Contributed By bpv Hügel Rechtsanwälte GmbH
The Austrian Cartel Act of 2005 (as amended) (Kartellgesetz, or Cartel Act) contains the main provisions of Austrian merger control; eg, the definition of a notifiable merger or acquisition (Cartel Act, Section 7), the turnover thresholds (Cartel Act, Section 9) and the substantive test for mergers (Cartel Act, Section 12). Additionally, the Austrian Competition Act 2002 (as amended) (Wettbewerbsgesetz, or Competition Act) also refers to merger control matters (eg, Competition Act, Section 10a relates to filing fees).
On 1 May 2017, significant changes to Austrian competition law entered into force pursuant to the Cartel and Competition Law Amendment Act of 2017 (Kartell- und Wettbewerbsrechtsänderungsgesetz 2017, or KaWeRÄG 2017/2017 Amendment). The changes concern the Cartel Act and the Competition Act. With regard to merger control, the changes introduced a new transaction value-based notification threshold and the filing fee for Phase I proceedings with the Official Parties (see 1.3 Enforcement Parties) was more than doubled.
The Federal Competition Authority (Bundeswettbewerbsbehörde, or FCA) provides guidance on its website (also provided in English) concerning basic aspects of merger control practice in Austria, including defining a merger, threshold values, notification requirements, fees, pre-notification, etc.
In July 2018, the FCA, in co-operation with the German Bundeskartellamt (Federal Cartel Office, or FCO), published detailed guidance on its recently enacted transaction value-based notification threshold (an English version is available on the FCA’s homepage).
There is no specific legislation for foreign transactions as such, but for specific sectors, particular authorities also have to be notified of transactions. For example, with regard to the bank and insurance sector, the Austrian Financial Market Authority (Finanzmarktaufsichtsbehörde, or FMA), which acts pursuant to the Austrian Financial Market Authority Act (Finanzmarktaufsichtsbehördengesetz, or FMABG), must also be notified.
Filings have to be made with the Official Parties (Amtsparteien): the FCA and the Federal Cartel Prosecutor (Bundeskartellanwalt, or FCP). Whereas the FCA is an independent body, the FCP is subordinate to the Federal Minister of Justice.
The FCA and/or the FCP are/is responsible for applying to the Cartel Court (Kartellgericht, a special division within the Vienna Court of Appeals, Oberlandesgericht Wien) for an in-depth (Phase II) investigation of a notified transaction. The Cartel Court is the only competent authority that is legally entitled to rule substantively on the legality of a notified transaction; eg, by prohibiting it or by granting clearance. Decisions and orders of the Cartel Court can be appealed to the Supreme Cartel Court (Kartellobergericht), a special division within the Supreme Court (Oberster Gerichtshof).
During the initial (Phase I) investigation of a notified transaction, the Austrian Competition Commission (Wettbewerbskommission) is entitled to submit a recommendation to the FCA. During an in-depth (Phase II) proceeding, a number of entities – including the Austrian Chamber of Commerce (Wirtschaftskammer Österreich), the Federal Chamber of Labour (Bundeskammer für Arbeiter und Angestellte), the President’s Conference of the Austrian Chambers of Agriculture (Präsidentenkonferenz der Landwirtschaftskammern Österreichs), as well as certain regulators – are entitled to submit observations to the Cartel Court.
If the preconditions for filing are fulfilled (with regard to turnover thresholds, the type of transaction and an effect in Austria), notification prior to closing of the deal is compulsory in Austria, with no exceptions.
Failure to notify a transaction is considered to be an infringement of the prohibition on implementation before clearance. In addition to nullifying the underlying transactional agreements, the Cartel Court, upon request of the FCA and/or the FCP, may impose fines on the undertakings concerned of up to 10% of their consolidated worldwide turnover.
The Supreme Cartel Court has ruled that the failure to notify is generally considered to be a serious infringement of competition law. In fact, failure to notify has been the focus of the FCA’s practice in recent years. Fines imposed have varied between EUR5,000 and EUR1.5 million. In 2019 year-to-date, the Cartel Court has fined several undertakings for implementing a transaction prior to clearance from the authorities, as shown below.
The Cartel Court is required by law to publish its final decisions in the so-called Ediktsdatei, which is a website run by the Austrian Federal Ministry of Constitutional Affairs, Reforms, Deregulation and Justice. The publication must state the parties and the substance of the decision, including the penalties imposed. The Cartel Court must take into account a legitimate interest of companies in preserving their trade secrets.
Furthermore, the FCA (also based on a legal obligation) publishes on its website short press releases concerning the Cartel Court’s rulings in proceedings involving a failure to notify a transaction. The notice identifies the names of the parties and a description of the transaction involved, as well as the amount of the fine imposed by the Court.
Under the Cartel Act, Section 7, the following types of transactions are caught by Austrian merger control:
Some of the above-listed transactions (those identified with a *) by definition cover operations that do not involve the transfer of shares or assets. A controlling influence without a transfer of shares or assets might be achieved, for example, by (i) attaching special rights to preferential shares (eg, the minority shareholders’ right to appoint more than half the members of the supervisory board), (ii) a de facto controlling influence by minority shareholders who are highly likely to achieve a majority at the shareholder meetings due to the percentage of shareholders in attendance, or (iii) minority shareholders acting together in exercising their voting rights.
'Control' is not defined in Austrian competition law.
The Austrian Supreme Cartel Court (Case No 16 Ok 7/07) has confirmed that a controlling influence under the Cartel Act, Section 7 is identical to exercising “decisive influence” within the meaning of Article 3 of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (EUMR). In the same decision, the Supreme Cartel Court also defined 'sole' and 'joint' control as follows.
Joint control exists where the controlling shareholders all have the “possibility to influence strategic decisions”; eg, where such decisions cannot be taken without the participation of other shareholders. In defining the term 'strategic decisions', the Supreme Cartel Court referred to the Commission’s Consolidated Jurisdictional Notice No 139/2004 and listed the “budget, the business plan, major investments or the appointment of senior management” as rights that typically confer joint control.
Sole control is achieved if the acquirer is able to influence the strategic competitive behaviour of the target independently. The Supreme Cartel Court again follows the Commission’s Jurisdictional Notice (including for cases of negative sole control).
As discussed, the direct or indirect acquisition of 25% or more (or 50% or more) of the shares or voting rights of an undertaking is caught by Austrian merger control, independent of whether control is acquired. In addition, under Austrian case law, the acquisition of less than 25% of the shares in an undertaking is caught by Austrian merger control if the acquirer secures rights that are comparable to minority rights typically attributed to a '25% or more' shareholder.
According to Section 9(1) of the Cartel Act, the thresholds of Austrian merger control are met if the undertakings concerned achieved the following turnover figures in the previous business year:
Furthermore, if only one of the undertakings concerned had a turnover of more than EUR5 million in Austria, the global turnover of the other undertaking involved must exceed EUR30 million to require merger notification (Cartel Act, Section 9(2)).
With the 2017 Amendment, a new notification threshold was implemented, which supplements the 'classic' turnover thresholds described above. This so-called transaction value-based threshold is based on the turnover of the undertakings concerned and the value of the transaction.
According to this new notification threshold (Cartel Act, Section 9(4)), a concentration has to be notified to the FCA if:
For mergers that occur in the media sector, a special turnover calculation has to be applied. Depending on the status of the undertakings concerned (eg, newspaper, publisher, etc), the respective turnover must be multiplied by a factor of 200 or 20.
The thresholds of Section 9(1) of the Cartel Act (see 2.5 Jurisdictional Thresholds) refer to the last business year, are based on turnover (ie, asset value is not factored in) and calculated on the basis of net turnover achieved by ordinary or regular business activity. Foreign turnover must be converted on the basis of official currency exchange rates; eg, the European Central Bank’s official exchange rates for the last business year.
Concerning credit institutions, the turnover calculation is based on (i) interest income and similar income; (ii) income from shares, other equity and non-fixed income securities, income from equity investments and income from investments in affiliates; (iii) commission income; (iv) net income from financial transactions; and (v) other company income. With regard to insurance companies, turnover is based on premium income (Section 22(2) of the Cartel Act).
The transaction value-based notification threshold (Cartel Act, Section 9(4)) refers to three criteria: (i) turnover thresholds, (ii) the value of the transaction and (iii) significant activity by the target in Austria (domestic activity).
The turnover thresholds are, as with the classic threshold, calculated on the basis of net turnover achieved by ordinary or regular business activity.
The value of the transaction (which must be specified in euros) is based on 'consideration'. While the term 'consideration' is not legally defined, reference can be made to the explanatory notes to the law. Furthermore, as detailed in 1.1 Merger Control Legislation, the FCA has published guidance on how to determine the value of a transaction (an English version is available on the FCA’s homepage). According to the explanatory notes to the law and the FCA’s guidance, 'consideration' comprises any value (which means any monetary benefits) that the seller receives from the acquirer in connection with the transaction – ie, it does not necessarily reflect the company value calculated on the basis of business methods – including the following.
The value of the consideration has to be calculated for a specific point in time. While the completion date of a transaction is relevant to when it needs to be notified, there may be cases where the value of the consideration at the time of completion has not been specified because of value fluctuations at the time of the notification. In such a case, the value of the consideration submitted in the notification can be as of the time the requirement was reviewed by the parties to the merger.
If a new joint venture creating a previously non-existing company is established by several parties that each transfers consideration into the new entity, the sum of those considerations must be used in calculating the value of the transaction.
In determining whether the transaction value-based threshold’s requirement of domestic activity by the target is satisfied, the focus is on current market-related activity. In contrast to Section 9(1) of the Cartel Act (discussed in 2.8 Foreign-to-foreign Transactions), domestic activity is generally not measured on the basis of domestic turnover). The above-discussed joint guidance of the FCA and German Bundeskartellamt provides some guidance in this regard. Different criteria to measure activities may be applied to different sectors and activities. The measurement should be carried out in line with objective industry standards that cannot be easily distorted. For example, in the digital sector, the explanatory notes in Austria refer to user numbers (monthly active users) or the access frequency of a website (unique visitors) as examples of possible indicators.
Furthermore, in Austria, the location of the target company is also relevant to determining whether it has significant domestic activity in accordance with Section 9(4) of the Cartel Act. Domestic activity must be presumed where the target has a physical presence (eg, subsidiary office) in Austria. However, this must also take account of the extent to which the activities at this site have domestic market orientation. Market orientation in cases where the user of the service does not pay for it could include (i) non-monetary renumeration by the user (eg, the user provides his or her data), (ii) future or alternative monetisation of the use (eg, the user must view revenue-generating advertising or pay to access additional features), or (iii) R&D of future marketable products or services.
According to the guidance, if turnover adequately reflects the market position and the competitive potential of the target company (usually in mature markets), the FCA will routinely find that there is no domestic activity if the turnover of domestic target companies is below EUR500,000.
The relevant turnover is the turnover of the buyer and the target. However, if the seller keeps 25% or more of the shares (and/or direct control) in the target, the seller’s turnover must also be included in the target’s turnover.
The respective turnover of each undertaking concerned is calculated on a group-wide basis. Austrian law provides for a somewhat extraordinary definition of what constitutes the relevant 'group', which deviates from the rules of the EUMR. Under Austrian law, the turnover of all undertakings linked to the parties concerned by direct or indirect control, or by an upstream or downstream shareholding of at least 25%, must be included in full (ie, not on a pro rata basis).
Changes in the business (such as acquisitions or divestments) after closing of the preceding financial year but before implementation of the planned transaction must be reflected in the analysis of whether the relevant thresholds are met.
Foreign-to-foreign transactions are subject to merger control in Austria; a local presence is not required. If the target does not achieve any turnover in Austria, but the thresholds are nevertheless still triggered, a filing is required unless the 'effects doctrine' applies.
The effects doctrine can be invoked in special circumstances to avoid notification in Austria. A precondition is that the target does not achieve any turnover in Austria. In addition, it must be shown that the planned transaction will have no effect on the Austrian market. Effects resulting in an obligation to file could exist; for example, on the basis that (i) the target will be active in Austria in the near future, or (ii) that the target, although not active in Austria, is active in a broader geographic market that encompasses Austria (eg, an EU-wide market). In general, a notification will be required if the market position of the acquirer in Austria is 'noticeably' and 'directly' strengthened by taking over the target. The FCA has published a guidance paper on the application of the effects doctrine, which is available on the FCA’s website.
Concerning the new 'value of transaction' threshold (see 2.5 Jurisdictional Thresholds), one of the preconditions is that the target is active in Austria to a “significant extent”. The FCA therefore takes the position that in Austria, the effects doctrine cannot be applied in cases where the thresholds of Section 9 (4) KartG apply.
There is no market share threshold in Austrian merger control.
Under Section 7(2) of the Cartel Act, Austrian merger control follows Article 3(4) of the EUMR, according to which “the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity shall constitute a concentration”. Therefore, a joint venture must be newly created, must have sufficient resources to operate independently in a market and must be involved in activities beyond one specific function for the parent companies. Furthermore, the sale/purchase relationship between the joint venture and its parent companies must be limited and the joint venture must be intended to operate on a lasting basis.
However, contrary to the EUMR (which, as made clear in Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, ECLI:EU:C:2017:643, C-248/16, treats as concentrations only full-function joint ventures, whether newly created or converted from an existing undertaking), the creation of a non-full-function joint venture might also trigger an obligation to file in Austria. This is the case if one of the parent companies transfers a “substantial part of an undertaking” into the joint venture. A 'substantial part' may include production facilities, customer lists, patents, etc. In specifying the term 'substantial part', the Supreme Cartel Court refers to whether a market position is, or will be, transferred with the transaction (Case No 16 Ok 8/01).
If the thresholds of Austrian merger control are not met, the Austrian competition authorities can investigate a transaction based on antitrust criteria according to the Treaty on the Functioning of the European Union (TFEU), Article 101 and the Cartel Act, Section 1. There is also the possibility (although very rare in practice) that a merger that does not meet the turnover thresholds may still qualify as an abuse of dominance under the TFEU, Article 102 and the Cartel Act, Section 5.
As the legal consequence of not notifying a notifiable transaction is nullification of the underlying agreements, there is no statute of limitations on the authorities’ ability to investigate a transaction.
Completion of a transaction must be suspended until clearance.
As discussed in 2.2 Failure to Notify, closing a transaction before clearance is subject to penalties of up to 10% of the consolidated turnover of the parties.
Recently, the Supreme Cartel Court ruled that a transaction had been implemented upon its registration in the company register and acceptance of a takeover bid (Case No 16 Ok 2/17f (7 December 2017)). The Court also held that a transaction is deemed implemented once the acquirer obtains the “opportunity to exercise economic influence”, regardless of whether, or when, it actually exercises that influence.
As outlined in 2.2 Failure to Notify, failure to notify, and therefore implementation prior to receiving clearance, has been the focus of the FCA’s practice in recent years and has led to fines in several cases. Reference is made to the discussion above.
Austrian merger control, in contrast to EU law (see Article 7(2) EUMR), does not provide any exceptions to the suspensive effect. In general, no such exception applies to failing firms, either.
However, under the Cartel Act, Section 19, notification is not required for certain types of transactions that are not considered to be an acquisition under the meaning of the Cartel Act, Section 7, such as:
As discussed above, the Supreme Cartel Court ruled that acceptance of a takeover bid is considered to be an implementation of a transaction (which requires immediate notification). Therefore the authorities’ former practice with regard to public bids, especially those concerning foreign-to-foreign transactions, does not seem to be applicable any more, including the practice of accepting the completion of acquisition of shares prior to clearance as long as the acquirer did not actually exercise influence on the target.
The Austrian authorities do not have the statutory authority to grant derogations from the bar on closing a transaction prior to clearance. And the debate in legal writing as to whether under Austrian law the parties may close the transaction prior to clearance, as long as the acquired control is not exercised, is not valid any more due to the above-discussed judgment of the Supreme Cartel Court that held that the mere acquisition of the possibility to exercise control is to be considered as an act of implementation.
In special cases, it is possible to implement transactions outside Austria while the transaction in Austria (eg, concerning an Austrian subsidiary) is suspended pending clearance (ie, so-called hold separate agreements). However, carve-outs of the Austrian branch of a business are feasible mainly in theory, as in practice the target’s Austrian operations typically are considered not sufficiently autonomous as a standalone business so as to be carved out.
There are no deadlines for notification in Austria. As outlined above, completion before clearance is not allowed. With regard to fines for failure to notify, reference is made to 2.2 Failure to Notify and 2.13 Penalties for the Implementation of a Transaction Before Clearance.
A written binding agreement or letter of intent is not necessary for notification. Instead, it is sufficient that the parties intend to implement the transaction; eg, the parties agree (in writing or orally) on the core elements of the transaction and the envisaged timetable.
The filing fee in Austria is EUR3,500, which is a fixed rate, regardless of the size of the transaction (or the turnover of the parties to the concentration). The filing fee must be irrevocably transferred to the FCA account before the filing is transmitted (if payment is not made before filing, the review period will start running only once the filing fee has been received by the FCA).
According to the Cartel Act, “the parties to the concentration” are responsible for filing. The Cartel Act does not define this term; however, it seems to be accepted that “parties to the concentration” covers the acquirer and the target company, but not the seller.
Based on the standard form published by the FCA, the following core information is requested for purposes of Austrian merger control.
If there is an 'affected market' (see 3.11 Accelerated Procedure), much more detailed information is requested, including the following.
Documents submitted should include the organisation charts of the undertakings concerned, annual reports, and the basis and sources (eg, economic statistics) for the calculation of the market data provided (listed above). Transaction documents are not required by the Austrian form (but may be requested). If the transaction results in an affected market, business plans for the acquired undertaking (or the acquired part of an undertaking) or the joint venture, as well as for the acquiring undertaking, are additionally required.
The Cartel Court has ruled that the filing and attachments must be submitted in German. However, in practice, English attachments are often accepted (eg, with regard to annual reports).
A written power of attorney or other specific documents are not required for filing a transaction in Austria.
The FCA and the FCP do not have the power to declare the notification incomplete. Only in an application to the Cartel Court for a Phase II proceeding can the FCA or FCP request that the Court order that the notification must be completed. If the parties concerned do not adhere to such an order (which must be issued by the Cartel Court within one month of the Official Parties’ respective request), the notification will be rejected by the Cartel Court.
In practice, the Official Parties try to obtain missing information during Phase I (which runs for four weeks). In complex cases, it might be useful to initiate pre-notification talks (see 3.9 Pre-notification Discussions with Authorities) with the Official Parties to gather feedback concerning the completeness of a notification upfront.
Under the Cartel Act, no fines can be imposed for submission of an incomplete notification as long as the incompleteness does not result in inaccurate or misleading information being provided to the authorities (see 3.7 Penalties/Consequences of Inaccurate or Misleading Information). However, the Cartel Court may impose ex post measures on the undertakings concerned if the non-prohibition of the concentration or the waiver of a request for a Phase II proceeding was based on incorrect or incomplete information from the parties.
If the notifying party supplied inaccurate or misleading information in the filing, the Cartel Court, upon request of the FCA and/or the FCP, can impose fines on the undertakings concerned of up to 1% of their consolidated worldwide turnover.
Fines that have been applied in practice include the following.
In 2018, a fine of EUR212,000 was imposed on REWE International AG, which is the market-leading retail grocer in Austria (the brand of 'Billa'). When acquiring some assets (ie, supermarkets) from the insolvent Zielpunkt GmbH, REWE International AG agreed with the FCA in the respective merger control proceeding to close a Billa branch, which was near one of the supermarkets acquired from Zielpunkt GmbH. However, REWE did not inform the authorities that it had specific plans to open a new Billa supermarket close by.
In 2017, the Cartel Court imposed a fine of EUR750,000 on Europapier International AG for supplying inaccurate or misleading information. In the filing, Europapier did not mention that besides advertising technology and paper goods warehousing, Europapier also took over assets with regard to paper wholesaling (although the Official Parties expressed their concerns upfront about a potential takeover concerning paper wholesaling).
Phase I takes four weeks, calculated from the date of submission. On request of the notifying party, Phase I can be extended to a total of six weeks. Phase II takes up to five months, calculated from the date when the application of the FCA and/or the FCP for an in-depth examination is received by the Cartel Court. On request of the notifying party, Phase II can be extended to a total of six months. The total duration of formal merger control proceedings (Phase I and Phase II) may therefore amount to up to seven and a half months.
In addition, decisions of the Cartel Court may be appealed to the Supreme Cartel Court, which must decide the appeal within two months, calculated from the date when the court file is received by the Supreme Cartel Court. Since under Austrian law the standstill obligation ceases to apply only once clearance has become final, a challenge by the FCA or the FCP to a clearance decision by the Cartel Court can thus lead to an additional delay.
The FCA and the FCP do not expect to be consulted prior to each and every merger filing. Pre-notification talks, however, are recommended if there are doubts as to whether filing is necessary, if the merger is very complex, or if the merger could result in high market shares. Initiation of pre-notification talks is not published on the FCA’s website.
It is quite common that, during a Phase I investigation of a transaction that involves meaningful competitive overlaps, the FCA and/or the FCP will send requests for information to the parties concerned. The Official Parties also might initiate market investigations and thereby include third parties in the process.
Information requests do not suspend the review period, nor do the Austrian authorities have the power to order an extension ('stop the clock') unilaterally. Extension of Phase I is only possible on request of the parties concerned, although receiving requests for information might cause the parties to apply for an extension of Phase I in the hopes of avoiding a Phase II proceeding.
The extent of the requests for information very much depends on the peculiarities of the given case. However, in general, in Phase I, information requests do not tend to be overly data-heavy, as the review deadline is too short for the authorities to perform a sophisticated economic analysis. However, in Phase II, the parties may be required to provide a significant volume of data to the Cartel Court.
If the Official Parties do not receive sufficient information in Phase I, they might initiate a Phase II proceeding before the Cartel Court.
A short-form notification is available if there are no affected markets; eg, if after implementation of the transaction the combined horizontal market shares do not reach 15% or if one of the undertakings concerned does not have a market share of 25% or more in vertically overlapping markets.
Clearance in Phase I may be expedited by obtaining waivers from both the FCA and the FCP of their right to initiate Phase II proceedings. Waivers are not issued automatically, but only upon request by the notifying party. The authorities have a wide discretion as to whether to grant a waiver and they will typically only do so if the case does not give rise to competition concerns. Furthermore, the notifying party has to demonstrate that there is an urgent need for the transaction to be cleared early. In 2018, the Official Parties granted a waiver concerning their right to initiate a Phase II proceeding in only 27 out of 481 filings. While in the past it was rather simple to get a waiver granted, the Official Parties recently have been becoming strict and hesitant in granting such waivers. The request must be therefore very well reasoned. Threat of insolvency is usually accepted as a reason for urgency.
Austrian merger control uses the dominance test: a transaction will be prohibited if it creates or strengthens a dominant position. Nevertheless, the Cartel Court must clear the transaction (i) if it gives rise to improvements in the competitive conditions that outweigh its detrimental effects or (ii) if it is indispensable to the international competitiveness of the parties and justifiable in the interest of the national economy.
While in theory the threshold for intervention is higher under the dominance test than in legal systems using the 'significant lessening of competition' test (or the like), Austrian law provides for very low statutory thresholds at which the existence of a dominant position will be presumed (rebuttably). In particular, an undertaking will be presumed to hold a dominant position if its market share is 30% or more. Similarly low thresholds exist for the existence of collective dominance. While the Austrian authorities are required to investigate the case ex officio and may not simply prohibit a case based on the statutory thresholds, these presumptions do have an impact on which cases are referred to Phase II.
The Austrian authorities will look at the market in which the target is active. Of special interest are markets in which both parties to the transaction are active (horizontal overlaps). Markets that are vertically linked (where, for example, one party is a supplier and the other party is a customer) also have to be identified in the notification form (the use of which is recommended by the FCA).
There is no de minimis rule but competitive concerns are unlikely where the use of the short-form notification is possible; ie, where there is no affected market (as outlined in 3.11 Accelerated Procedure, an affected market exists if the combined horizontal market share reaches 15% or more, or if one of the parties concerned has a market share of at least 25% in a vertically overlapping market).
The Austrian authorities generally refer to the decisional practice of other competition authorities, in particular with regard to market definition. The most important points of reference for the Austrian authorities are the European Commission and the German Federal Cartel Office.
The dominance test applies to all types of mergers; eg, horizontal, vertical and conglomerate transactions. In investigating these transactions, the authorities may rely on both unilateral and co-ordinated effects. In practice, the focus has mostly been on horizontal cases that have given rise to high market shares, and on vertical and conglomerate foreclosure issues. Recent decisions also reveal an increasing emphasis on closeness of competition.
To date, efficiencies have not featured prominently in Austrian practice. However, the Cartel Act explicitly provides for efficiencies to be taken into account. Given the increased attention granted to efficiencies in recent practice at an EU level, efficiencies may also become more important in Austria in the future.
The Austrian Cartel Act provides for a competitiveness defence: a transaction giving rise to dominance is to be cleared if it is indispensable to the international competitiveness of the parties and, moreover, in the interest of the national economy. However, in spite of this explicit statutory provision, non-competition considerations such as industrial or employment policy do not play a factual role in Austrian merger control proceedings.
In the case of a media merger, Austrian merger control also protects media diversity.
In Austria, contrary to the EUMR, the creation of a non-full function joint venture may qualify as a notifiable transaction if one or both parents transfers assets into the joint venture such that the formation of the joint venture qualifies as an “acquisition of an undertaking or part of an undertaking” (which is a reportable transaction under Austrian merger control rules, see 2.3 Types of Transactions).
In substance, like all other reportable transactions, joint ventures are subject to the dominance test. In addition to the concentrative effects of the merger, any co-ordination between the parent companies that is directly related and necessary to the implementation of the merger is to be assessed in the course of the merger proceedings under the dominance test. Any co-ordination between the parent companies that is not directly related and necessary to the implementation of the merger is deemed beyond the co-ordinative effects resulting from the structural change brought about by the merger and therefore is assessed under the antitrust rules (and not the merger control rules).
In Phase I, the Official Parties cannot prohibit a transaction.
In Phase II, only the Cartel Court may prohibit a transaction if it creates or strengthens a dominant position (as discussed above). In addition, the Cartel Court may clear transactions subject to conditions or obligations; eg, asset divestitures.
In practice, the Cartel Court appoints an economic expert witness in the early stages of Phase II. The economic analysis is then largely carried out by the expert witness, whose report is of considerable importance to the outcome of the proceedings. If the expert concludes that the transaction would give rise to the creation or strengthening of a dominant position, the parties may offer remedies to the Cartel Court to obtain clearance. However, in practice, it is much more common for remedies to be offered to the FCA and the FCP (on the basis of which the FCA and/or the FCP refrain from requesting an in-depth review of the transaction by the Cartel Court or, if Phase II has already been opened, withdraw their request(s)).
The parties may offer remedies to the FCA and the FCP to convince them (i) in Phase I, not to refer a case to Phase II or to withdraw their Phase II request(s), or (ii) in Phase II, in order to withdraw their Phase II request(s). In addition, Phase II remedies may be offered directly to the Cartel Court to obtain conditional clearance; however, in practice, negotiations with the FCA and the FCP are much more common.
While only remedies accepted by the Cartel Court result in a formal (conditional) clearance decision, 'informal' remedies entered into with the FCA and the FCP to avoid Phase II or to obtain withdrawal of a Phase II request also have a binding effect. An undertaking that fails to comply with such remedies is deemed to have violated the standstill obligation, which may result in substantial fines.
There is no specific legal standard that remedies must meet. Similarly to the European Commission, the Austrian authorities will assess whether the remedies proposed are suitable to address the specific competition concern(s) at issue. Precedents, in very general terms, define remedies as an order requiring the merging companies to act, tolerate or refrain from doing something. Remedies must ensure that the merger does not create or strengthen a dominant position. If this requirement is achieved by remedies, the merger cannot be prohibited.
In accepting remedies, the authorities do, however, have a wide margin of discretion.
Compared to authorities such as the European Commission, the Austrian authorities are more willing to consider not only structural, but also behavioural remedies. For example, in the acquisition of joint control of Fresenius Medical Care (FMC) over D.Med Consulting (DMC) in 2019, FMC offered remedies to prevent, on the one hand, ongoing projects by DMC for FMC's competitors from being slowed down or hampered and on the other hand, that in DMC’s future projects FMC would gain an undue competitive advantage from sensitive competitive information. By creating respective organisational 'Chinese walls', FMC committed to take reasonable measures to ensure that the FMC members of the DMC Management Board neither directly nor indirectly will receive sensitive competitive information.
Concerning the acquisition of office furniture producers hali büromöbel and svoboda büromöbel by BGO in 2018, the undertakings concerned offered remedies that included maintenance of production sites, preservation of brands, unchanged price level for existing customers and the target’s independence from the acquirer when submitting offers in a bidding process (all combined with reporting obligations imposed on BGO).
In addition, access remedies are relatively frequent. By way of example, in a recent transaction involving the creation of a joint venture between the Austrian Federal Railways and a leading producer of railway switch points, the latter agreed to provide third parties with spare parts for switch points on a non-discriminatory basis. Price control remedies are also comparatively common; in particular, in markets where prices can be easily pegged to a reference price.
A somewhat more idiosyncratic feature of Austrian merger practice is the relative frequency of 'hold separate' remedies that are not tied to divestitures. Such remedies typically involve the purchaser agreeing not to integrate parts of the acquired business with its own activities for a number of years. Similarly, purchasers sometimes commit to continue to supply certain products in Austria. In a recent case involving ski cableway operators, the parties committed to offer ski tickets that had not been available before.
However, structural remedies are also used. In 2018, VTG Rail Assets acquired CIT Rail Holdings (as the sole shareholder of Nacco SAS). To alleviate the increase in market share that the acquisition would have resulted in, VTG Rail Assets agreed to sell approximately 30% of the Nacco business to third parties upfront (the same remedies were also agreed on in the respective merger proceedings conducted by the German Federal Cartel Office).
Lastly, Austrian merger control also protects media diversity. Therefore, remedies might be required in order to guarantee media diversity (eg, by requiring that editorial teams or marketing teams of merging newspapers have to work independently for a certain period after the merger).
There is no procedural regime for discussing remedies with the Official Parties, nor are there any strict deadlines. However, if the parties consider offering remedies in Phase I, these should be offered relatively early in the proceedings, given the short time available to the authorities (a maximum of six weeks). In Phase II, more time is available for discussing remedies.
There is no standard approach for discussing remedies with the Official Parties. In practice, parties often try to negotiate remedies in the early stage of Phase II to prevent significant delays to the closing of the transaction.
The authorities can, in theory, also propose remedies on their own motion. The Cartel Court can even clear a transaction subject to “conditions and obligations”, meaning that remedies can effectively be imposed on the parties. In practice, however, remedies are usually based on a proposal by the parties.
The Austrian authorities typically do not make completion of the transaction conditional on compliance with the remedies. However, nothing prevents the Official Parties from requiring an upfront buyer or fix-it-first solution if the circumstances of the case warrant such action. See, eg, VTG Rail Assets’ indirect acquisition of Nacco SAS, whereby VTG Rail Assets agreed to sell upfront approximately 30% of the Nacco business to third parties (see 5.4 Typical Remedies).
Failure to comply fully with remedies is subject to substantial fines, which may amount to up to 10% of consolidated turnover. This applies irrespective of whether the remedies were imposed by means of a formal conditional clearance decision adopted by the Cartel Court, or entered into informally with the FCA and the FCP. In addition, failure to comply with obligations imposed by a formal conditional clearance decision may result in the imposition of appropriate remedial measures by the Cartel Court.
Formal decisions are very much the exception under Austrian law. Phase I cases are cleared by expiry of the statutory deadline or waivers issued by the FCA and the FCP, and the authorities do not publish a decision or otherwise make the bases for their decision publicly known. Phase II cases are usually resolved by withdrawal of the FCA’s and/or the FCP’s Phase II request(s). Such withdrawals are often based on remedies agreed on between the parties and the FCA or FCP. The FCA publishes short summaries of remedies cases, as well as the text of the remedies, on its website.
Only cases going through a full Phase II examination (or the very unlikely case in which the Cartel Court, on its own initiative, clears a transaction subject to “conditions and obligations”) are subject to a formal decision by the Cartel Court. Such decisions are published in an online database.
Given that merger cases are ultimately decided by the Cartel Court (unless there is an appeal to the Supreme Cartel Court), the authorities challenging a merger (the FCA and/or the FCP) have an incentive to resolve cases with remedies, as this gives them some control over the outcome of the proceedings. This results in a very low number of prohibition decisions in Austria, while remedies are fairly common. Failing an agreement on remedies, transactions are typically abandoned by the parties.
For example, in 2017 and 2018, not a single notified transaction was prohibited by the Cartel Court.
Foreign-to-foreign mergers do not receive any different legal treatment. As a matter of fact, the Austrian filing thresholds capture a significant number of transactions that have little impact on the Austrian market. Such transactions are typically cleared in Phase I without detailed examination by the authorities. By contrast, the authorities do not hesitate to investigate fully foreign-to-foreign transactions that may have a significant impact on Austrian consumers and have also required remedies in foreign-to-foreign transactions; eg, in the above-mentioned foreign-to-foreign acquisitions, VTG Rail Assets/CIT Rail Holdings (see 5.4 Typical Remedies and 5.6 Conditions and Timing for Divestitures) and FMC or DMC (see 5.4 Typical Remedies).
Merger control clearances also cover ancillary restraints, to the extent that they are directly related to, and necessary for, the implementation of the transaction. No separate notification is required (or indeed possible) for such arrangements. As experience in Austria is scarce, the European Commission’s Ancillary Restraints Notice provides some guidance on what types of restraints may be considered ancillary and thus covered by the clearance. A proposal in 2017 for an amendment to the Cartel Act allowing the Cartel Court to declare in a decision clearing the creation of a joint venture that there is no need to take action against certain agreements linked to the creation of the joint venture ultimately did not become law.
Third parties are entitled to submit their observations to the authorities, both in Phase I and in Phase II, but they do not have any further procedural rights and do not receive party status. In particular, third parties are not granted access to the file.
In Phase II of merger proceedings (as in any proceedings before the Cartel Court), access to the file is subject to the parties’ consent. In the context of damage claims following on from a cartel infringement, this rule has been found to be in violation of EU law by the ECJ in the Donau Chemie case. The most recent amendment to the Cartel Act (2017) did not change the basic rule that access to the Cartel Court’s file is subject to the parties’ consent and only introduced new rights for damage claimants to request the disclosure of documents in damage proceedings.
In more complex cases, it is quite common for the authorities to contact third parties such as competitors, customers and suppliers. Usually, they do this on the basis of written questionnaires in which they 'test' the information provided in the notification (in particular, regarding market definition and the market position of the parties and competitors). It is also common that remedies offered by the parties are 'market tested' in this way.
The fact of the notification is published on the FCA’s website. While third parties are not granted access to the file, it is common for the notifying parties to submit a non-confidential version of the notification. This version is not published, but may be used by the FCA; eg, for the purpose of information requests addressed to third parties.
Austria is a member of the EU and, as such, the FCA co-operates routinely with its counterparts in other EU and European Economic Area member states. These authorities share with each other basic information on notifications received and may co-operate more closely on a case-by-case basis. In practice, the FCA co-operates most often with the German Bundeskartellamt.
Authorities of EU member states must seek a waiver from the parties to share confidential information. However, in practice, such waivers are rarely sought by the FCA and written evidence obtained from other competition authorities in relation to merger proceedings is rarely seen in Austrian merger control proceedings.
Final decisions by the Cartel Court may be appealed to the Supreme Cartel Court (a division of the Austrian Supreme Court) by the parties to the transaction, and by the FCA and/or the FCP.
Appeals against final decisions by the Cartel Court must be brought within four weeks of the decision. The other parties to the proceedings may then file a response to the appeal within four weeks. The Supreme Cartel Court then has two months from receipt of the file in which to decide the appeal. Note that an appeal by the FCA and/or the FCP against a clearance decision extends the standstill obligation beyond the deadlines discussed above, as the parties may close the transaction only once the clearance has become final.
Appeal rests on points of law only, which makes it difficult to challenge the Cartel Court’s decisions effectively, as merger cases usually turn on the facts. With a view to this, and to the low number of formal decisions in merger cases in Austria, appeals are quite rare in practice and those appeals that are brought are typically not successful. The 2017 amendment to the Cartel Act sought to facilitate challenging the Cartel Court’s factual findings to some extent by stipulating that the appeal may also be based on serious doubts arising from the case files as to the accuracy of the facts on which the Cartel Court’s decision is based. It remains to be seen whether this new provision will change the situation regarding appeals to the Supreme Cartel Court.
Only the parties to the transaction as well as the FCA and the FCP have the right to appeal the Cartel Court’s decisions (note that the FCA and FCP have party status automatically even if they are not the applicant).
The last changes to the Cartel Act were introduced in 2017. Concerning merger control, the changes introduced a new transaction value-based notification threshold (see 1.1 Merger Control Legislation, 2.5 Jurisdictional Thresholds and 2.6 Calculations of Jurisdictional Thresholds). Furthermore, the filing fee for Phase I proceedings with the Official Parties was more than doubled (see 3.3 Filing Fees).
In 2018, a total of 481 mergers were notified with the FCA and FPA. Compared to 2017 (when there were 429 notifications), the number of notified mergers in Austria increased again. To put these figures into context, as recently as 2015 there were only 366 notifications and in 2007 (the year before the economic crisis), 342 transactions were notified in Austria.
In recent years, there have been repeated discussions about whether the FCA should render substantive decisions on merger control applications in general and – particularly – on remedies (so far, only the Cartel Court and not the FCA can actively rule on merger control notifications). However, in practice, notified transactions already tend to receive clearance in Phase I based on remedies negotiated between the FCA and the undertakings concerned.
Furthermore, as Austria has one of the lowest national merger control thresholds, it is also regularly discussed whether to increase the existing domestic turnover thresholds (eg, by introducing a second national threshold) to limit the number of transactions that are notifiable. Furthermore, Austria also follows the 'creation or strengthening of a dominant position' as a substantive test, as compared to the 'significant impediment of effective competition' test that is applied under the EUMR and, for example, in Germany.