On 9 June 2017, the 9th amendment of the German Act Against Restraints of Competition entered into force. One of the major changes is the introduction of a new transaction size threshold into German merger control law.
Previously, merger control filings in Germany were triggered only if the parties to the transaction had a combined worldwide turnover of over EUR 500 million and at least two of the parties had turnover in Germany - one party with over EUR 25 million turnover and another with over EUR 5 million.
Under the new law, merger control filings are required even if the transaction does not involve a second party with turnover in Germany of over EUR 5 million (the other two turnover thresholds must be met), provided that the value of the transaction exceeds EUR 400 million and the target company is active in Germany to a “considerable extent”.
The amendment aims to address the concern that, under the previous thresholds, important mergers and acquisitions could "fly under the radar". The law-maker was particularly concerned about companies in the digital industry since their low turnover would not necessarily indicate minor competitive relevance, especially with respect to their potential for innovation – even more so if major companies would be willing to pay a considerable price for them. The leading example in this regard is Facebook's acquisition of WhatsApp in 2014, which did not trigger filing in Germany even though Facebook paid USD 19 billion. However, the new rule is not limited to transactions in the digital industry; it applies to all acquisitions with transaction values over EUR 400 million that involve a target active in Germany “to a considerable extent”.
It will be interesting to see how the Federal Cartel Office will apply this rule in its practice. Regarding the “value of the transaction”, the law indicates that the value of the transaction is the purchase price plus all liabilities assumed by the acquirer – which in practice may be difficult to determine. This is also true for the requirement that the target must be active in Germany “to a considerable extent”. In all likelihood, the Federal Cartel Office will make this assessment conditional on the industry at issue, allowing it to consider industry-specific aspects.
The Federal Cartel Office indicated that it will issue guidelines on the new provision and we will be sure to update you on this as more information becomes available.