Germany: Merger Control

This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight

In summary

From a practitioner’s standpoint, this article gives insight into the merger control process in Germany. It covers jurisdictional, procedural and substantive requirements and pitfalls, and highlights recent developments at the enforcement level and legislative changes in the making.

Discussion points

  • First experience with the transaction value threshold
  • Gun-jumping
  • The Federal Cartel Office’s practice regarding de minimis markets
  • The role of ministerial approval
  • Proposed changes to German merger control rules

Referenced in this article

  • 10th amendment to the Act against Restraints of Competition
  • Federal Cartel Office
  • Ministry for Economic Affairs and Energy
  • EU Foreign Investment Screening Regulation


In 2019, the Federal Cartel Office (FCO) examined approximately 1,400 concentrations, which is the highest number in the past 10 years. Of those, just 14 underwent an in-depth review (Phase II). Of these cases, two were cleared (one with and one without conditions and obligations) and four were ultimately prohibited. However, in five Phase II cases, the parties withdrew their notification after the FCO had summarised its serious competition concerns in a statement of objections (the remaining four cases were not decided in 2019). 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 that are not palatable to the parties.

The FCO considers the number of competitively unproblematic transactions subject to notification in Germany too high. At the same time, the FCO would have liked to review several transactions, which escaped regulatory scrutiny in particular because of the de minimis market exception. The FCO therefore lobbied for some fine-tuning of the relevant rules in the course of the forthcoming 10th amendment of the Act against Restraints of Competition (ARC). The draft law currently in the legislative process largely follows the FCO’s suggestions. Details of the suggested overhaul of the ARC with a bearing on merger control are discussed at the end of this article.

Obligation to file

Merger control filings are mandatory for concentrations meeting the jurisdictional thresholds. The parties concerned (usually the acquirer, or acquirers, and the target) are responsible for filing. In the 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 of the 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 has been implemented (section 39(6) ARC).

Failure to notify/gun-jumping

Implementation acts that fall foul of section 41 of the 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 of the 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-empting the intended implementation must be considered as gun-jumping. In this respect, German merger control is 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 regarding these implementing measures, which contribute directly to a change of control over the target company.

Once a transaction is implemented, it can no longer be subject to a regular merger control filing. Instead, the parties can inform the FCO about the implementation pursuant to section 39(6) of the ARC. The FCO will then review the competitive effects of the implemented transaction in dissolution proceedings pursuant to section 41(1) No. 3 of the 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 this case, 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 that, 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.
    • 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 because of 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 ‘plus factors’ allowing the acquirer some degree of influence that does not amount to control. The plus factors are, for example, superior familiarity with the market or industry at issue, important business relations with the target or a seat on 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. For this influence to be competitively relevant, there need 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 that provides some crucial business functions for the target, may suffice.

Turnover-related filing thresholds

Pursuant to section 35 of the 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 turnover in Germany 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 of the ARC contains further details on turnover calculation, including specific rules for certain industries (trading of goods, broadcasting, press, financial institutions and insurance).

With regard to the geographical 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, even 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 confirmed by the FCO in the Hytera Communications/Sepura case (2017), the relevant year for the 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 aforementioned turnover thresholds, concentrations are not subject to the notification requirement if a company, which achieved a global turnover of less than €10 million in its last business year, ‘merges’ with another company. 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 able 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 a 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, joint ventures in which only the parents trigger the thresholds may escape the filing obligation owing 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).

Threshold based on transaction value

In 2017, section 35(1a) of the ARC introduced a threshold based on the transaction value to make acquisitions of targets with low turnover but considerable market potential (such as internet start-ups) subject to merger control. It covers cases in which:

  • the aggregate global 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.

This threshold 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 this context, in July 2018, the FCO and the Austrian Federal Competition Authority published a 36-page joint guidance paper that 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 licences 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. The guidance paper clarifies that the FCO will usually not consider domestic operations significant if the target's turnover remains below €5 million in Germany and adequately reflects its market position and competitive potential.

The two-digit number of deals filed under the transaction value threshold so far did not involve any competitively problematic cases.

Process and substantive issues

Review periods and timing considerations

There is no reporting deadline but, as has been explained, implementation prior to clearance is prohibited. Filings can be made 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 up front, 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 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 respond fully and in a timely manner 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) of the 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 in which the parties’ combined share is 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 the 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. However, in practice, the FCO still focuses, at least as 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 (no more than three undertakings with a combined market share of at least 50 per cent (section 18(5) ARC) or no more than five under­takings with a combined share of two-thirds (section 18(6) ARC)). If 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 at their own initiative or by responding to information requests by the FCO.

A particularity of German merger control is that the FCO cannot prohibit transactions based solely on concerns regarding de minimis markets, that is, markets that have existed for at least five years and had a total sales volume of less than €15 million in Germany during the past calendar year (section 36(1) No. 2 ARC). This exemption does not apply to cases caught by the threshold based on transaction value, which was explicitly introduced to protect competition on markets that are not (yet) characterised by significant revenues.

In practice, there are some exceptions to the de minimis market rule allowing the FCO to bundle closely related geographical and product markets for the purposes of calculating the total sales volume. For example, pursuant to the Federal Supreme Court, the FCO can rule on de minimis markets 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 a non-de minimis market. In CTS Eventim/FKP Scorpio (2017), the FCO extended the latter concept to multisided (platform) markets, including de minimis markets.


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

In 2017, the FCO published an extensive guidance paper summarising the FCO’s (and the German courts’) decisional practice on remedies. Not surprisingly, 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 up-front buyer conditions), which must be fulfilled for the clearance decision to become effective, over obligations, which need to be complied with only after the implementation of the transaction and, in the FCO’s view, may not provide the parties with sufficient incentives for speedy implementation. If there are 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 is reluctant to accept mix-and-match solutions, in which 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 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 23 applications for ministerial approval, 10 of which were successful (the last being the Miba/Zollern case, which was approved in August 2019). The instrument is highly controversial. 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 – ministerial approval is now subject to a six-month deadline (for further suggested changes in the course of the 10th amendment to the ARC, see Hot topics, below).

Hot topics

Proposed changes to merger control rules

As part of the legislative process regarding the 10th amendment to the ARC, draft legislation published on 24 January 2020 provides for a number of important changes to the merger control rules. Their common objective is to allow the FCO to focus its resources on the cases that have the most significant effect on competition.

  • It is suggested to double the second domestic turnover threshold from €5 million to €10 million. At the same time, the de minimis exemption benefiting undertakings with global revenues of less than €10 million will be abolished because raising the second domestic turnover threshold to €10 million will leave no room for its application.
  • The draft bill extends the review period in Phase II from three to four months (ie, to five months including the month-long Phase I review). If parties offer remedies in Phase II, the entire review period as of filing will be six months. The option to prolong the review period with the parties’ approval will be limited to one month. A further extension of the review period may result from the FCO’s authority to stop the clock if the parties fail to answer requests for information in a timely manner.
  • The draft law provides for two important changes concerning de minimis markets. First, it is envisioned to raise the threshold for the definition of a de minimis market from €15 million to €20 million of overall sales in Germany. Second, the draft foresees a codification of the FCO’s practice to bundle several de minimis markets together and treat them as one integrated market. The latter will make it significantly harder for notifying parties to claim that the de minimis clause removes their case from the FCO’s scrutiny.
  • The draft legislation suggests the introduction of a new section 39a, which might have a major effect on the FCO’s review powers. Pursuant to the new provision, the FCO shall be empowered to request a company with a global turnover of more than €250 million for three years to notify any merger in one or more specific economic sectors if the FCO sees indications that further concentration may be harmful to competition. An exception shall apply only if the target company achieved total sales of less than €2 million or if it generates more than one-third of its revenues outside Germany. According to the explanatory notes accompanying the draft legislation, the new provision is supposed to capture cases in which an already powerful company gradually takes over small competitors, when a sector inquiry by the FCO has brought up competition concerns or when mavericks in already concentrated markets are being acquired. It will be interesting to see whether this new approach will survive the legislative process, as it is difficult to reconcile with the existing system of German merger control. In any case, the FCO continues to lobby for even further-reaching competences.

Further suggested changes concern ministerial approval (section 42 ARC). In particular, they require that a legal assessment made by the FCO in a prohibition decision is confirmed by a court – at least in proceedings for interim relief – before ministerial approval can be granted. This is to prevent parties from using the referral to the Federal Minister for Economic Affairs and Energy as a faster and possibly more cost-effective way to obtain the go-ahead for their transaction when actually the lawfulness of the FCO’s prohibition decision is disputed. In addition, the draft law clarifies that ministerial approval – to be granted only in exceptional cases – always requires paramount reasons of public interest.

The suggested amendments may be subject to modifications during the legislative process but it is expected that they will become law in large parts once the 10th amendment to the ARC enters into force. It is not clear whether that will still happen in 2020, as there have been several delays already and the covid-19 pandemic is likely to take an additional toll on timing.

Digital economy and platform markets

The digital economy and its effects on competition continue to be a clear priority in the FCO’s enforcement practice. The authority is currently carrying out a sector inquiry into online advertising and, with the French competition authority, published a joint study on algorithms and their effects on competition. In addition, the 2017 overhaul of the ARC introduced two changes, which are particularly relevant for platform markets and also affect the FCO’s 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. In 2015, the FCO 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 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 resulting from the associated economies of scale), access to data, user behaviour (including the use of parallel platforms (multi-homing) and switching costs) and innovation-induced competitive pressure. These criteria played an important part in the assessment of the planned acquisition of the concert and event agency Four Artists by CTS Eventim, which operates a multisided online ticketing platform. The FCO prohibited the merger as it found CTS Eventim to hold a dominant position in the market for ticketing services, which would have been further strengthened by the planned transaction.

Stricter standards for foreign direct investments

In its first prohibition decision under the German rules on foreign direct investment (FDI), after several months of investigation, the federal government vetoed the takeover of a German machine tool manufacturer by a Chinese investor. In April 2020, the Foreign Trade and Payments Act and the corresponding Regulation, 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 10 per cent of the shares in a domestic company by a non-EU investor and that cover military goods, critical infrastructures in the energy, information technology and telecommunications, transport, healthcare, water, food, finance and insurance sectors, and software development, were amended to reflect the EU’s FDI Screening Regulation. As of now, foreign investments will be examined for any ‘likely adverse impact’ on public order, safety or security. Previously, the relevant standard was an ‘actual and serious threat’.

Unlock unlimited access to all Global Competition Review content