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Process and timing
Is the notification process voluntary or mandatory?
The notification process is mandatory if a transaction is subject to the German merger control regime.
What timing requirements apply when filing a notification?
No timing requirement for filing a notification exists, but a transaction may not be implemented before merger clearance has been obtained. Thus, mergers should be notified in time to allow for completion on the planned date.
A merger can be notified to the Federal Cartel Office (FCO) at any stage of the transaction before its completion. No definitive agreement is required for that purpose, not even a letter of intent. However, the parties should be able to describe the transaction in sufficient detail (ie, parties, structure and ancillary restraints) in order to allow for a substantive merger control analysis. The parties should also be reasonably confident that an agreement will be reached in order to avoid unnecessary administrative fees. The loss of confidentiality after submitting a merger notification may also affect the timing of the notification. The FCO publishes the fact that a transaction was notified within two to three days after receipt of the notification on its website. For that reason, it is common to submit a notification only after a definitive agreement has been signed and the parties are comfortable with the transaction to be disclosed to the public.
What form should the notification take? What content is required?
There is no mandatory form for the notification of a merger to the Federal Cartel Office (FCO). In practice, merger notifications are generally made in the form of a letter to the FCO, which must contain the following information (Section 39 of the Act against Restraints of Competition):
- the form of the concentration;
- the name, place of business (or registered seat) and type of business of each affiliated undertaking concerned and the type of affiliation;
- turnover figures in Germany, the European Union and worldwide on a consolidated group basis;
- market shares, even for markets which are not affected by the transaction (and including the bases for their calculation), if the combined market share of the undertakings concerned amounts to 20% or more in Germany or a substantial part thereof;
- for acquisitions of shares, the amount of the shareholding acquired and the amount of the total shareholding held by the purchaser afterwards;
- for acquisitions which are only reportable due to the transaction value, information on the transaction value, on the basis for its calculation, and on the type and scale of the business activities in Germany; and
- for parties based outside of Germany, the contact details of a person authorised to accept services in Germany.
The following information is not required by law, but is often included in a notification to facilitate the review process:
- the parties' market shares (even where the combined market share is less than 20%);
- separate data for the undertakings that are directly involved;
- descriptions of the markets affected by the merger and the merger's competitive effects; and
- other countries where the merger is intended to be notified or has been notified.
- In cases where the parties expect the transaction to give rise to competitive concerns, it is common to provide detailed market information, often supported by economic studies.
Is there a pre-notification process before formal notification, and if so, what does this involve?
No standard pre-notification process exists and, in straightforward cases, the notification can be submitted without prior discussions or contact with the Federal Cartel Office (FCO). However, in more complex cases, it is advisable to have informal discussions and submit a draft notification to the FCO.
If a case officer is already familiar with the case and has seen a draft notification before the formal notification is submitted, this will generally (though not always) help to facilitate and speed up the process. In some cases, pre-notification discussions may even help to avoid Phase II proceedings. Hence, it is advisable to start the preparation of notifications early in the process and approach the FCO on an informal and confidential basis well ahead of the intended filing date.
Can a merger be implemented before clearance is obtained?
Implementing a merger before obtaining clearance from the Federal Cartel Office (FCO) is an administrative offence subject to severe fines for the undertakings and individuals concerned. In addition, any implementing measures will be considered invalid under German civil law. However, the merging parties may apply to the FCO for an exemption from the suspension obligation. Exemptions are granted only in rare cases, where further delay would lead to severe damage for the merging parties. Special exemptions also apply for the implementation of public takeovers.
Guidance from authorities
What guidance is available from the authorities?
The Federal Cartel Office has published several guidance documents in English on its website at www.bundeskartellamt.de. For case-specific guidance, parties may initiate pre-notification discussions.
What fees are payable to the authority for filing a notification?
The Federal Cartel Office (FCO) charges administrative fees of up to €50,000 (€100,000 in exceptional cases) after it has issued a decision. The fee amount is based on the FCO's administrative expenses and the economic significance of the case. Fees in straightforward cases are often below €10,000.
Publicity and confidentiality
What provisions apply regarding publicity and confidentiality?
Informal pre-notification discussions are kept confidential by the Federal Cartel Office (FCO). Within a few days of receipt of a formal notification, the FCO will publish the fact that a notification has been filed on its website. This publication includes the name of the parties to the transaction and the sector concerned. Thus, the transaction is no longer confidential.
While the merger notification itself is not published, possible intervening parties have the right to obtain non-confidential versions of the merger notification and all other relevant documents. The FCO is under a statutory obligation to ensure the confidentiality of business secrets which have been identified as such by the merging parties.
Are there any penalties for failing to notify a merger?
Implementing a transaction which is subject to German merger control without the necessary notification and clearance is an administrative offence. A fine of up to 10% of the total worldwide group turnover achieved in the preceding business year may be imposed on the undertakings concerned. The responsible individuals may also be fined up to €1 million. Moreover, all legal acts implementing the transaction are considered invalid under German civil law.
Procedure and test
Procedure and timetable
What procedures are followed by the authority? What is the timetable for the merger investigation?
The German merger control procedure consists of two phases.
Phase I The initial proceedings start when the Federal Cartel Office (FCO) receives a complete merger notification. The FCO then has one month to decide whether it intends to open main proceedings (Phase II). Main proceedings are initiated by the FCO only if it identifies substantive competition concerns. Otherwise, the FCO will clear the merger by way of an informal clearance letter. The clearance letter is not reasoned and may not be appealed. Most transactions (approximately 98%) are cleared in this manner. In straightforward cases with no substantive overlaps or insignificant effects in Germany, the FCO often issues clearance letters long before the end of the statutory one-month period – even within one week in exceptional cases. The exact duration depends on the workload of the decision board, its prior knowledge of the relevant markets and the level of information provided in the notification. The one-month period cannot be extended.
Phase II Main proceedings must be completed by a formal decision – either clearance, clearance with undertakings or prohibition. If the FCO plans to issue a prohibition decision, it will present its substantive competition concerns in a statement of objections beforehand and give the parties to the proceedings the opportunity to respond. The FCO is allowed four months from receipt of a complete notification to reach a decision. The FCO routinely uses the full four-month period to conduct in-depth investigations and prepare a reasoned decision. This period can be extended where:
- a party has submitted proposals for remedies (by one month);
- the parties agree to an extension;
- the parties' submission of incorrect or incomplete information causes delay; or
- the parties fail to supply information formally requested by the FCO in a timely manner.
What obligations are imposed on the parties during the process?
The obligations imposed on the parties are as follows:
- The parties must not implement the merger until it is cleared.
- The parties must respond to formal information requests correctly and in a timely manner.
- The parties must notify the Federal Cartel Office without delay after having put the concentration into effect.
What role can third parties play in the process?
The Federal Cartel Office (FCO) often seeks market intelligence from competitors, suppliers and customers to understand the markets concerned better and to verify the information submitted by the merging parties. Market information is gathered extensively in Phase II cases.
Market participants may formally apply to participate in the merger control proceedings as intervening parties. They must demonstrate that the merger affects their commercial interests on the markets concerned. Intervening parties enjoy the right to be heard, the right to file and the right to appeal the FCO's decision. Apart from formal participation, anyone may submit comments and observations to the FCO in the course of merger control proceedings.
What is the substantive test applied by the authority?
The Federal Cartel Office (FCO) will prohibit a merger if it significantly impedes effective competition (SIEC) – in particular, if it will create or strengthen a dominant market position. The following exceptions apply:
- The undertakings concerned prove that the merger will also lead to improvements to the conditions of competition and that these improvements will outweigh the impediments to competition.
- The conditions for a prohibition relate only to a so-called ‘de minimis’ market which had a total market volume of less than €15 million in the last calendar year. This exception does not apply to (a) markets which have been in existence for less than five years, (b) markets in which services are rendered free-of-charge, and (c) acquisitions which are only reportable due to the transaction value.
- The target is a print media company in financial distress (and certain other criteria are met).
Does the legislation allow carve-out agreements in order to avoid delaying the global closing?
A carve-out of German completion in an international transaction is unlikely to succeed in practice, as the parties will have to structure the transaction in a way that ensures it was no longer subject to German merger control. This is difficult and sometimes impossible to achieve. If the carve-out fails, the Federal Cartel Office (FCO) may consider it as a deliberate act of gun jumping and impose a penalty. Hence, merging parties considering a carve-out agreement are strongly advised to seek legal guidance from local counsel and to contact the FCO beforehand.
Test for joint ventures
Is a special substantive test applied for joint ventures?
No special substantive test is applied for joint ventures. Joint ventures between competitors may additionally be investigated as restrictive practices (Section 1 of the Act against Restraints on Competition) in separate proceedings.
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