The European Antitrust Review 2014 Section 3: Country chapters

Germany: Merger Control

Germany has a long and well-established merger control regime that has existed since 1973. Every year, around 1,000 transactions are notified to the Federal Cartel Office. While the number of merger notifications has dropped quite significantly as a result of the introduction of a second domestic turnover threshold in 2009, the comparably low thresholds continue to apply to a large number of transactions in which the undertakings involved have business activities in Germany.

Legislation and competent authority

The German merger control regime is contained in sections 35 to 47 of the Act against Restraints of Competition (ARC). The competent authority for the application of the merger control rules is the Federal Cartel Office (FCO), which has its seat in Bonn. The FCO is organised into 12 decision-making bodies – the decision divisions. Nine of these decision divisions apply the full range of provisions of the ARC on competition and merger control. The responsibilities of these decision divisions are defined according to industries. There are no divisions with a specific competence for the application of the merger control rules.

Transactions subject to merger control

German merger control applies if the following conditions are met.

Form of concentration

The transaction has to fall into one of the categories of concentration defined by the ARC. These categories are broader than under the European Community Merger Regulation (ECMR). Many transactions falling short of the acquisition of control of the target may constitute concentrations for the purposes of German merger control. The ARC defines the following categories of concentrations.

Acquisition of all or a substantial part of assets of another undertaking

If the acquisition of individual assets results in the acquisition of all or a substantial part of another undertaking, the transaction constitutes a concentration that may be subject to merger control. Whether or not this is the case will be determined not only by the size or value of the assets compared to the assets that will remain with the seller, but mainly by the extent to which the target assets confer a market position on the acquirer.

Acquisition of control of part or all of another undertaking

Acquisition of control as a separate form of concentration was introduced into the catalogue in 1998 to remove potential gaps of application between German merger control and the ECMR. The FCO and German courts interpret the acquisition of control in accordance with the decision practice of the European Commission and the case law of the General Court.

Acquisition of shares or voting rights

Share acquisitions may trigger German merger control if the shares either separately or in combination with other shares already held by the acquirer reach 25 or 50 per cent of the capital or the voting rights of the target company. Whether or not the shareholding confers on the acquirer a possibility to take decisive influence on the target is of no relevance.

Acquisition of a competitively significant influence on another undertaking

Any other combination of undertakings enabling one or several undertakings to directly or indirectly exercise a competitively significant influence on another undertaking constitutes a form of concentration. This category is supposed to catch share acquisitions below 25 per cent where additional means of influence are granted to the acquirer similar to the rights of a shareholder holding 25 per cent or more. Moreover, this position must be competitively relevant in that the acquirer has to have an interest in influencing the market conduct of the target.

Joint ventures

The creation of a joint venture, either by incorporation of a new entity or by acquisition of shares in an existing entity, is a form of concentration that may be subject to merger control, provided that a shareholding of at least 25 per cent is acquired by more than one
undertaking. Other than under the ECMR, all joint ventures are caught by merger control rules regardless of whether or not they perform, on a lasting basis, all of the functions of an autonomous economic entity (full-function joint ventures). The full-function character of a joint venture is only of relevance for the applicability of the general rules (section 1 ARC, which largely corresponds to article 101 TFEU) alongside the merger control rules. Section 1 ARC will typically be applied to joint ventures that will be active in the same or closely related – including upstream or downstream – markets as their parent companies.

It should be noted that in the creation of a joint venture, it is not only the acquisition of shares of the target company that constitutes a concentration. The ARC also treats the combination of the parent companies each acquiring 25 per cent or more in the joint venture as a distinct concentration, albeit only as regards the markets where the joint venture is active. This provision is of practical relevance in particular for the analysis of whether the turnover thresholds (see below) are exceeded, because both parent companies are regarded as participating undertakings, the turnovers of which have to be taken into account.

Turnover thresholds

A transaction that constitutes a concentration within the meaning of the ARC is subject to merger control if the combined and individual turnovers of the participating undertakings exceed certain thresholds. The worldwide consolidated turnover of all participating undertakings has to exceed €500 million. Additionally, at least one participating undertaking must have a domestic turnover in Germany of more than €25 million and at least one other participating undertaking must have a domestic turnover in Germany of more than €5 million.

The participating undertakings are identified in accordance with the form of concentration that is fulfilled by the transaction. The acquirer is always a participating undertaking, as is the target in case of an acquisition of control, a share acquisition or an acquisition of a competitively significant influence. In case of an asset acquisition, the seller is a participating undertaking only with regard to the target assets. Otherwise the seller does not qualify as a participating undertaking unless he retains a shareholding in the target of at least 25 per cent or, post closing, controls the target jointly with the acquirer.

For the calculation of turnover, the entire turnover of the undertaking directly involved in the transaction has to be included. In addition, on the acquirer’s side, the turnover of all companies controlled or controlling the undertaking directly involved have to be taken into account, whereas, on the target side, turnovers are relevant only insofar as they are attributable to companies controlled by the target company (ie, not the entire seller’s group turnover). Furthermore, the calculation of the applicable turnover thresholds is based on net turnover, ie, all income generated from business activities in the normal course excluding taxes, intra-group sales and transitory items for example. The calculation of turnover is not confined to revenue generated in the markets concerned by the transaction. The relevant time period normally is the most recent financial year. However, certain adjustments may be necessary to reflect developments of financial relevance between the end of the last financial year and the time of the proposed acquisition.

There are special rules for the calculation of turnover of banks and insurance undertakings. Moreover, if a participating undertaking generates revenues in whole or in part with the trade of goods or services, only three-quarters of this trading revenue have to be taken into account. In case of revenue generated with certain media activities with importance for the freedom of opinion such as the publication of newspapers or the broadcasting of television or radio programmes, the respective turnover has to be multiplied by the factor 20. Many transactions involving newspapers and other media undertakings are therefore subject to German merger control. According to the government bill of a forthcoming amendment of the ARC, which will enter into force in 2013, the factor will be lowered to eight.


There is an exemption from the filing requirement relating to the size of the participating undertakings. The ARC contains a second exemption relating to the size of the relevant market. This exemption, however, will be adapted to limit the application of the substantive test of German merger control as part of the upcoming amendment to the ARC which will enter into force shortly (likely before the summer of 2013). Upon entry into force, the provision on de minimis market will not exempt reportable transactions from the obligation to notify anymore.

The exemption for small undertakings applies if one undertaking participating in the concentration including any subsidiaries has a worldwide turnover of less than €10 million in the last financial year, provided that it is not controlled by another undertaking. However, although not expressly provided for in the ARC, the FCO also accepts the application of this exemption in case of the acquisition where the aggregate worldwide turnover of the seller’s group remains below €10 million since the purpose of this clause is to privilege the sale of small companies (or group of companies) for the benefit of their owners. Therefore, it should be noted that this exemption does not apply in the case of an acquisition of joint control if both acquiring parties have a worldwide turnover of more than €10 million each. It follows that in these types of situations, the small size of the target undertaking does not preclude the application of the merger control rules.

The second exemption concerns de minimis markets with a volume of less than €15 million, provided that the relevant market for the sale of goods or services does exist for at least five years. According to the judgment by the Federal Supreme Court in the Sulzer/Kelmix case of 2007, only the volume of the German market has to be taken into account even if the relevant geographic market is broader than national. It should be noted that the de minimis market exemption does not render German merger control per se inapplicable. Rather, it only exempts the de minimis market but not any other markets concerned by the proposed concentration subject to review by the FCO. The scope of the de minimis exemption has been further narrowed by a decision practice of the FCO that was upheld by the courts, according to which, under certain circumstances, several closely related de minimis markets with similar structural elements may be bundled together for the calculation of the €15 million threshold.

According to the forthcoming amendment to the ARC, the de minimis exemption will be changed from a full exemption to a limitation of the scope of review by the FCO. This means that a filing can not be excluded to the extent a market is concerned that has a German volume of less than €15 million, but that the FCO will not be entitled to block a concentration if the statutory prerequisites for a prohibition will only be fulfilled with respect to a de minimis market.

Non-applicability of the ECMR

In line with the principle of ‘one-stop shop’ on EU level, German merger control does not apply if a concentration is subject to review by the European Commission under the ECMR. This is the case if:

  • the transaction constitutes a concentration with an EU dimension (by reference to the definition of concentrations in article 3 ECMR and the turnover thresholds in article 1 ECMR); or
  • a case was referred in full to the European Commission from the level of the member states.

It follows that German merger control not only applies in case the turnovers of the participating undertakings fall short of the thresholds of the ECMR. If the transaction does not constitute a concentration within the meaning of the ECMR, but is caught by the scope of one of the types of concentrations set out in the ARC, it will be subject to review by the FCO. This scenario typically arises, for example, in the case of non-full-function joint ventures, which are not subject to merger control by the European Commission. German merger control in contrast is not confined to full-function joint ventures, but applies to all types of non-full-function joint ventures provided that the acquiring undertakings reach a shareholding of at least 25 per cent each or in case of the acquisition of joint control. The creation of non-full-function joint ventures of undertakings that have worldwide turnover even exceeding the thresholds of the ECMR are therefore subject to German merger control.

The jurisdiction of the FCO is also excluded in case of a pre- or post-notification referral to the European Commission under the referral provisions of the ECMR (articles 4(5) and 22). The last case in which the FCO requested a referral of a case to the European Commission under section 22 ECMR was Birla/Columbian Chemicals (case M.6191). The FCO has stated that it would favour a less restrictive interpretation of section 22 ECMR by the European Commission in cases where several member states request a referral, even though the transaction does not threaten to significantly affect competition in all member states that have joined the referred request.

Procedural issues

Transactions that are subject to German merger control must not be closed before clearance or before the statutory waiting periods have expired. The FCO has the power to impose fines of up to €1 million
or, in the case of undertakings, 10 per cent of worldwide group turnover. The FCO actively enforces the suspension obligation. For example, it has imposed fines of more than €4 million in two cases in 2008 and 2009 on undertakings for closing a notifiable transaction without clearance. In 2010 and 2011 the FCO imposed fines of €600,000 for ‘gun jumping’. One case concerned the acquisition of a warehouse by an agricultural wholesaler. The FCO held that in the wholesale market a warehouse constituted an asset that was of key importance for the market position of a wholesaler and that by acquiring a warehouse a market position was acquired as well. There is an opportunity to request a waiver of the suspension obligation from the FCO, but the FCO only grants such a waiver in exceptional circumstances, such as imminent insolvency of the target. German merger control rules do not contain an exception from the suspension obligation for public takeovers. Bidders therefore either have to complete a merger control review of the takeover prior to publication of the offer document or have to make the offer conditional upon clearance of the FCO. With a view to the publication of the notification on the FCO’s website (see below), the second alternative is normally the preferred option to ensure confidentiality. The forthcoming amendment to the ARC will introduce exceptions from the suspension obligation similar to the ECMR for public takeover bids.

Strictly speaking, there is no legal obligation to notify a concentration, but a prohibition to close a transaction without clearance. Consequently, there is no time period within which notifications have to be filed. The parties may submit a notification once the parties have reached a common intention to realise the transaction. A binding agreement is not necessary. When considering the best time to file, the parties should keep in mind that the fact of the notification and some very basic information on the transaction (ie, the parties, type of concentration and the markets concerned) will be published on the FCO’s website. Notifications are the responsibility of the participating undertakings and, in the case of an acquisition of assets or shares, of the seller as well. It is not necessary for each party that is under an obligation to submit a filing under separate cover. Rather, one party (typically the acquirer) notifies the transaction also in fulfilment of the obligation to file of all other parties concerned.

Notifications to the FCO are less formalised than filings to the European Commission on Form CO. Although the FCO has published a form on its website, the use of this form is voluntary and most parties continue to notify concentrations by letter. Notifications typically present the concentration as well as the participating undertakings including (relevant) affiliates. Although the ARC obliges parties only to identify markets in which they hold a market share of 20 per cent or more, it is common to provide at least some information on the relevant markets as well as the market share of the parties. In a recent case the FCO imposed a fine of e90,000 on an ultimate shareholder of an acquiring group for failing to submit complete information on his shareholdings in the notification. However, this is rather exceptional and has to be seen in the context of high market shares in the relevant markets that eventually led to a prohibition of the transaction by the FCO. Transaction agreements or other documents are usually not submitted together with notifications. The FCO may, however, ask for copies during the review process. Foreign parties should note that they have to provide an address for service of a representative in Germany.

The review process of a transaction by the FCO is divided into a preliminary phase (Phase I) and a main procedure (Phase II). Phase I lasts for one month from the filing of a complete notification. More than 95 per cent of the notified transactions are cleared in Phase I. If within the first month the FCO concludes that an in-depth
investigation of the transaction is warranted, it opens Phase II. Phase II lasts for four months from the filing of a complete notification. This time period can be extended with the consent of the notifying parties.

A clearance in Phase I comes in the form of a short letter in which the FCO simply confirms that the transaction may not be prohibited, (ie, the requirements for a prohibition decision are not fulfilled). The clearance letter does not contain any reasons or further explanations and will not be published as part of a general reporting scheme. A decision in Phase II, be it a clearance, conditional clearance or prohibition, in contrast is an extensively reasoned decision that is published on the FCO’s webpage. While a clearance in Phase I cannot be appealed, all decisions of the FCO in Phase II are subject to full judicial review. Points of fact and law will be examined by the Higher Regional Court of Düsseldorf, which has exclusive jurisdiction for appeals against decisions of the FCO. Judgments by the Higher Regional Court of Düsseldorf may be appealed in points of law to the Federal Supreme Court.

During the investigation in Phase I and even more in Phase II, the FCO will contact customers and competitors of the participating undertakings to test the market definition and explanations of the parties in their notification. In particular, if customers express concern about the reduction of the number of suppliers as a result of the transaction, the FCO is likely to give it close scrutiny. Moreover, third parties have the right to be accepted to the procedure as intervening party if they can show that the concentration materially affects their interests. This is typically the case if a third party is a competitor, supplier or customer of the participating undertakings. Interveners have the right to access to the file and to challenge decisions rendered by the FCO in Phase II. Phase I clearance letters, in contrast, are not subject to appeal by interveners.

Merger control procedures in Germany are subject to an administrative fee levied by the FCO. The statutory maximum fee is €50,000 (€100,000 in exceptional cases). The amount of the fee is determined by the FCO at its own discretion after the procedure on the basis of the economic significance of the case as well as the costs incurred for the investigation. Fees for a merger control procedure that is completed in Phase I typically range between €5,000 and €15,000.

Substantive test

Germany applies the dominance test in merger control. The FCO has to prohibit a notified concentration if it is to be expected that it creates or strengthens a dominant position, unless the undertakings concerned provide evidence that the concentration will lead to an improvement of the conditions of competition on another market and that these improvements outweigh the drawbacks of market dominance as a result of the transaction. Germany will introduce the ‘SIEC test’ (substantial impediment of effective competition) as part of the upcoming amendment to the ARC (likely before the summer of 2013) and will thus further harmonise German merger control with the provisions of the ECMR. The European Commission has to make an appraisal whether a notified concentration significantly impedes effective competition in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.

Market dominance is defined by the ARC as a situation where an undertaking either has no competitors or is not subject to substantial competition, or holds a superior market position in relation to its competitors. Indicative of a superior market position are the undertaking’s market share, its financial resources, its access to downstream or upstream markets, combinations with other undertakings, the extent to which it is subject to actual or potential competition, its ability to switch its supply or demand to other goods or services as well as switching possibilities of its suppliers or customers. When assessing dominance, the starting point is usually the market share of the undertaking concerned. However, the FCO increasingly takes into account other factors as well, such as the structure of supply and demand in the market, barriers to entry, recent market entries or departures and so on. It should be noted that the ARC stipulates a number of legal presumptions of dominance. An undertaking is deemed dominant on a relevant market if it holds a market share of at least one-third. Several undertakings are deemed collectively dominant on a relevant market if three or fewer undertakings jointly have a market share of at least 50 per cent, or if five or fewer undertakings have a combined market share of at least two-thirds. These presumptions are rebuttable, which parties often successfully do. According to the forthcoming amendment of the ARC, the threshold of a market share of one-third, which triggers a presumption of individual market dominance, will be raised up to 40 per cent.

If the FCO comes to the conclusion at the end of the Phase II proceeding that the notified concentration would create or strengthen a dominant position on any market (or, in the future, if the notified concentration would impede effective competition) and if the parties are unable to provide sufficient evidence that the concentration will lead to improved conditions of competition on another market outweighing the strengthening or creation of the dominant position, the FCO has to prohibit the transaction. Of the about 1200 cases that were notified to the FCO in 2012 there have been 21 Phase II procedures (1.8 per cent of the notifications). Of these 21 Phase II procedures, the FCO granted conditional clearance in four cases, four projects were abandoned by the companies themselves and four transactions were prohibited (0.3 per cent of the notifications respectively 19 per cent of the main procedures), namely the cases Haspa Finanzholding/Kreissparkasse Lauenburg, Xella International/H+H, Klinikum Worms/Hochstift and Lenzig/Kelheim. In 2013 the FCO blocked the acquisition of cable network operator Tele Columbus by rival Kabel Deutschland.

The ARC provides for the possibility to clear a concentration subject to conditions. The parties therefore have the opportunity to offer commitments to the FCO to remedy the competition concerns. It is also possible to implement remedies prior to the final decision. The FCO clearly prefers structural remedies and commitments. It is very reluctant to accept behavioural commitments unless their effect corresponds to structural remedies, such as access to infrastructure. The ARC expressly specifies that conditions imposed on the parties must not result in an ongoing monitoring of the parties’ commercial behaviour. According to the upcoming amendment to the ARC, behavioural commitments will be allowed only if they do not result in an ongoing monitoring of the parties’ commercial behaviour. The FCO has published model texts for divestiture commitments on its website. Also, under the amended ARC the Phase II review period will be extended automatically by one more month as soon as the parties have formally offered committments to remedy the competition concerns identified by the FCO.

As mentioned above, German merger control applies to all joint ventures regardless of their full-function character. In the merger control procedure the FCO only assesses whether the creation of the joint venture leads to a creation of strengthening of a dominant position. Any cooperative effects of the joint venture are not taken into account during this procedure and a clearance decision does not prevent the FCO from continuing with the investigation due to antitrust concerns. The FCO typically states in a clearance letter or decision that the merger control clearance is without prejudice to the assessment under section 1 ARC (the general prohibition of competition restraints that mirrors article 101 TFEU). While the FCO often initiates proceedings under section 1 ARC following a notification of the creation of a joint venture if it clearly raises issues under the prohibition of competition restraints, it is not excluded that the FCO opens such proceedings years after merger control clearance has been granted. Parties that intend to create a joint venture should therefore carefully assess the compatibility of their project both with merger control and antitrust rules.

When appraising notified concentrations, the FCO may only take into account the likely impact on competition in the relevant markets and not other policy considerations. If the FCO has prohibited a concentration, the parties may request from the federal minister of economics an approval that overrides the FCO’s prohibition decision, even after it has been upheld by the Higher Regional Court in Düsseldorf or the Federal Supreme Court. The minister has the power to grant such an approval at its own discretion if either the concentration yields benefits for the economy as a whole that outweigh the disadvantages of the creation or strengthening of a dominant position on the relevant market, or if the approval is justified by preeminent public interests. There has been only a very small number of cases where parties have successfully involved the possibility of ministerial approval to set aside a prohibition decision of the FCO.

Recent developments

An amendment to the ARC will likely enter into force before the summer of 2013, which will bring a number of substantial changes to German merger control to further align it to EU merger control. In particular a new substantive test will be introduced which will correspond to the SIEC test under the ECMR (see above). The creation or strengthening of a dominant position will be an example of a substantial impediment of effective competition. Further changes proposed by the government include the admissibility of behavioural commitments, the introduction of an exception from the suspension obligation for public takeover bids, a change to the method of calculation of the €5 million turnover threshold to include all transactions between the same parties during the last two years and the possibility to stop the clock in Phase II if the parties do not respond fully to requests for information or within the deadline set by the FCO. Moreover, the government proposes raising the threshold of a market share of one-third, which triggers a presumption of individual market dominance, up to 40 per cent. Finally, the ARC will be applicable to mergers of health insurance funds.

On 29 March 2012, the FCO published on its website new guidelines on market dominance in the context of merger control. It is planned to revise the guidelines after the SIEC test has been implemented into the ARC. The FCO also stresses that, although the SIEC test will be introduced in Germany, the dominance test will still be relevant in the analysis of concentrations since market dominance will be an example for a substantial impediment of effective competition. According to explanation from the FCO, a revision of the guidelines was warranted in particular by the development of the applications of the merger control rules by the FCO. The FCO acknowledges that it has increasingly taken into account economic insights and concepts in its decision practice. Rather than focusing predominantly on market shares, the new guidelines put greater emphasis on a more comprehensive analysis of market conditions, ie, the effects of the concentration on the competitive conditions in the market.

An important recent case in the area of merger control was the clearance of the acquisition of daily newspaper Frankfurter Rundschau by the competing newspaper Frankfurter Allgemeine Zeitung in February 2013. The FCO accepted the failing company defence and followed the argument of the parties that there would be no causal link between the expected increase of the market share of Frankfurter Allgemeine Zeitung, as many readers and advertising customers of Frankfurter Rundschau would switch to Frankfurter Allgemeine Zeitung even without the transaction.

In the case Asklepios/Rhön the FCO took the view that an acquisition of 10.1 per cent of the shares in Rhön by Asklepios, two private hospital companies, constituted a notifiable transaction subject to merger control. Since the articles of association of Rhön required a majority of 90 per cent for various decisions of the shareholders’ assembly, a shareholder holding shares of 10.1 per cent was able to exercise significant competitive influence on Rhön. The FCO granted conditional clearance in March 2013 after Asklepios offered to sell two hospitals.

The Local Court of Cologne rejected a claim brought by GN Store Nord against the FCO for damages of about €1.1 billion for having unlawfully blocked the sale of its hearing aid device business to Phonak in 2007. The Federal Supreme Court had found in 2010 that the FCO was wrong to prohibit the transaction. The Local Court of Cologne held that the officials of the FCO responsible for reviewing the notification violated their duty to lawfully apply the relevant provisions of the ARC. However, the Local Court found that the officials did not commit an act of negligence when deciding to block the transaction. GN Store Nord has appealed against the judgment to the Higher Regional Court of Cologne.

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