Germany: Merger Control


In 2018, the Federal Cartel Office (FCO) received approximately 1,300 merger notifications, approximately the same number as in the preceding year. Of the transactions notified in 2018, just 13 underwent an in-depth review (Phase II) and no deal was ultimately prohibited. Moreover, in only one case the FCO made its clearance decision subject to remedies. However, in three of the Phase II cases, the parties withdrew their notification after the FCO has summarised its serious competition concerns in a statement of objections. To pull (and refile) is not unusual in situations where the originally notified transaction has no realistic chance of being approved within the remaining review period at all or only subject to remedies, which are not palatable to the parties.

According to the FCO’s president, the number of cases subject to notification in Germany is still too high. At the same time, the FCO would have liked to review several transactions, which escaped regulatory scrutiny in particular due to the so-called de minimis market exception. The FCO therefore lobbies for some fine-tuning of the relevant rules in the course of the upcoming 10th amendment of the Act against Restraints of Competition (ARC).

Obligation to file

Merger control filings are mandatory for concentrations meeting the jurisdictional thresholds. The parties concerned – ie, usually the acquirer and the target – are responsible for filing. In case of asset deals or acquisitions of at least 25 per cent or 50 per cent of the share capital or voting rights, the seller also has an obligation to notify. Separate filings are not required; normally the acquirer notifies on behalf of all parties concerned.

Section 41 ARC prohibits implementing transactions without the required merger control clearance. There is an exemption for public offers provided the transaction is notified without undue delay and the acquirer does not exercise its voting rights prior to clearance. Moreover, under exceptional circumstances the FCO may grant a dispensation from the suspensive effect.

Finally, parties to a notifiable transaction are obliged to inform the FCO once the transaction was implemented (section 39(6) ARC).

Failure to notify and gun-jumping

Implementation acts that fall foul of section 41 ARC are deemed null and void under German law. The FCO can order the dissolution of implemented transactions if they result in a significant impediment of effective competition. In addition, the FCO can impose fines of up to 10 per cent of the infringing undertaking’s global turnover for a violation of section 41 ARC. In more than 10 cases, the FCO fined companies for implementing a notifiable transaction prior to clearance (gun-jumping). So far the highest such fine, which was imposed on Mars Inc in 2008, amounted to €4.5 million. Importantly, in two judgments of November 2017 and July 2018 (Edeka/Kaisers Tengelmann I and II) the German Federal Supreme Court held that any action (partly) pre-emptying the intended implementation must be considered as gun-jumping. In this respect German merger control is thus stricter than EU law – in its Ernst & Young judgment of 31 May 2018, the European Court of Justice had limited the scope of the corresponding rules in the EU Merger Control Regulation to such implementing measures, which contribute directly to a change of control over the target company.

Once a transaction is implemented, it cannot be subject to a regular merger control filing anymore. Instead, the parties can inform the FCO about the implementation pursuant to section 39(6) ARC. The FCO will then review the competitive effects of the implemented transaction in dissolution proceedings pursuant to section 41(1) No. 3 ARC. If the conditions for a prohibition are not met, the FCO will close the dissolution proceedings (which are not subject to specific review periods). As a consequence, implementation acts that were previously deemed null and void will become valid retroactively.

Definition of concentration

In section 37, the ARC defines four types of concentrations.

  • The acquisition of all or a substantial part of the assets of another undertaking. There used to be broad consensus that the acquisition of assets required the acquisition of ownership. However, in the Lufthansa/Air Berlin case (2017), the FCO took the position that ownership does not necessarily need to be transferred but that a long-term wet-lease agreement may be sufficient. In the case at hand, the FCO ultimately left that question open. In any event, it is decisive that the transferred assets form the basis (or substrate) of an existing market position and allow the acquirer to take over that position from the seller.
  • The acquisition of direct or indirect control by one or more undertakings of the whole or a part of one or more other undertakings. The notion of control in German merger control is largely the same as under the EU rules. Control may be conferred by rights, contracts or any other means which, either separately or in combination and having regard to all factual and legal circumstances, confer the possibility of exercising decisive influence over the target, in particular through ownership or the right to use all or part of the assets of the undertaking, or rights or contracts that confer decisive influence on the composition, voting or decisions of the governing bodies of the target.
    • It is worth mentioning that German law contains a presumption that a majority shareholder controls its subsidiary. However, control may also be conferred by minority shareholdings or even purely contractual links as long as they provide the long-term ability to exercise decisive influence, eg, because of low attendance at the annual shareholders’ meeting or due to contractual (veto) rights.
    • Acquisitions of sole or joint control (including changes from joint to sole control and vice versa) are covered, as are changes within a group of jointly controlling shareholders.
  • The acquisition of capital or voting rights, which result in participations of at least 25 per cent or 50 per cent in the capital or voting rights of the target. Transactions that increase an existing participation of 25 per cent or more, up to at least 50 per cent, also need to be notified.
    • Provided that the transaction results in two or more undertakings holding stakes of at least 25 per cent in the target (joint venture), an additional concentration is deemed to arise between those undertakings (limited to the markets in which the joint venture is active). This has two consequences: first, all shareholders holding at least 25 per cent of the joint venture qualify as ‘parties concerned’ so that their turnovers need to be taken into account when assessing the filing thresholds. Second, the substantial assessment will comprise an analysis of overlaps between the parent companies’ activities in the joint venture’s markets.
  • The acquisition of a competitively significant influence. This concept is the least clear-cut and serves as a subsidiary threshold, which becomes relevant only if none of the other definitions of concentration is applicable. A competitively significant influence must be based on a structural link, usually a shareholding of less than 25 per cent (even shareholdings below 10 per cent can be sufficient), and so-called ‘plus factors’ allowing the acquirer some degree of influence that does not amount to control. Such plus factors are, eg, superior familiarity with the market or industry at issue, important business relations with the target or a seat in its decision-making bodies. If, considering the circumstances of the specific case, it has to be expected that the majority shareholder will take the minority shareholder’s interests into consideration when determining the target’s business strategy, the FCO will usually assume significant influence. In order for such influence to be competitively relevant, there needs to be horizontal (or vertical) links between the acquirer and the influenced undertaking.
    • In Edeka/Budnikowsky (2017), the FCO made clear that the required structural link does not necessarily have to consist of a shareholding in the target. Instead, a common joint venture, in which the acquirer of competitively significant influence has a 25.1 per cent stake and which provides some crucial business functions for the target, may suffice.

Turnover-related filing thresholds

Pursuant to section 35 ARC, concentrations that do not fall under the EU Merger Regulation are subject to German merger control if, during their last business year:

  • the parties concerned achieved an aggregate worldwide turn­over of more than €500 million;
  • one party concerned had a German turnover in excess of €25 million; and
  • another party concerned generated a turnover of more than €5 million in Germany.

For the purposes of turnover calculation, the parties concerned are the groups of the acquirers and the target, ie, the assets to be purchased or the legal entity or entities to be acquired, including their controlled subsidiaries. The seller’s turnover is not taken into account unless the seller retains a stake of at least 25 per cent in the target. Intra-group sales, VAT and other taxes do not form part of the relevant turnover. Section 38 ARC contains further details on turnover calculation, including specific rules for certain industries (trading of goods, broadcasting, press, financial institutions and insurances).

With regard to the geographic allocation of turnover, the FCO follows the approach set out in the European Commission’s Consolidated Jurisdictional Notice and focuses on the location where competition with alternative suppliers takes place. Thus, if customers purchase via a central purchasing department outside Germany, turnover with goods and services delivered to German production sites will usually be considered turnover generated in Germany.

Importantly, as recently confirmed by the FCO in the case Hytera Communications/Sepura, the relevant year for purposes of turnover calculation must be determined by reference not to the date of the notification but rather to the envisioned implementation date.

In spite of reaching the above turnover thresholds, concentrations are not subject to the notification requirement if a company, which achieved a worldwide turnover of less than €10 million in its last business year, ‘merges’ with another company (the ‘de minimis clause’). This provision covers not only mergers but also acquisitions by and of de minimis companies. This preferential treatment is based on the rationale that owners of small companies should be enabled to participate in concentrations without the burden of merger control. Against this background, the entire group turnover needs to be taken into account in determining whether the €10 million threshold is met even on the seller’s side. If, for example, a large group of companies with turnover exceeding €10 million sells a subsidiary or assets generating a turnover of less than €10 million, the deal will not benefit from the de minimis exemption.

Finally, it is noteworthy that joint venture scenarios, in which only the parents trigger the thresholds, may escape the filing obligation due to a lack of domestic effects, in particular if the joint venture has no actual or potential activities in Germany (see the FCO’s guidance on domestic effects in merger control, which is available in English on the FCO’s website).

New threshold based on transaction value

In June 2017, an additional threshold referring to the transaction value was introduced in section 35(1a) ARC in order to make acquisitions of targets with low turnover but considerable market potential (such as internet start-ups) subject to merger control. A merger filing is now also required in cases where:

  • the aggregate worldwide turnover of all undertakings concerned exceeded €500 million;
  • one undertaking concerned had a turnover of more than €25 million in Germany;
  • the transaction value exceeds €400 million; and
  • the target has ‘significant operations’ in Germany.

The amendment was triggered by the Facebook/WhatsApp case in 2014, which was not subject to German merger control due to WhatsApp’s insignificant global turnover even though the purchase price amounted to €19 billion. The FCO recently reported that until the end of 2018 it was contacted in about 25 instances about the potential applicability of the new threshold. However, ultimately less than five notifications resulted from these consultations.

The new concept raises many questions, which concern, in particular, the determination of the transaction value and the exact meaning of ‘significant operations’ of the target in Germany. In July 2018, the FCO and the Austrian Federal Competition Authority therefore published a 36-page joint guidance paper, which focuses on these issues. As regards the transaction value, the paper makes clear that it comprises not only cash payments, securities and tangible assets but also intangible assets (such as licenses or trademark rights) and even considerations that are contingent on certain conditions (such as earn-out clauses), which may necessitate a present value calculation based on an appropriate discount rate.

Process and substantive issues

Review periods and timing considerations

There is no reporting deadline but as explained above implementation prior to clearance is prohibited. Filings can be made already based on the parties’ (documented) good faith intention to do the transaction (eg, on the basis of a letter of intent). Pre-notification contacts are not mandatory but recommended in cases that could potentially give rise to competitive concerns or where timing is crucial. In particularly complex transactions, the FCO, upon receiving the necessary information upfront, may even provide the parties with a preliminary competitive assessment to allow them to assess the feasibility of their deal and, if needed, to amend their plans accordingly.

As of filing, the review periods are one month for Phase I and four months for a full-blown investigation including Phase II. The review period can be extended with the parties’ consent and is automatically prolonged by one month if the parties offer remedies in Phase II. The clock is stopped if the parties fail to fully and timely respond to a formal request for information.

Required information

The statutory requirements regarding information to be included in a German merger filing pursuant to section 39(3) ARC are moderate. In addition to certain mandatory information concerning the parties and the transaction, it is good practice also to describe the relevant markets and to provide market share estimates – even though the latter is only required for markets where the parties’ combined share reaches at least 20 per cent. Increasingly, the FCO follows the example of US and EU enforcers and asks for internal documents shedding light on the deal rationale and the parties’ internal view on the transaction’s effects on competition.

The parties are obliged to submit complete and accurate information. In several cases, the FCO imposed fines of up to €90,000 for the submission of incorrect or incomplete information in merger notifications. In Bongrain Europe SAS (2016), the FCO found that the parties had only succeeded in obtaining merger clearance by submitting incorrect information and started dissolution proceedings, which were discontinued only upon divestiture of the shares in one of the companies concerned.

Substantive test

As at EU level, the substantive test under the German merger control rules asks whether the notified transaction would lead to a significant impediment of effective competition (SIEC). However, in practice the FCO still focuses, at least in a first step, on the traditional dominance test and evaluates the creation or strengthening of a dominant position. In doing so, the FCO starts from the ARC’s rebuttable presumptions for single firm dominance (combined market share of at least 40 per cent, section 18(4) ARC) and collective dominance (three or less undertakings with a combined market share of at least 50 per cent, section 18(5) ARC, or five or less undertakings with a combined share of two-thirds, section 18(6) ARC). In case these thresholds are met, the assessment then shifts to a detailed analysis of the case-specific market structure characteristics, such as the number and strength of competitors, market entry barriers and the issue of countervailing buyer power. Only if no dominance can be found does the FCO turn to assessing the possibility of a ‘gap case’, which may justify the prohibition of a transaction even in the absence of dominance. Throughout the process, third parties can make their views known by responding to information requests of the FCO or at their own initiative.

A particularity of German merger control is that the FCO cannot prohibit transactions based solely on concerns regarding ‘de minimis markets’, that is, markets, which have existed for at least five years and which had a total sales volume of less than €15 million in Germany during the last calendar year (section 36(1) No. 2 ARC). In practice, there are some exceptions from this rule allowing the FCO to bundle closely related geographic and product markets for the purposes of calculating the total sales volume. For example, pursuant to the Federal Supreme Court, the FCO may take de minimis markets into consideration if a non-de minimis market upstream or downstream of the de minimis market is affected and if the competitive situation on the de minimis market materially influences competition in such a non-de minimis market. In CTS Eventim/FKP Scorpio (2017), the FCO extended the latter concept also to multi-sided (platform) markets including de minimis markets.


Unlike under EU law, in Germany remedies are only possible in Phase II proceedings since Phase I does not conclude with a formal decision that would allow the clearance to be made subject to conditions or obligations.

In May 2017, the FCO published an extensive guidance paper on remedies. For the first time, this paper summarises the FCO’s (and the German courts’) decisional practice in this area. Not surprisingly, it becomes apparent that the authority’s approach is to a considerable and increasing extent aligned with the approach of the European Commission. For instance, the FCO generally prefers divestiture commitments over behavioural remedies and stresses that the latter must not result in the need for long-term monitoring by the authority. The FCO prefers conditions (such as upfront buyer conditions), which must be fulfilled for the clearance decision to become effective, over obligations, which only need to be complied with after the implementation of the transaction and, in the FCO’s view, may not provide the parties with sufficient incentives for speedy implementation. In case of major uncertainties regarding the availability of a suitable buyer for a divestiture business, the FCO may also resort to fix-it-first solutions, by which the parties commit to implementing the divestiture during the review period.

Finally, the FCO expresses concerns about ‘mix-and-match’ solutions where assets and personnel from different business divisions (and sometimes even from different parties) are bundled together in a divestiture package. However, the FCO’s approach is highly case-specific; under certain circumstances, it may suffice to dispose of shareholdings in, or cut contractual links with, other companies in order to alleviate competitive concerns.

Model texts for the different types of commitments and a trustee mandate are available on the FCO’s website.

Legal recourse and ministerial approval

Prohibitions and (conditional) clearance decisions issued by the FCO following a Phase II investigation are subject to full judicial review by the Higher Regional Court of Düsseldorf. Judgments of that court can be appealed (on grounds of law) to the Federal Supreme Court. Provided that they are able to demonstrate that the FCO’s decision directly and individually affects their competitive interests, third parties may also seek legal recourse against the FCO’s decision.

Upon application by the parties, the federal minister for economic affairs and energy can approve a transaction that was prohibited by the FCO (section 42 ARC). In his or her decision, the minister has ample discretion to take economic and public interests into account but the decision is subject to judicial review. So far there have been 22 applications for ministerial approvals, nine of which were successful. The instrument is heavily disputive. In 2016, the approval of Edeka’s acquisition of approximately 450 supermarkets of rival group Kaiser’s Tengelmann (subject to a number of non-competition-related conditions) triggered heated discussions and culminated in legislative proposals ranging from the complete abolishment of the instrument to the introduction of a parliamentary veto right. In the end, only a procedural change was introduced – the ministerial approval is now subject to a six month deadline.

Notwithstanding the fact that they had obtained ministerial approval, the parties in the EDEKA/Tengelmann case appealed against the prohibition decision as they wanted to prevent the FCO’s ruling from hampering future deals (in particular as regards the definition of the relevant markets). However, the Düsseldorf Higher Court confirmed the prohibition decision and even adopted a more resolute stance than the FCO.

Hot topics

Digital economy and platform markets

The digital economy and its effects on competition have been a clear priority of the FCO’s recent enforcement practice. The authority launched a sector inquiry into online advertising and, together with the French competition authority, started a joint project on algorithms and their effects on competition. In addition, an FCO think tank conducted comprehensive research and published its results in a working paper entitled ‘Market Power of Platforms and Networks’ (available on the FCO’s website). In this vein the FCO lobbied for the adaptation of German competition law to the realities of the digital era. These efforts were at least partly successful – the 2017 overhaul of the ARC introduced two changes, which are particularly relevant for platform markets and which will also have an impact on the FCO’s future approach in the area of merger control.

First, the revised ARC clarifies that a ‘market’ within the meaning of competition law can exist even if services are provided free of charge. This is often the case, for example, for two-sided platforms. The law now reflects the FCO’s case law – in 2015 the authority had defined relevant markets in two merger cases concerning online real estate platforms and online dating platforms, respectively, even though some of the users did not have to pay for the services at issue.

Second, the ARC now contains additional criteria relevant for determining the existence of a dominant position, which are particularly important for the assessment of digital platforms. The additional aspects include network effects (in particular due to the associated economies of scale), access to data, user behaviour (including the use of parallel platforms, so-called multi-homing, and switching costs) and innovation-induced competitive pressure. These criteria played an important role in the assessment of the planned acquisition of the concert and event agency Four Artists by CTS Eventim, which operates a multi-sided online ticketing platform. The FCO prohibited the merger as it found CTS Eventim to hold a dominant position on the market for ticketing services, which would have been further strengthened by the planned transaction.

Minority shareholdings

The Monopoly Commission, an independent body advising the federal government mainly on regulatory issues and competition law, has repeatedly voiced concerns about minority shareholdings of institutional investors in several undertakings that are active in the same industry. In a report issued in July 2018, the Monopoly Commission set out in detail that such indirect links between competitors pose a potential risk to competition not only under the aspect of coordinated behaviour but that they also raise concerns due to unilateral effects (eg, if a price increase by one portfolio company benefits another portfolio company as well). Nevertheless, at least for the time being the commission does not recommend an extension of merger control or a fixed cap concerning minority stakes. However, the FCO should carry out a separate examination as to whether the existence of multiple shareholdings is likely to contribute to a significant impediment of effective competition – akin to the approach recently taken by the European Commission in Dow/DuPont and Bayer/Monsanto where the focus was on potential negative implications for competition on innovation.

Additional hurdles for non-EU investors

In August 2018, the federal government decided, after several months of investigation, to veto the takeover of a German machine tool manufacturer by a Chinese investor due to concerns that the transaction would impair public safety and order. This is the first prohibition decision after the entry into force of the Regulation on Foreign Trade and Payments (RFTP) in 2004, pursuant to which the Federal Ministry for Economic Affairs and Energy may examine, independently of the merger control proceedings under the ARC, acquisitions of at least 25 per cent of the shares in a domestic company by a non-EU investor. In July 2017, the reporting obligation under the RFTP was extended beyond military goods to also cover the envisioned acquisition of undertakings, which operate critical infrastructures in the energy, information technology and telecommunications, transport, healthcare, water, food, finance and insurance sectors or which develop software for this purpose. Furthermore, it was clarified that the RFTP also applies to indirect acquisitions where a foreign investor uses an acquisition vehicle set up in the European Union. In December 2018, the scope of the RFTP was further expanded by reducing the notification threshold to 10 per cent.

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