Notification and clearance timetable

Filing 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 a notification of a concentration, but notifiable concentrations must not be completed before clearance. It is possible to file a pre-merger notification even prior to the signing of the transactional documents. Parties should also not forget to submit a mandatory post-completion notice to the BKartA, which needs to be filed without ‘undue delay’ following completion of the transaction. This is, however, a mere formality.

Fines can be imposed for closing before clearance as well as for submission of incorrect or incomplete filing. Those sanctions are regularly applied in practice (see question 12 below).

Which parties are responsible for filing and are filing fees required?

In principle, all parties involved in a merger (ie, typically the purchaser and the target company) are responsible for filing. In the case of an acquisition of shares or assets, the vendor must also notify. In practice, the filing is often done by the acquiring firm on behalf of all parties involved.

Filing fees payable to the BKartA can amount to up to €50,000 (in cases of minor importance or with insignificant effect on the German market, the filing fees normally range between €3,000 and €15,000). In exceptional cases, a fee of up to €100,000 is possible. The BKartA determines the fees by taking into consideration both its administrative (ie, personnel and material) expenses and the economic significance of the transaction notified. In addition to the fees, the BKartA can recover costs for external consultants (eg, economists) from the merging parties.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

Mergers that are subject to merger control may not be completed before either the BKartA has cleared the transaction or the relevant waiting periods of one month (first phase) or four months (first and second phases together) after submission of a complete notification have expired without the BKartA having prohibited the transaction.

2008 case law clarified that the suspension obligation also applies to transactions that are notified to the BKartA even where there is no formal notification obligation. Therefore, the decision to submit a ‘precautionary notification’ of a transaction where the question of the notification requirement is not entirely clear (eg, in possible cases involving the acquisition of material competitive influence (see question 4)) must be carefully made, as the notification, once submitted, triggers the waiting periods until a final decision of the BKartA is rendered. The BKartA can, upon the submission of an application, grant an exemption from the suspension obligation if there are compelling reasons to do so. This is the case, in particular, if the parties involved can establish that an exemption would prevent severe damage to one of the undertakings involved or to a third party. However, both the BKartA and the courts interpret this exemption restrictively. Stock market, staff loss or competitiveness risks usually would not suffice - exemption tends to be limited to situations of imminent insolvency.

The parties have the right to withdraw their notification at any time, unless the BKartA itself has delivered a decision ending the procedure (such as an explicit or implicit clearance decision or a prohibition decision). Such withdrawal automatically ends the merger control procedure.

Pre-clearance closing

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 completion of a notifiable merger prior to clearance can lead to severe penalties: fines of up to €1 million or, in the case of undertakings, of up to 10 per cent of their total worldwide group turnover in the preceding business year, can be imposed. The BKartA regularly imposes fines for closing notifiable transactions prior to clearance. Since the end of 2007, the BKartA has imposed five fines (up to €4.5 million) for closing before clearance.

In a recent judgment in the case Edeka/Kaiser’s Tengelmann, the Higher Regional Court of Düsseldorf decided that a partial implementation of a concentration before clearance also violated the suspension requirement. In that case, the merging parties had already started implementing some aspects of the merger agreement (one party agreeing to close outlets in an interim period before clearance and joint purchasing cooperation). This decision has been confirmed by the German Federal Court of Justice (Bundesgerichtshof) in November 2017 that decided that measures or behaviour, which themselves cannot constitute a concentration per se, but which are made in the context of the intended concentration and can (at least) partly create the effects of that intended concentration, constitute gun jumping. In another judgment relating to the same case, rendered in 17 July 2018 (Edeka/Kaiser’s Tengelmann II), the German Federal Court of Justice also confirmed the possibility for the BKartA to formally issue interim measures against existing or merely imminent gun-jumping acts of the parties (and according to the BKartA this approach also holds in the context of the Court of Justice of the European Union’s Ernst & Young judgment).

In cases of negligent disregard of the notification obligation, the BKartA normally informs the parties to the transaction of their obligations and insists on the submission of a post-completion notice containing all the details that are normally required in a pre-merger notification. If the parties comply with this request, they may in many cases escape a fine, if it was their first violation of the obligation to notify. However, if the concentration involves parties with significant business activities in Germany who have already submitted a number of notifications in prior transactions, fines are more likely. In cases of deliberate disregard of the notification obligation, the BKartA normally will impose a fine. Fines are much more likely if there is already a negative track record.

The BKartA does not treat notifications of transactions that occur after their (complete or partial) completion as ‘proper’ notifications but will rather consider them as post-completion notices. The BKartA assesses the competition issues triggered by the proposed transaction directly as part of a ‘merger dissolution procedure’. As a consequence, the one-month period for first-phase cases does not apply. Should the BKartA reach the conclusion that the transaction raises substantial issues, it may directly order the dissolution of the transaction. As a consequence, it is easier for the BKartA to undo a consummated merger that fulfils the prohibition conditions in the GWB quickly, as there is no longer a need to issue a formal decision prohibiting the merger before opening a merger dissolution procedure.

Further, any transaction implementing a merger in violation of the clearance requirement is regarded as invalid under civil law (at least in German law) until final clearance is given.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

Sanctions for closing before clearance are applied to any notifiable concentration. Whether the concentration involves national undertakings or foreign undertakings is irrelevant. The largest fine ever imposed by the BKartA for closing before clearance related to a foreign-to-foreign merger (fine imposed on Mars in 2008 for having closed the non-German parts of the acquisition of Nutro Products, see question 14).

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

Hold-separate arrangements that are entered into between the parties for the purpose of closing a foreign-to-foreign transaction prior to clearance without breaching the suspension obligation may be possible if they ensure that the closing will not have an impact on the market in Germany. However, because they are unusual under German merger control rules, they require analysis in each individual case, and in practice, it is difficult to design hold-separate arrangements in a way that clearly excludes effects on the German market. This was made particularly clear after the BKartA’s fining of Mars for having closed its acquisition of Nutro before clearance (one of the five gun-jumping fining decisions mentioned in question 12). Mars had notified its intention to acquire all shares in Nutro. Nutro had no assets in Germany and all sales of Nutro products into Germany were made through an independent third-party distributor located outside Germany. Following clearance by the FTC in the United States, Mars acquired the majority of the shares in Nutro prior to the BKartA’s clearance. Prior to the transfer of the Nutro shares, the seller and Mars agreed to transfer and carve out the German activities that remained with the seller. The BKartA found that this was not sufficient as, in the BKartA’s view, the German business could not be separated from the remaining Nutro business. It therefore concluded that the acquisition of the foreign Nutro assets had an impact on the German market and that the transfer of the shares therefore constituted an infringement of the German standstill obligation.

It is generally advisable to discuss all kinds of carveout or hold-separate solutions with the BKartA beforehand to avoid fines. In cases that do not raise competitive issues, asking the BKartA for a quick clearance may be the preferable option.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

German merger control rules are aligned with article 7(2) EUMR, allowing the notifying parties under certain conditions to consummate the public takeovers prior to clearance. The GWB does not prevent the implementation of a public bid that has been notified to the BKartA, provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the BKartA.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

Germany is one of the few jurisdictions worldwide that requires only a limited amount of information in a notification. The GWB requires, as a minimum, a description of the transaction and, in respect of all participating enterprises: name, place of incorporation, type of business, turnover of the parties involved (worldwide, in the European Union and in Germany), market shares of the parties in Germany and the basis of its own calculation if the combined market shares amount to 20 per cent or more, and in the case of an acquisition of shares in another company, information about the shares already held in the target company and the shares to be acquired. In the case a transaction is notified because the second set of thresholds is met, the value of consideration for the transaction as well as the principles dictating its computation are also required pieces of information. It is advisable, and may accelerate the proceedings, to provide at least some basic information on the markets concerned by the transaction. The level of information and analysis will depend on the extent to which the merger raises substantive competition law issues. The usual form of notification is a simple letter setting out the necessary information.

The notification must be submitted in German. The relevant waiting period begins after a complete notification has been received by the BKartA.

Foreign parties must appoint an authorised representative in Germany, on whom documents in the merger proceedings can be formally served. In contrast to EU merger control law, there is no obligation to submit the acquisition or merger agreement or any additional documents such as internal reports or annual reports and accounts to the BKartA. However, the BKartA sometimes requests such documents. Similarly, the BKartA does not usually require the submission of powers of attorney.

If a filing is made with incorrect or incomplete information, a fine of up to €100,000 can be imposed (this is an administrative offence). A fine of €90,000 was imposed in a case in which one notifying party did not disclose a majority participation in a company, although this participation was relevant for the substantive assessment of the notified concentration with another company (Clement Tönnies/Tummel, January 2013). The same penalties can apply for a failure to submit a post-merger completion notice or in cases of incomplete, incorrect or late notice. A fine of up to €1 million or, in the case of an undertaking, up to 10 per cent of its total worldwide group turnover in the preceding business year, can be imposed if the notifying parties intentionally include or make use of incorrect or incomplete information in the notification with a view to causing the BKartA to refrain from issuing a prohibition decision or from opening a second-phase investigation. External lawyers advising the notifying parties can also be fined if they intentionally submit incorrect information. Several external lawyers have already been or are subject to such an infringement procedure. Fines for incomplete filings have, so far, been rare in practice. Early in 2016, the BKartA imposed a fine of €90,000 on Bongrain Europe SAS for submitting incorrect (under-evaluated) market shares in a merger control filing. Where the parties intentionally submit incorrect information, the BKartA is likely to impose significant fines (eg, a fine of €250,000 has previously been imposed on a US company that provided incorrect information on its market share).

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

If the BKartA has sufficient data on the relevant markets, a decision is likely to be issued after internal discussions within the BKartA’s division responsible for the case. If it requires more information (which is often the case) or needs to verify the information provided by the parties, it often contacts other market participants (such as competitors, customers or suppliers) to seek their views and information on their activities and the relevant markets, as well as often requiring the notifying parties to provide further information.

In the vast majority of cases, the BKartA is able to ascertain during the first-phase investigation that the case does not raise substantive competition problems in Germany. In these cases, the BKartA will issue an informal clearance letter within the first phase. The clearance letter is not reasoned and not subject to appeal by third parties.

If competition concerns are identified during the first-phase investigation, the BKartA must inform the parties (usually, but not necessarily, in writing) within one month that a second-phase investigation will be initiated. If the initial concerns are not confirmed during the second phase, the BKartA will either clear the concentration directly or, if there are intervening third parties, issue a draft clearance decision. If the second-phase investigation confirms the competition concerns, the BKartA will set out the identified issues in a written statement of objections. Both the statement of objections and the draft clearance decision provide an opportunity to submit comments. In addition, upon request of the notifying or the intervening third parties, the BKartA will also allow them to present their comments in a meeting with the case team.

Merging parties can submit proposals for commitments at any time of the procedure, provided that the BKartA still has sufficient time to review and market test the proposal. At the end of a second phase, the BKartA will either issue a clearance decision, a clearance decision with commitments or a prohibition decision. All three types of decisions are formal administrative decisions, which means that they must be reasoned and are subject to full judicial review.

The BKartA is open to pre-filing consultations in cases that are high-profile, are likely to raise competition concerns or present an unusual degree of complexity. Such discussions will usually help with the efficient preparation of the notification, as they will identify the areas in which the BKartA would like to receive more information etc. In fact, the President of the BKartA, Andreas Mundt, welcomed this explicitly by stating the following in its annual end-of-year press release: ‘Companies often approach us first, in particular in cases which might be critical. Some of these projects will then not even be notified. After taking preliminary soundings in the extensive Karstadt/Kaufhof case we were able to send out formal requests for information to around 100 companies on the actual day of notification. This ultimately meant that the merger could be examined very quickly and at the same time very thoroughly.’ By contrast, in simple cases, pre-filing consultations with the authority appear unnecessary.

What is the statutory timetable for clearance? Can it be speeded up?

The BKartA must decide within one month of complete notification whether to clear the merger or, if the transaction raises competition concerns, whether to commence an in-depth second phase investigation. Decisions in second phase proceedings must be issued within four months of the notification date. The four-month period may be further extended, provided that the notifying parties consent. This is applied in many cases after commitments have been proposed by the parties to allow the BKartA to properly market test the commitments, and there is an automatic one-month extension of the second phase if the parties submit commitments. In addition, there is a stop-the-clock mechanism in second phase proceedings should the notifying parties not fully respond to an information request of the BKartA.

In practice, decisions are usually issued within the initial investigation (first phase) period of one month (more than 95 per cent of all notifications).