreign-to-foreign mergers. In a case involving the acquisition of parts of a Spanish bubblegum manufacturer by the world leader in chewing gum, the Austrian authorities were satisfied with a commitment by the acquirer to continue to offer the whole spectrum of bubblegum products offered by the target on the Austrian market for a period of at least two years. It cannot be excluded, however, that in cases involving foreign parties with strong market positions in Austria, the authorities would require much stricter remedies.Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
The ACA does not contain any provision specifically regulating the treatment of ancillary restrictions, although their admissibility has been recognised by earlier case law. The European Commission’s 2005 Notice on Restrictions Directly Related and Necessary to Concentrations may provide useful guidance on this matter.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
In the course of its investigations, the FCA may, on its own initiative, address information requests to competitors and customers. This has become a common approach, especially in cases involving remedies.
As regards the rights of third parties to intervene in merger proceedings, third parties whose legal or economic interests are affected by the concentration (ie, in particular, competitors and customers) may submit written comments to the FCA and the FCP. The deadline for the submission of written comments is two weeks after the date of publication of a short summary of the notification on the FCA’s website. Such interveners, however, do not have a right to any specific treatment of their submission.
In the course of Phase II proceedings before the Cartel Court, third parties may at any time submit written comments to the court. The ACA, however, explicitly provides that third-party interveners do not acquire party status in the proceedings by virtue of their submission.Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
The FCA only publishes a short summary of each notification on its website. If a statutory party requests the initiation of a Phase II review of the merger by the Cartel Court, the fact that such request has been made is also published on the FCA’s website. In some cases, this publication consists of a single sentence, naming the statutory party having lodged the request and the date of the request. In other cases, however, the FCA has issued a press release setting out the competition problems identified in the course of its preliminary investigation.
Also, decisions by the Cartel Court clearing a concentration subject to conditions and obligations have to be published on the FCA’s website. In cases involving remedies agreed between the notifying party and the FCA (so as to avoid a request for a Phase II investigation or to have such request withdrawn, see question 25), the FCA also publishes the text of the commitments on its website.
Finally, with the 2013 amendment to the ACA, an enhanced duty of the Cartel Court to publish full text decisions was introduced. Decisions of the Cartel Court (including the court’s reasoning) are published in the Ediktsdatei, a publicly available online collection of court decisions (however, the parties have the right to request that confidential information be redacted prior to publication, and this is done at the discretion of the court).
Business secrets are generally protected by way of a restriction on third-parties access to the file. Persons who are not parties to the merger proceedings are only granted access to the file if the parties agree. Interveners in the proceedings are not considered to be parties.Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?
On a European level, the FCA is a member of the European Competition Network (ECN) and participates in the cooperation among ECN members. The FCA is also a member of the International Competition Network.
In its day-to-day practice, the FCA cooperates closely with the other ECN members, in particular with the German Federal Cartel Office. In particular, in cooperation with the German Federal Cartel Office, the FCA developed and published a joint guidance on the interpretation of the newly implemented transaction-value-based threshold. A final version of this guidance was published in July 2018. Therefore, where a transaction is notified not only in Austria, but also in other EU member states, the parties should ensure that the information provided to the authorities is consistent. It is, nevertheless, advisable to keep the statutory parties informed of any relevant procedural developments occurring in parallel proceedings before other competition authorities (or regulatory bodies).
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
Decisions by the Cartel Court are subject to judicial review by the Supreme Court. Only the parties to the transaction and the statutory parties are entitled to appeal decisions of the Cartel Court; third parties may not appeal such decisions, irrespective of their interest in the case and of any intervention in the proceedings before the Cartel Court.Time frame
What is the usual time frame for appeal or judicial review?
Appeals may be lodged within a period of four weeks from the day on which the decision is served on the parties. The respective other party or parties to the proceedings are allowed a further four weeks to reply to the appeal. The Supreme Court must reach a decision within two months of receipt of the file, which is sent to the Supreme Court upon receipt of the reply to the appeal.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
In 2018, 481 transactions were notified in Austria, which is – again – a slight increase compared to the previous year, which saw 439 merger filings. As in previous years, the statutory parties have been busy with merger review and significant enforcement action.
In 2018, one case went into Phase II (compared to two cases in 2017). It concerned the acquisition of joint control of D.Med Consulting by Fresenius Medical Care and KR2. D.Med Consulting is active in the field of development and marketing as well as consulting for medical products with a focus on dialysis technologies and related medical fields. The merger was cleared in early 2019 subject to conditions intended both to protect current projects conducted by the target for a competitor of the acquirer and to prevent the acquirer gaining a competitive advantage by obtaining sensitive information. One of the Phase II cases of 2017, which concerned the leasing of railcars, was cleared in 2018 with conditions after an in-depth review by the Cartel Court (VTG Rail Assets/CIT Rail Holdings (Europe); Nacco-Group), with concerns relating to the possible creation of a dominant position in particular in the area of the rental of dry goods wagons and regarding the accuracy of the proposed market definition. The notifying parties undertook to sell approximately 30 per cent of the Nacco business to an upfront buyer (the same conditions were also agreed on with the German Federal Cartel Office).
In 2017, the FCA started its sector investigation into the Austrian healthcare sector, which had previously seen two noteworthy mergers (both cleared subject to remedies). The investigation targets numerous segments of the healthcare industry, including pharmaceutical production and distribution, pharmacies, medical devices, e-health and also health institutions and health insurance. First results relating to the pharmacy area were published in May 2018. In this report, the FCA addresses possible competition restraints regarding market entry, ownership as well as operating rules applicable to pharmacies. According to the FCA, anticompetitive regulations exist in various areas such as needs assessment, prohibition of chains and third-party ownership, restriction of opening hours, restrictions on online sales of OTC medicines and of pharmacy delivery services and exclusive rights of pharmacies to sell OTC medicines. Far-reaching liberalisation measures are therefore recommended, with the aim of achieving better prices and more transparency for consumers as well as enhanced quality through more competition. On this basis, it can be expected that transactions in the healthcare sector will generally be of interest to the FCA. Furthermore, in October 2018 the FCA published a ‘Fairness catalogue for companies’ which is intended as (non-binding) guidance to market participants and to prevent breaches of good conduct, with a particular view to the retail sector.
Furthermore, there was an interesting merger in the media and entertainment sector, relating to the takeover of Sky, Europe’s largest media company and pay-TV broadcaster, by the US telecommunications conglomerate Comcast. In parallel to the EU filing, this case was reviewed as a media merger in Austria (and certain other countries). The case was cleared unconditionally in Phase I, following an extension of the review period by two weeks, which allowed the statutory parties to rule out any concerns as to media plurality in Austria.
One case concerning the operation of ski-resorts (Bergbahnen Aktiengesellschaft Wagrain; Fremdenverkehrs GmbH/Bergbahnen Flachau Gesellschaft mbH) was cleared without remedies in the formal sense, but the companies had agreed to certain commitments that were already included in the initial merger application for the Phase I review. The commitments included discounted new ski passes and new bus tariffs. One case (Apple Inc/Shazam Entertainment Ltd) was referred to the European Commission by a number of national authorities, including the Austrian FCA. Another case, relating to Knauf’s acquisition of AWI’s modular suspended ceilings business, was referred to the Commission in early 2018.
As explained in question 7, a large number of transactions with only very limited effects on the Austrian market come within the ambit of Austrian merger control, because of the low turnover thresholds. In light of the FCA’s criticism of the Supreme Court’s case law on the domestic effects requirement, it will presumably continue to closely monitor compliance with the notification obligation. In this context, the head of the FCA has repeatedly emphasised his ambition not only to take up cases of early implementation but also to focus on the completeness of notifications submitted to the FCA.
Moreover, in recent years, the FCA has been active in the gas and electricity markets. Mergers in this sector could therefore attract particularly close competition scrutiny. The same applies to media mergers, which tend to be closely scrutinised by both the FCA and the FCP (including in particular aspects of media plurality). Other sectors of a broader public interest, for example, telecoms and financial services, have also been subject to an in-depth review recently. The telecom sector was also subject to a sector investigation by the FCA, which was concluded in March 2016. With regard to the food retail sector, which has been under close scrutiny for anticompetitive conduct, takeovers of the majority of stores from an insolvent retailer by several of the major retail chains in Austria were cleared in Phase I in early 2016 (out of 98 stores, 28 could only be taken over subject to conditions, while takeovers of eight stores were abandoned because of competitive concerns; considerations relating to the securing of jobs played a certain role in the authorities’ assessment).
Apart from that, there have been developments in the kinds of evidence that the FCA reviews in assessing mergers. For complex cases, it is advisable to provide economic evidence, at least in Phase II and potentially earlier to avoid a Phase II referral. Also, the FCA and FCP appear to be increasingly interested in parties’ internal documents in complex cases. For instance, we have seen in the telecoms sector that it is advisable to engage in pre-notification discussions and provide the statutory parties with regulatory data early Phase I. The acquisition of Tele2 Austria, a provider of fixed-line telecoms services, by Hutchison Drei Austria, one of the major Austrian mobile telecoms operators, is a prime example of good procedural cooperation with the authorities. This case has shown that a detailed economic analysis of a transaction within the four-week Phase I window is possible if the parties reach out to the authorities at an early stage of the transaction process, engage with pre-notification contacts to discuss the scope of information and data required, and keep up the dialogue with the authorities throughout Phase I to swiftly provide any additional evidence required for the analysis. The same applied for the Comcast/Sky case, which, because of the close cooperation regarding the authorities’ media merger review, could be cleared unconditionally in Phase 1, using the two-week procedural extension tool. This matter required a solid understanding of the media market not only in Austria but more widely, combined with an ongoing dialogue with the authorities. In Phase II proceedings, the Cartel Court usually appoints an independent economic expert to review this evidence or conduct their own market investigations on which they will then report to the Cartel Court. It is also quite common that the FCA sends out questionnaires to market participants (eg, in the case BGO Holding/hali/svoboda büromöbel, the FCA conducted a market test with 300 customer surveys and 172 requests for information from competitors in Austria and abroad). Besides that, however, third parties still have a rather limited role in Austrian merger control, especially compared to the EUMR process. They have no procedural rights and cannot challenge a clearance decision. Another interesting development is that the FCA has made use of the instrument of referral of a transaction to the European Commission in recent years (along with other national authorities). This was done in Apple Inc/Shazam Entertainment Ltd and Knauf’s acquisition of AWI’s modular suspended ceilings business.Reform proposals
Are there current proposals to change the legislation?
As mentioned above, the latest amendment to the ACA was adopted in May 2017. This introduces several unclear legal terms that can be difficult to handle in practice. In the light of practical uncertainties regarding the new threshold, the FCA recently published a joint guidance paper with the German Federal Cartel Office on the new transaction-value-based threshold (which was similarly introduced in Germany).
In terms of the interpretation of the new threshold, according to the wording of the law, the ‘value of consideration’ has to exceed €200 million. The FCA has already made it clear that this should not only include the purchase price itself, but other non-cash benefits granted to the seller such as payments that are conditional on future turnover or profits. Moreover, it can be difficult to assess whether the target is ‘active in Austria to a significant extent’.
The FCA has clarified in a number of public talks that current activities of the target are relevant for the purpose of the analysis. There is some uncertainty in particular around the question of what constitutes an activity.
The FCA has worked with a number of indicators such as production facilities, branches, local sales forces, R&D activities – or with regard to the digital economy – a high amount of ‘monthly active users’. Furthermore, for the new threshold to be met, the activity in Austria has to be significant. This should be judged on a sector-specific scale, but there is currently no case law or decision practice available on this issue. The FCA has encouraged companies and their advisers to reach out to the authorities and discuss the application of the new threshold in cases of doubt.
Concerning procedure, the present institutional structure of competition enforcers in Austria (with two authorities – the FCA and FCP – being entitled to request the initiation of proceedings before the Cartel Court, and the Cartel Court acting as the sole adjudicator in competition law matters) has been up for debate for some time. However, whereas the FCA has repeatedly pointed out that it should be the competent body for both negotiating and decision-making with regard to remedies, current reform discussions do not question this aspect any more. Similarly, the legislator has not yet decided to increase the (domestic) turnover thresholds to limit the number of transactions that are notifiable to the FCA but have no impact on the Austrian market.
The latest reform discussions have also included a potential change of the substantive test (with a view to introducing a SIEC test as in the EUMR); however, it is still unclear whether and when such change might be introduced.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?
The recent amendment of the Austrian Cartel Act has introduced a new notification threshold, considering the value of the consideration of a transaction. Under the new threshold, mergers have to be notified if the combined worldwide turnover of the undertakings concerned exceeds €300 million, the combined Austrian turnover of the undertakings concerned exceeds €15 million, the value of consideration exceeds €200 million and the target is active in Austria to a significant extent. This threshold has been introduced in Germany in an almost identical manner (with different values) and, accordingly, raises the same questions in law in both jurisdictions. Being still very new to both legal systems, it gives rise to interpretation and application issues that can be difficult to handle in practice. In light of those practical uncertainties, the FCA has developed a draft joint guidance paper together with the German Federal Cartel Office (FCO) which is currently subject to public consultation.
The following summarises key considerations concerning the criterion of a ‘significant domestic activity’, as addressed in the guidance provided by the authorities. It is not always straightforward to assess whether the target is ‘active in Austria to a significant extent’. Importantly, the FCA/FCO have clarified in a number of public talks and in their draft joint guidance paper that current (as opposed to potential future) activities of the target are relevant for the purpose of the analysis.
There is some uncertainty around the question of what constitutes a ‘significant domestic activity’. As clarified in the draft joint guidance paper, the criterion of an activity – according to the laws of both jurisdictions – is measured in terms of any activity of the target with a market nexus (for example, this is generally assumed where the target’s services are offered for cash on an existing market). Furthermore, the assessment of domestic activity requires sector-specific indicators, such as local production facilities, branches, sales forces, R&D activities, or, with regard to the digital economy, a high amount of ‘monthly active users’ or access frequency of a website. A sufficient local nexus can also be based on the location of the customer base (eg, if users of an app are located in Austria). In Austria, a mere location of the target company can also constitute a sufficient domestic activity (which does not necessarily require a registered company in the formal sense).
Furthermore, for the new threshold to be met, the domestic activity has to be significant. This should be judged on a sector-specific basis. The situation is different if domestic turnover is not an adequate indicator; for instance, because the company is active in a market that is not characterised by turnover or because its product has only recently come onto the market so that the low turnover generated so far does not reflect the competitive potential. In this case, significance must be determined on the basis of other criteria.
Considering the above uncertainties, the FCA has encouraged companies and their advisors to reach out to the authorities and discuss the application of the new threshold in cases of doubt. Important examples are, in particular, pharma cases, where it may not be clear whether the R&D activities (eg, pipeline products) amount to a significant activity; in this context, further indicators could be a local specific budget assigned to this activity or proximity to market launching.
Regarding the second crucial element relating to the ‘value of consideration’, the joint guidance paper defines the value of consideration as encompassing ‘all assets and other monetary benefits that the seller receives from the buyer in connection with the merger in question’. The term ‘asset’ is to be interpreted in a broad sense and covers all cash payments and the transfer of voting rights, securities, tangible assets and intangible assets. But it also includes ‘considerations that are contingent on certain conditions, such as those specified in earn-out clauses, or agreed additional payments to the seller that are conditional on the achievement of certain turnover or profit targets at a specific point in future (eg, licence fees)’. Last but not least, also included are payments for non-competition by the seller.