German merger control rules are contained in Section 35 et seq of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen (GWB) or ARC). Furthermore, the German Federal Cartel Office (Bundeskartellamt or FCO) has issued several guidance papers on its website; eg, in relation to domestic effects, market dominance and the size-of-transaction threshold.
Germany has one of the most established and active foreign investment control regimes in Europe. If a transaction raises concerns, the transaction may be subject to remedies or, in severe cases, even prohibited.
The regime essentially has two prongs:
In addition, asset deals are also in scope of the foreign investment regime.
Transactions triggering a mandatory filing requirement are subject to a comprehensive prohibition on gun jumping, which carries severe criminal penalties for non-compliance. Since the regime has generally become significantly stricter in recent years and the coordination of regulators on an EU level increases, companies engaged in M&A activities should consider the potential applicability of any foreign regime early on and allow for a lengthier approval process.
The foreign investment regime has been subject to numerous changes in the past years. After three amendments in 2020, the 17th amendment to the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung) entered into force on 1 May 2021. These changes related in particular to an expansion of sectors in which transactions are subject to a mandatory filing requirement. In addition, various legal issues were clarified by law and the previous practice of the Federal Ministry of Economic Affairs and Climate Protection (Bundesministerium für Wirtschaft und Klimaschutz) was codified. Following these far-reaching amendments, we have seen a significant increase in the number of foreign investment filings. The Federal Ministry will evaluate the new measures in mid-2022 with a view to reducing the administrative burdens for companies where appropriate. Most recently, the sanctions package adopted by the EU in response to Russia’s invasion of Ukraine led to a further change in fine provisions for the financial sector.
The German merger control regime is enforced by the FCO, which has its seat in Bonn. The FCO is headed by a president, currently Andreas Mundt.
If a merger has been prohibited by the FCO, the parties may apply to the Federal Ministry of Economic and Climate Protection under Section 42 of the ARC and ask for a ministerial authorisation of the transaction.
Notification is mandatory.
The ARC does not sanction a failure to notify but does impose sanctions for the implementation of a notifiable transaction prior to clearance (see 2.13 Penalties for the Implementation of a Transaction Before Clearance).
For merger control purposes, the ARC exhaustively defines concentrations as any of the following transactions:
This covers acquisitions of minority stakes of less than 25% in another company. Such transactions have to be notified if they confer upon the acquirer the ability to exercise influence on commercial policy and, thus, affect the competitive behaviour of the target company.
As in the EU merger control regime, the acquisition of shares for resale by credit institutions, financial institutions or insurance undertakings is not considered a concentration as long as the acquirer does not exercise the voting rights attached to the shares and resells the shares within one year.
Internal restructurings or reorganisations within the same economic entity are not subject to merger control.
Further, concentrations of public institutions in the framework of municipal reforms (situations where municipalities decide to merge their institutions or where municipalities merge themselves) are explicitly not subject to merger control review. In practice, this rule particularly affects hospitals and savings banks.
Also, concentrations between hospitals are exempted from merger control, provided that such hospitals qualify for government subsidies by the hospital structure fund (Krankenhausstrukturfonds) and that the Federal State responsible for handling the application for such subsidy confirms that the merger otherwise complies with competition law. Such transactions will need to be closed by 31 December 2027 in order to benefit from the exemption. However, parties will have to file a short post-completion notice to the FCO.
In contrast, the merger control provisions are applicable (analogously) to voluntary mergers of statutory health insurers. Prior to a prohibition in this sector, the FCO has to consult with the relevant supervisory authorities and, partly, different time limits and further specific rules apply.
The concept of control follows the EU merger control system and is regularly interpreted within this framework by the FCO. Control means the effective possibility of exercising decisive influence on an undertaking on a lasting basis. The actual exercise of control is not required. Control may be conferred through rights, agreements or other means (legal or factual) that individually or jointly enable the acquirer(s) to determine the target company’s strategic business decisions.
In terms of acquisition of minority, or other interests less than control, a transaction must be notified if the acquirer, following the transaction, holds 25% (or more) of the capital or the voting rights in another undertaking, or gains a competitively significant influence on another undertaking.
The latter scenario covers acquisitions of minority stakes of less than 25% in another company. Competitively significant influence arises where the acquired interest confers upon the acquirer the ability to influence the commercial policy and, thus, to affect the competitive behaviour of the target company. The FCO determines on a case-by-case basis whether this has occurred. In doing so, it considers the rights resulting from the amount of acquired shares as well as so-called plus factors as identified in FCO case law. These plus factors are, for example, voting and veto rights, and board representation rights of the acquirer; other personal links between the parties; options and pre-emptive rights, and information rights of the acquirer; and separate agreements with the target company.
Plus factors do not necessarily have to be ensured by binding agreements: it is sufficient if they provide the acquirer with a factual and lasting influence.
German merger control law provides for a turnover thresholds test and, since 2017, for a subsidiary transaction value test. Furthermore, a new notification obligation based on prior FCO decision was introduced in January 2021.
Turnover Thresholds Test
Pursuant to Section 35(1) of the ARC, a transaction falls within the scope of German merger control law if in the last financial business year:
There is a size-of-transaction test that alternatively applies if the second domestic turnover threshold of EUR17.5 million is not met. A concentration has to be notified if in the last financial business year:
An exemption to both threshold tests can apply to the credit and banking sector if companies do not provide end consumer services.
The FCO Guidance on Transaction Value Thresholds for Mandatory Pre-merger Notification (published together with the Austrian Competition Authority in July 2018) contains additional information on the interpretation of the new Section 35(1a) of the ARC.
Notification Obligation Based on Prior FCO Decisions
The FCO is entitled to impose a filing obligation by decision on a company to notify all transactions in designated sectors; the decision will be valid for three years. Requirements are:
However, before imposing a filing obligation, the FCO must have carried out a sector inquiry by means of which the structures and competitive conditions in the relevant economic sector were examined and analysed.
Calculations of Jurisdictional Thresholds – General Rules
For the assessment of the turnover thresholds, the group turnover of the participating undertakings in the last financial business year has to be considered. This includes the consolidated revenues of all companies belonging to the same group, controlled by the same ultimate parent company, to which the respective participating undertaking belongs. If a participating undertaking is jointly controlled by several undertakings, the full group turnover of all parent companies has to be taken into account.
If parts of one or more undertakings are acquired, only the turnover relating to those parts is considered when calculating the turnover on the seller’s side. This does not, however, apply if the seller keeps control of 25% or more of the shares.
The internal turnover generated within a group of undertakings as well as sales or turnover taxes are excluded from turnover calculations.
As in the European Merger Control Law, several acts of acquisitions between the same undertakings (and with the same acquirer) conducted within a period of two years are calculated together for the purpose of the turnover thresholds, provided that they are subject to separate agreement acts and completion, and they meet the turnover thresholds. The entire transaction history within that period is then relevant for the turnover calculation, from the time of the last transaction.
Turnover can be calculated in accordance with Section 270(1) of the German Commercial Code (Handelsgesetzbuch) or based on internationally recognised accounting standards such as IFRS. Thresholds are related to turnovers and thus are not asset-based.
Special Turnover Calculation Rules
Special turnover calculation rules apply to:
For the assessment of the turnover thresholds, the group turnover of the participating undertakings in the last financial business year must be considered.
Acquirer and Target
Participating undertakings are usually the acquirer (including its parent companies and its subsidiaries) and the target (either the legal entity and its subsidiaries or the business/assets to be acquired). Thus, on the acquirer’s side, all undertakings controlling the acquirer and all undertakings controlled by the acquirer form a group and have to be considered for the calculation of turnover.
On the target’s side, only turnover achieved by the entities controlled by the target and the target’s turnover are taken into account.
If parts of one or more undertakings are acquired, only the turnover relating to those parts is considered when calculating the turnover on the seller’s side. This does not, however, apply if the seller keeps control of 25% or more of the shares.
Joint Venture Company
In the case of a joint venture company, the turnover of all "parent" companies that, following the concentration, will either jointly control the joint venture or have a shareholding of at least 25% is relevant with a view to the turnover thresholds.
The turnover of the seller is generally not taken into account. However, this does not apply if the seller keeps control of 25% or more of the shares in the target. In these cases, the seller is a participating undertaking within the meaning of German merger control. This is, in particular, relevant for the setting up of a joint venture with no previous business activities.
Scope of Turnover Information
Turnover information has to be provided for the last business year. However, with respect to subsequent acquisitions and divestments, the date of the notification is relevant for the basis of consolidation. All acquisitions, divestments or business closures that were implemented until the date of notification of the intended transaction have to be considered. When calculating the relevant turnover, it has to be determined what the turnover of the group (as it stands at the notification date) would have been in the last completed business year.
Generally, German merger control rules also apply to mergers taking place outside Germany, as long as the relevant turnover thresholds are met and the proposed merger has a domestic effect.
The FCO’s Guidance on domestic effects in merger control (2014) is dealing with domestic effects of foreign-to-foreign mergers and joint ventures. According to these guidelines a transaction has domestic effects if it is likely to influence competition on the German market directly (appreciable effect). Different factors are taken into account; eg, the involved parties’ business activities in Germany or parties’ domestic subsidiaries/branches.
However, it is not explicitly required that the target company has a presence or assets in Germany for establishing these effects.
There are no market share thresholds under German merger control law.
The following joint ventures are subject to merger control legislation:
In Germany, joint ventures generally have to be notified if two or more acquirers gain joint control, or if each of them acquires at least 25% of the shares, or if they acquire a competitively significant influence on the target. Contrary to the EU merger control regime, this also includes non-full-function joint ventures.
If a participating undertaking is jointly controlled by several undertakings, the full turnover of all parent companies is considered when the turnover thresholds are calculated. Likewise, in cases where a parent company is a participating undertaking in a transaction, the full turnover of the joint venture has to be considered for the turnover calculation, not only in the amount of the interest held.
If a transaction does not meet the jurisdictional thresholds, the FCO does not have any competence to make further investigations.
The participating undertakings are prohibited from implementing the transaction prior to clearance.
If the participating undertakings infringe this suspension obligation, they are subject to fines of up to 10% of the undertaking’s total group turnover in the preceding business year. Individuals (eg, board members) who violate the suspension obligation are subject to fines of up to EUR1 million.
In the past, the FCO has issued fines in several cases where a concentration has been implemented prior to clearance and is certainly willing to continue this practice. The highest fines imposed on an undertaking at the time of writing amounted to EUR4.5 million in 2008 and EUR4.1 million in 2009 (which in the latter case, however, was revoked). The average fine for undertakings ranges between EUR200,000 and EUR400,000. In most cases, the FCO issues a press release indicating the penalty for gun jumping and the undertakings concerned.
Based on publicly available information, the FCO has already imposed a fine of EUR40,000 on a board member for breaching the suspension obligation (however, this was later revoked by the courts). In practice, individual fines for gun jumping seem to be rare.
Legal acts (eg, the transfer of shares) that infringe the suspension obligation are void. However, legal invalidity resulting from gun jumping may be remedied. Remedying such actions requires notification of the implementation of the transaction to the FCO. The FCO then opens demerger proceedings, in the course of which it applies the same substantive test as in a standard merger control review. Demerger proceedings are not subject to any deadlines.
Should the FCO be satisfied that the transaction does not meet the requirements for a prohibition (as it is or after removal of the relevant competition concerns through obligations and conditions) or if the Federal Minister of Economics and Energy grants permission to implement the transaction (as discussed below), the FCO will close the demerger proceedings. This has an effect tantamount to a clearance decision, so the legal acts carried out in relation to the transaction will retroactively become valid. Otherwise, if the FCO does not approve the transaction, it may dissolve it.
Furthermore, under the ARC, the invalidity of specific transactions caused by gun jumping may be cured by way of registration. This applies to real estate agreements once they have become legally valid by entry into the land register; to certain agreements on the conversion, integration or formation of an undertaking; and to enterprise agreements once they have become legally valid by entry into the appropriate register.
The suspension obligation does not apply to public takeover bids or to the acquisition of shares in a series of transactions via stock exchanges as long as those concentrations have been notified to the FCO and the acquirer does not exercise the voting rights related to the shares, or exercises them only to maintain the full value of its investment on the basis of an exemption granted by the FCO.
The FCO may, upon application, grant derogations from the suspension obligation if the parties can justify such exemptions; however, in practice, derogations are rarely granted. In clear-cut Phase I cases, it is normally faster to obtain a clearance decision than derogation from the suspension obligation.
Apart from exceptions in relation to public takeovers or a specific authorisation by the FCO, parties are prohibited from closing the transaction before clearance, which usually includes carve-out solutions. Only in very exceptional circumstances may such scenarios be conceivable, and only then if separation and completion will, beyond any doubt, have no impact on the German market.
In any case, all carve-out solutions should be carefully prepared, analysed and discussed, together with the FCO, prior to implementation.
There is no formal deadline for filing a notification.
A binding agreement is not a prerequisite for filing. Parties only have to demonstrate a good faith intention to implement the transaction.
The FCO charges an administrative fee on the basis of a general fee regulation act. The FCO has discretion in determining the amount and various criteria are considered in this regard.
The main factors that are considered are:
The maximum statutory amount is EUR50,000, or, in exceptionally complex cases, EUR100,000. In practice, fees usually vary between EUR5,000 and EUR15,000 (simple Phase I clearances), EUR10,000 and EUR25,000 (complex Phase I cases) or EUR20,000-plus (Phase II investigations).
Usually, the administrative fee is payable within one month following clearance of the transaction.
In theory, the acquirer and the target are obliged to notify in the event of an acquisition. If shares or assets are being acquired, the seller is also subject to a notification obligation.
In practice, however, the FCO is usually satisfied if one of the parties (normally the acquirer) submits a notification (ideally but not necessarily in co-ordination with the other parties that are obliged to notify). The other parties may also "join" the acquirer’s notification by submitting a one-line letter.
It is also possible (but not common) to notify jointly.
The FCO publishes as guidance a filing form on its website; however, this form is not mandatory and is rarely used in practice. Notifications are usually filed in the form of a letter to the FCO. The following information is mandatory for a complete filing, which triggers the deadlines.
Submitting a Filing
The filing has to be submitted in German. Parties are not obliged to submit further documents; eg, sale and purchase agreements. However, the FCO may ask for underlying agreements; in particular, in joint venture transactions.
It may also ask for other documents, such as market reports or case studies. Any accompanying documents, such as annual reports (which are usually enclosed), may be submitted in English.
The FCO’s review period to clear or prohibit the transaction does not start to run. The FCO can also issue a fine of up to 1% of the undertaking’s total turnover for incomplete filings. In January 2013, the FCO imposed a personal fine of EUR90,000 on the principal shareholder of a German meat manufacturer for submitting incomplete information in the merger control proceedings regarding a planned acquisition of an abattoir.
The review process may take longer than one month if the FCO declares the filing incomplete (in which case the one-month period only starts from the submission of the missing information).
The FCO can impose fines for (negligently or deliberately) providing incorrect information in merger control filings. Fines can reach up to 1% of the undertaking’s total turnover.
In October 2015, the FCO initiated divesture proceedings against Andechser and Söbbeke, which had submitted incorrect information in merger control proceedings, and finally also imposed a fine of EUR90,000 on the parent company Bongrain Europe SAS (now Savencia SA) in 2016.
The German merger control regime provides for a two-stage review process, with an annual average of more than 95% of cases receiving clearance after the first stage (Phase I). Very few cases are analysed in in-depth proceedings during the second stage (Hauptprüfverfahren – Phase II), discussed further below.
A Phase I review formally takes one calendar month following the filing of a complete notification. In practice, clearance may be granted earlier (eg, two/three weeks following submission of the notification), but this essentially depends on the case handler (workload, availability, etc).
In Phase I, the FCO will focus particularly on testing the market definition and market share information submitted by the parties using existing information on the relevant industry sector or by contacting market players and other stakeholders, such as trade associations.
Should the FCO not be satisfied, during the Phase I period, that the proposed transaction does not significantly impede effective competition, it may enter into in-depth investigations. The parties are informed accordingly, usually by a formal letter.
A review resulting in a Phase II investigation may take up to five months following the filing of a complete notification (up to six months if the parties submit a first proposal for conditions and obligations). The review process may also be extended subject to the parties’ consent and it is not uncommon for the FCO to express that it would strongly prefer an extension.
There is no formal pre-notification process and informal pre-filing contact with the FCO is still not that typical. They are, however, commonly seen in very complex cases or cases where confidentiality is a crucial issue.
For informal pre-filing contact, the FCO usually wants to receive at least the minimum information concerning the parties, the transaction and the market before entering into pre-notification discussions.
It is not uncommon that the FCO asks for additional information after receiving the filing documents. Detailed questionnaires can be burdensome and providing answers may be subject to tight deadlines.
The timetable would only "(re)start" if the parties had filed an incomplete notification and subsequently submit the additional information. Further, the five-month examination period is put on hold if the undertakings concerned do not provide the information requested by the FCO completely or in due time.
There is no formal fast-track review process.
The FCO prohibits concentrations that would lead to a significant impediment to effective competition (the "SIEC test"). As with European merger control law, the main example of the SIEC test is the creation or strengthening of a dominant position. The test allows, among others, the prohibition of anti-competitive concentrations in oligopolistic markets, even if undertakings are not or will not become dominant.
The FCO determines post-merger effects on the basis of a forecast detailing how the relevant market will develop within an average period of three to five years. This period may be shorter or, in exceptional cases, longer, depending on the specific characteristic of the market structure. Such post-merger effects have to be likely to occur.
In cases where the post-merger effects result in a significant impediment to effective competition, the FCO has to demonstrate that they are caused by the transaction. By contrast, the parties have to show that the transaction has pro-competitive effects that outweigh the relevant anti-competitive effects.
Market dominance continues to play an important part in the analysis of a transaction. The ARC provides for presumptions of market dominance. A company is presumed to be dominant if it has a market share of at least 40%.
A group of undertakings is presumed to be dominant if it consists of three undertakings or fewer that account for a combined market share of 50%, or if it consists of five undertakings or fewer that account for a combined market share of 66%.
Presumptions can also be rebutted. To do so, the parties have to show either that competition conditions allow for the assumption of continuous substantial competition between the respective undertakings or that the (group of) undertaking(s) has no paramount market position over the remaining competitors.
Presumptions do not keep the FCO from assuming a dominant market position in cases where market shares are lower than those discussed. In March 2012, the FCO published on its website extensive guidance on substantive merger control and the test of market dominance that details its approach and shows a sharper focus on economic findings and concepts in the decision-making process in line with the criteria of the SIEC test.
Special rules apply to concentrations in so-called de minimis markets. These are markets where goods or commercial services have been offered for at least five years and where sales of less than EUR20 million were generated in Germany in the last calendar year, unless the market is characterised by the offer of products or services free of charge. This assessment is carried out on a combined-market basis. While these concentrations have to be notified, the FCO cannot prohibit the transaction on the basis of a significant impediment to effective competition in such markets. The de minimis rule does not apply to notifications filed on the basis of the size-of-transaction threshold.
The FCO is an independent body performing its own assessment of the case. However, in practice, it also includes the decisional practice of the Commission and Courts in its assessment.
The FCO broadly distinguishes between horizontal mergers, vertical mergers and conglomerate mergers. Generally, it will investigate in each case the creation or strengthening of single or collective dominance (or, on the demand side, of buyer power in cases of horizontal mergers) and consider both co-ordinated and non-coordinated effects.
In the case of horizontal mergers, in order to establish single dominance, the FCO investigates which factors determine the parties’ market positions in the relevant market and whether, or how, these positions change as a result of the transaction. In addition to market share and concentration levels in the relevant market, various market and company-related factors may be relevant for the assessment: capacities and capacity constraints, customer preferences and switching costs, IP rights and know-how, market phase, access to suppliers and customers, corporate and personal links with other companies, financial resources, barriers to entry and countervailing buyer power.
In cases of collective dominance, the FCO analyses whether the transaction enables the parties to co-ordinate their behaviour in the market or if the transaction facilitates existing co-ordination or makes it more stable.
In the opinion of the FCO, vertical mergers are considered to have more indirect competitive effects. Still, the FCO also increasingly assesses these mergers in detail.
The FCO assesses in detail any foreclosure effects (input and customer foreclosure) on upstream and/or downstream markets taking into account pre-existing links between the merging companies, alternative supply sources for competitors and the degree of vertical integration of other market players, etc. However, such effects may create competition concerns only if the parties additionally have the ability and the incentive to foreclose.
A further concern may be that the vertically integrated company might gain access to the competitively sensitive information of its competitors.
In the case of collective dominance, the FCO assesses whether the vertical merger enhances co-ordination between the dominant companies.
Conglomerate mergers are generally less likely to raise competition concerns than horizontal mergers because they do not entail the loss of direct competition between the merging firms. However, competition concerns may arise if the parties are active in economically related markets; ie, their products are complementary or close to substitution. Typically, this requires that at least one of the parties already has a sufficiently strong market position in one of the relevant markets.
As with vertical mergers, in the case of collective dominance, the FCO will assess whether the conglomerate merger facilitates co-ordination between the dominant companies.
The FCO will consider the countervailing benefits of a transaction. A concentration that would significantly impede effective competition may not be prohibited if the parties prove that the concentration will also have pro-competitive effects that outweigh the significant impediment to effective competition.
The FCO does not consider factors other than competition issues in its decisions.
The situation is different with regards to the procedure for obtaining an authorisation from the Federal Minister of Economics and Energy (Ministererlaubnis). The Minister can overrule the FCO on the basis of social or political considerations (if the concentration’s benefits for the economy as a whole outweigh the disadvantages for competition); however, this is rare in practice. Public interest factors that have been accepted in the past are, eg safeguarding technical know-how of companies being in financial or industrial difficulties, the potential for reductions of subsidies, the long-term security of energy supply, research in the health sector, the protection of employees through collective agreements and operational co-determination and, most recently, to know-how and potential for innovation for energy turnaround and sustainability.
Germany has a separate foreign direct investment control regime consisting of a mandatory sector investment review, a mandatory cross-sector notification review and a voluntary investment review. Filings to the Federal Ministry for Economic Affairs and Climate Change have to be made in separate proceedings (see 1.2 Legislation Relating to Particular Sectors). Over the past four years the German legislator has substantially strengthened and extended the rules in Germany. More than ever, it is imperative for dealmakers to consider foreign investment issues upfront in order to mitigate potential risks and/or delays.
In principle, joint ventures may be subject to a twofold assessment, both under the merger control provisions and the antitrust rules. Under the merger control regime, the SIEC test also applies to joint ventures.
The antitrust rules will additionally come into play in the case of co-operative effects, which particularly applies if the parent companies remain active in the joint venture’s fields of activity, or if they are competing in upstream or downstream markets. Only the extent to which the concentration, as such, creates anti-competitive concerns has to be assessed exclusively within the merger control process, which takes priority over the antitrust rules.
Contrary to the EU merger control regime, merger clearance does not automatically entail an exemption for ancillary restraints. Moreover, the deadlines that are applicable with regard to the merger control procedure do not apply to proceedings relating to Section 1 of the ARC/Article 101 of the Treaty on the Functioning of the European Union (TFEU). Therefore, the FCO usually gives priority to the merger control review of the joint venture. In addition, it aims to analyse the joint venture under the antitrust rules and to form at least an opinion on potential infringements and possible exemptions in the course of the merger control proceedings. However, it is also not unusual for the FCO to postpone this assessment until a later stage, usually after the merger control process.
Should the FCO conclude that co-operation in the joint venture violates Section 1 or the ARC/Article 101 of the TFEU and that the conditions for an exemption are not fulfilled, the FCO may issue a prohibition decision, pursuant to Section 32 of the ARC. This is possible even after merger control clearance. Divergent decisions with regard to merger control and antitrust proceedings have, in fact, already occurred in practice.
Following the introduction of the SIEC test, there have been discussions about whether such a twofold assessment is still possible. Clearance of a joint venture would imply that it does not significantly impede effective competition. Accordingly, it would be difficult to argue later, under Section 1 of the ARC/Article 101 TFEU, that the joint venture impedes competition and therefore should be dissolved.
The FCO does have the power to prohibit or interfere with a transaction. It may do so in the course of the regular merger control process or in the course of demerger proceedings after the completion of the transaction.
The FCO is legally obliged to consider whether an authorisation with remedies would alleviate the competition concerns. However, this does not create an obligation to accept any offer of remedies. The FCO only has to accept remedies that will remove the significant impediment to effective competition.
In turn, the FCO must not impose remedies that the parties have not offered. It may propose remedies that it considers suitable, but it is not obliged to do so – it is ultimately up to the parties to develop and offer remedies.
There is no binding legal standard for remedies. However, the FCO published a Guidance on Remedies in Merger Control in May 2017 that describes the most important types of remedies and explains the requirements that they must fulfil.
Standard remedies are the divesture of part(s) of the undertakings’ business or the granting of licences to third parties. However, the removal of structural or contractual links with competitors ma be appropriate in certain situations, eg, in oligopolistic markets. In the past, the FCO has, among others, allowed the decommissioning of production plants as a suitable (behavioural) remedy, but has not accepted remedy proposals aiming at organisational obligations or investment controls.
Further, it has already imposed a prohibition to co-operate in the area of purchasing on parents that were parties to a joint venture transaction as part of a remedy package. Behavioural remedies, such as granting licences for important technologies or granting customers special termination rights for long-term contracts of the parties may also be appropriate. The mere closure of capacities or the use of "Chinese walls" within merged entities, however, is not generally considered an effective behavioural remedy.
Commitments in general can be submitted at any stage of the procedure, during or even before the first phase of merger control. In order to achieve a successful solution, it is highly recommended to co-operate with the FCO fully and at an early stage.
Remedy negotiations usually start as a result of competition concerns that are expressed by the FCO, informally or formally. Procedurally, before prohibiting a transaction, the FCO informs the notifying parties of its competitive concerns and related objections to the transaction. It does this by sending a so-called statement of objections, usually in the form of a draft prohibition decision. The statement of objections may be issued at any time during Phase II.
If remedy discussions start early and are successful, the statement of objections may never be formally issued. However, typically the FCO will send it out towards the end of Phase II. The parties can respond to the statement of objections. In order to prepare this response, they can have access to the FCO file.
Since the FCO is under a legal obligation to consider whether an authorisation with remedies (conditions and obligations) would alleviate the competition concerns, the statement of objections will also deal with possible remedies – even if the parties have not submitted a related proposal. However, as discussed above, the FCO cannot impose specific remedies on its own. It can only issue a clearance decision subject to conditions and obligations that have been offered by the parties.
If the parties agree with the FCO on suitable remedies, the FCO will lay down the conditions and obligations in its final clearance decision, which will also be published in a non-confidential version.
In the case of a divestiture remedy, the parties must generally provide evidence that the divestiture has been completed. It can, however, be sufficient for companies to take all necessary steps to initiate the transfer of ownership at a time when only the entry into the commercial register remains to be submitted, provided that an application for the entry has been lodged with the register.
In appropriate cases, it may be sufficient for the fulfilment of the remedy to provide evidence that all contracts necessary for the divestment have been concluded in a legally binding way. In cases where this appears to be a suitable approach, this will normally be explicitly mentioned in the text of the remedy decision. Any merger control proceedings that may be required with regard to the acquisition of the divestment business by the buyer have to be concluded within the time limit for the implementation of the divestment.
In so far as the remedies include other commitments in the form of a condition precedent, the parties have to prove that they have been implemented as well before they are allowed to complete the transaction.
If the divestitures commitment is a condition precedent (which is the common form) for the clearance decision, a period of six months should be sufficient to meet the requirements. The divestiture period should be as short as possible. However, this will vary from case to case and will usually be set in the text of the remedy decision. An extension of the time limits provided by the remedies is only possible in exceptional cases.
In Phase I cases the FCO informs the parties by informal letter that the transaction does not fulfil the criteria for prohibition and therefore can be implemented. It does not issue a formal decision.
If the FCO does not inform the parties, within the one-month period of Phase I, that it has authorised the transaction or entered into Phase II proceedings, the transaction is deemed to have been cleared.
In Phase II proceedings, the FCO issues a formal decision prohibiting or authorising the transaction (unconditional or subject to conditions and obligations). If the FCO does not issue a decision within the relevant deadline, the transaction is deemed to have been cleared.
The FCO publishes on its website that a concentration has been cleared or prohibited. Clearance/prohibition decisions may only be published in Phase II proceedings. The parties will be asked to review the decision and to mark any business secrets. The FCO usually accepts that turnover and market information is confidential. Market share information, however, may be replaced by ranges.
Since 2009, the FCO has also published short summaries (Fallberichte) of important Phase I and Phase II cases on its website.
There is no recent case law on the imposition of remedies or prohibitions of concentrations in foreign-to-foreign transactions.
A clearance decision does not automatically entail an exemption for ancillary restraints. There is also no separate notification procedure for ancillary restraints. The parties themselves have to assess any competition concerns in horizontal or vertical agreements.
As is the case with joint ventures, the FCO may analyse ancillary restraints at a later stage, independent of the merger control process. In practice, separate assessments during the merger control process appear to be more common.
Generally, the FCO applies more or less the same principles that apply under EU competition law, namely that ancillary restraints should be permitted if they are necessary and indispensable to the successful implementation of the transaction.
Third parties may apply to be admitted as interveners in the merger control proceedings at any stage of the process. They have to demonstrate that their economic interests will be substantially affected (directly or indirectly) by the decision. However, an application does not automatically result in an admission. The FCO has considerable discretion in this regard.
Although there are no legal provisions related to this issue, competitors, suppliers and customers will usually be deemed to have an economic interest. Associations and trade unions will have to prove that their own interests, or at least the interests of their members, will be affected by the decision.
Third parties that have been admitted as interveners have the right to be heard and to access the file. In practice, this applies mainly to Phase II investigations. However, prior to granting access to the file, any business secrets will be removed.
The FCO usually contacts third parties and competitors during its review process to "market test" the transaction as well as the remedies. In most of the cases the FCO sends out questionnaires.
The fact that a notification has been submitted is published on the FCO’s website. In general, this happens a few days after the filing. Only in very rare cases has the FCO been willing to postpone the publication and only then under very special circumstances.
Besides file number and responsible decision division, the FCO publishes the names of the parties, the date of the filing and the relevant industry sector. The fact of an initiation of Phase II proceedings is published as well. At the end of the proceedings, the FCO will also publish the result of its analysis; ie, clearance (unconditional or subject to conditions and obligations) or prohibition.
Generally, the FCO is obliged to ensure that confidential commercial information, including business secrets, that is obtained during the merger control process remains so. Interveners may have limited access to the file, but not to the business secrets of the parties. Phase II decisions are published in a non-confidential version that has been agreed with the parties.
The FCO is, among others, part of the International Competition Network (currently chaired by FCO president Andreas Mundt), the European Competition Network (ECN) and of the network of the European Competition Authorities (ECA). The ECA is a forum for discussion of all competition law-related matters between the NCAs within the EEA as well as the Commission and the European Free Trade Association (EFTA) supervisory authority. This discussion includes the exchange of information on all merger cases that are notifiable in more than one ECA country (multiple filings).
Phase II Appeals
The parties may file an appeal against Phase II decisions of the FCO to the Higher Regional Court of Düsseldorf within one month following the service of the decision. The appeal can be made on both legal and factual grounds, including new facts and evidence. The period of the appeal proceedings may vary significantly depending on the case, but an average duration of one to three years should be expected.
The decision of the Higher Regional Court may be appealed to the Federal Supreme Court within one month following the service of that decision. This appeal can only be made on legal grounds and the Higher Regional Court has to have permitted such appeal. The decision not to permit a legal appeal may be appealed to the Federal Supreme Court as well.
The proceedings of the Federal Supreme Court may vary in terms of duration, but again it might take one to three years before a final decision is reached.
In the event of mergers between statutory health insurers, the same rules for an appeal apply, with the exception that the Social Courts have competence.
Applications to the Federal Minster for Economic Affairs and Climate Action
In the event that the FCO prohibits a concentration or orders the unwinding of a non-notified concentration, the parties may also apply to the Federal Minister for Economic Affairs and Climate Action to request permission to implement the transaction. The deadline for such application is one month following the service of the decision of the FCO. The regular review period for the Federal Minister amounts to four months.
If they go beyond the regular four-month period for authorising a concentration that had been prohibited by the Federal Cartel Office, they have to decide on the submission within six months. Additionally, another prolongation of the six-month period for a further two months is possible.
While under previous rules third parties were admitted to appeal proceedings if their interests were substantially affected by the decision, they now have to claim the violation of individual rights.
The ministerial decision may also be fully appealed to the Higher Regional Court of Düsseldorf.
The proceedings for an application for ministerial permission do not preclude the appeal against the original decision of the FCO, the deadline for which starts to run only after service of the ministerial decision.
Regarding the typical timeline for an appeal, see the explanations above. Although it is not uncommon to challenge a FCO prohibition decision, in practice, successful appeals are rather rare. One example is the Phonak (now Sonova)/GN Resound transaction that was prohibited by the FCO in 2007. The Düsseldorf Higher Regional Court confirmed the FCO prohibition, however, was finally overruled by the Federal Supreme Court.
As an example of an unsuccessful case, in the EDEKA/Tengelmann case, EDEKA and Tengelmann appealed in parallel the FCO’s decision (that only comprises of judicial aspects) and applied for a Ministererlaubnis. The Düsseldorf Higher Regional Court rejected the appeal and confirmed the FCO’s prohibition of the merger (which did not have a practical effect because of the Ministererlaubnis).
The right of appeal is also granted to third parties if the FCO decision directly and individually affects their competition interests. A further prerequisite is that such third parties must have been party to the FCO proceedings. This requires that they have at least applied to the FCO to be admitted as interveners and complied with all procedural requirements in this regard.
The latest German Competition Law Reform (GWB-Digitalisierungsgesetz) came into force on 19 January 2021. The amendments re-focused German merger control rules in light of the very high number of unproblematic notifications, the increasing number of filings submitted to the FCO, as well as the many competitively relevant transactions that are not within the scope of merger control in Germany.
The second domestic turnover threshold was increased from EUR5 million to EUR17.5 million and the de minimis threshold was increased from EUR15 million to EUR20 million. The reform introduced a new filing obligation based on a prior FCO decision and subject to specific requirements. The maximum duration of the Phase II review period was extended from four to five months (six months in case of remedies). Any additional extensions of the review period, by consent of the parties, were limited to one month only.
The standard post-completion notice to the FCO following clearance of a transaction was abolished. Further, companies are now able to calculate their turnover based on internationally recognised accounting standards such as IFRS. In addition, submitting filings electronically has been simplified.
Based on the most recent available figures, the FCO examined about 1,000 transactions in 2021. Of these, 14 notifications were assessed in Phase II proceedings. Three cases were unconditionally cleared, two cases were cleared subject to conditions and obligation and two transactions were prohibited (Funke Mediengruppe/Ostthüringer Zeitung and ACO Severin/BIRCO). In six other cases, notifications were withdrawn. One case is currently still ongoing following an extension of the review deadline.
In general, competition authorities face new challenges in digital markets, such as internet platforms and online sales, as well as the commercial usage and valuation of personal data. Following an overhaul of the German provisions on abuse control last year, the focus is now back on merger control and structural intervention in markets with a high degree of consolidation. FCO president Andreas Mundt recently stated that it is extremely difficult and lengthy to "fix" markets via abuse control. He therefore invites competition authorities to assess whether the current merger control tools are still appropriate to prevent the creation or strengthening of dominant positions on digital markets and how they could be improved.
Referring to the recent Meta/Kustomer transaction, the FCO president said that the introduction of the size-of-transaction threshold is helpful to pick up relevant cases in digital markets, but the tools to intervene are lacking. The FCO had asked Meta/Kustomer in December 2021 to file the transaction (in parallel to EU proceedings); however, it could not establish evidence to prohibit the case. In June, the Federal Ministry of Economics and Climate Protection published a paper on key issues of the upcoming German Competition Law Reform. The paper discusses the possibility of breaking up companies in oligopolistic markets as ultima ratio instrument, the revision of the rules on benefit skimming following antitrust infringements and stronger FCO powers in the area of sector inquiries. The Ministry will start working on a first draft this year.
Merger Control Following the Increase of Turnover Thresholds
In January 2021, the long-awaited tenth amendment to the Act Against Restraints of Competition (ARC) entered into force. While it mainly focuses on the digital economy, earning it the byname “ARC Digitisation Act”, there were some significant changes regarding merger control. Arguably, the most important change concerned the turnover thresholds. Both domestic turnover thresholds were significantly increased. One company must now generate more than EUR50 million (instead of the previous EUR25 million threshold) in Germany, whereas another relevant company must generate more than EUR17.5 million (instead of the previous EUR5 million threshold).
One of the main objectives of the increase to the turnover thresholds is to relieve the regulatory burden on small and medium-sized enterprises as well as on the Federal Cartel Office (FCO). It was expected that the increased thresholds will reduce the number of annual notifications by 30-40%. The FCO expressly welcomed these changes, as more resources can now be dedicated to potentially critical cases. Yet, the decrease of notifications was not as substantial as expected. In 2020, the FCO received 1,200 notifications, whereas in 2021 there were 1,000, a 16% decrease as opposed to the expected decrease of around 30-40%. In 2021, only 14 notifications were subject to in-depth Phase II review proceedings. Within these, three were cleared without obligations and one with obligations, whereas five of the notifications were withdrawn by the parties. The FCO prohibited one merger. The remaining four cases were still ongoing in 2021.
The tenth amendment also introduced a new mechanism, which enables the FCO to require companies to notify transactions involving smaller target companies under certain conditions. Most importantly, there must have been a prior sector inquiry in the relevant economic sector. Furthermore, the acquirer must achieve a worldwide turnover of more than EUR500 million and have market shares of at least 15% within the sectors concerned, and the target company must achieve turnover of more than EUR2 million in Germany. Moreover, there must be indications that future mergers could impede effective competition within the economic sectors concerned. The regulation is primarily aimed at step-by-step acquisitions that lead to widespread market concentration and which were exempt from merger control in the past. The legislator expects that this regulation will be applied to between one and three companies per year. In early 2022, the FCO made use of this tool for the first time and started a sector inquiry in the household waste industry, as explained in detail below.
Further changes in relation to merger control include:
Merger control remains to be the most powerful tool of the FCO. The president of the FCO, Mr Mundt, regularly makes clear that the FCO will continue using the merger control tool consistently, especially in the digital economy.
Catching “killer acquisitions”
In innovative sectors, certain companies with a strong market position are suspected of systematically removing emerging competitors from the market through targeted acquisitions, commonly referred to as “killer acquisitions”. This practice has sparked public debate and raised the question as to the effectiveness of merger control regimes in innovative sectors.
German merger control law (so far) provides two tools to capture potential killer acquisitions. In addition to the FCO’s new powers to oblige certain companies to notify any merger (see above), a further means of capturing such acquisitions under German merger control was introduced in 2017. At that time, the merger control thresholds were revised to include a threshold that is based on the transaction value (EUR400 million). The reason for this was, inter alia, the “Facebook/WhatsApp” merger, which did not fall under German merger control despite a significant purchase price and significant competitive concerns.
In this context, a recently published joint statement by Germany, France and the Netherlands, in which the three countries suggest supplements to the EU’s proposed Digital Markets Act, is worth mentioning. The three member states stress the importance to strengthen and speed up merger control in particular vis-à-vis certain gatekeeper platforms. They call for setting value-based thresholds on EU level and for adapting the substantive test to effectively address cases of potentially predatory acquisitions.
The same rationale of capturing transactions that do not meet turnover thresholds has led to the European Commission changing its practice regarding case referrals from member states under Article 22 of the EU Merger Regulation. In certain cases, the national competition authorities are encouraged to refer cases to the European Commission even if the transaction is not notifiable in that member state. It remains to be seen whether the FCO will actually make use of this highly controversial new referral option or whether it finds the national tools sufficient.
According to the coalition agreement, the current government in Germany plans to adopt stricter rules for killer acquisitions, which may include reforming the ministerial veto power.
Call for further reform: stringent merger control indispensable in digital economy
The FCO continues to focus its work on the digital economy, and in this regard, it plays a pioneering role. In April 2021, the FCO released a joint statement on merger control enforcement together with the UK Competition and Markets Authority (CMA) and the Australian Competition and Consumer Commission (ACCC). Together with its counterpart authorities, the FCO emphasises that consistent merger enforcement is key to preserving competition and diversity. In light of the particularly strong market concentration in the digital economy, “stringent merger control is indispensable”.
Following the recent changes in the ARC, the FCO has additional tools to avoid that important acquisitions cannot be reviewed by the FCO. However, the FCO must still meet the evidentiary thresholds to prove that a merger harms competition, which is not always easy. Mr Mundt called for a merger reform that would make substantive merger review less complex and easier to be “court-proof”. Indeed, very recently a court in Germany annulled a merger clearance with remedies (as explained below in detail), which seems to impose an even higher burden on the FCO. Mr Mundt’s plea towards lawmakers is also triggered by the recent greenlight decision given by the FCO to the Facebook /Kustomer deal despite having “serious doubts” about the transaction. According to Mr Mundt, the FCO lacked the tools to ban the transaction.
First application of new Section 39a ARC
As mentioned above, the FCO used Section 39a ARC for the first time in January 2022. The FCO has initiated another sector inquiry in the waste management sector following the results of a previous inquiry conducted in 2021. The FCO intends to examine in particular the specific market position of the Rethmann Group, which is a leader in this sector. The inquiry will determine whether the Rethmann Group can be obliged to notify future acquisitions of smaller companies. In Germany, the waste management sector is characterised by regional markets whereby the municipalities (as opposite market side) often do not have much choice. If smaller competitors were to be acquired one by one without any merger control, the larger competitor would be able to gain a dominant position and/or consolidate its market power without the FCO being able to intervene.
State-owned enterprises under close observation
In recent times, state-owned or subsidised companies, particularly from China, have increasingly come under the scrutiny of German regulators.
In April 2020, after an in-depth Phase II examination, the FCO cleared the takeover of a German manufacturer of shunting locomotives (Vossloh) by the Chinese state-owned company CRRC. In its decision, the FCO dealt in detail for the first time with the acquisition of a competitor by a state-owned company domiciled in a centrally planned economy. In the view of the FCO, in cases involving companies in which the People’s Republic of China directly or indirectly holds a majority stake, all state-owned enterprises are to be treated as a single economic unit for the purpose of merger control. This results in the requirement to provide information on all group companies in the merger notification.
In Vossloh/CRRC, the FCO encountered some challenges in the course of carrying out its investigations into the affiliated group of companies. As the notification is not complete without such information and only the receipt of a complete notification triggers the review deadlines, failure to provide this information may significantly delay closing of the transaction. However, it seems that the FCO is willing to take a pragmatic approach in cases where the parties are in a position to prove that the transaction will not lead to significant impediments of effective competition, eg, by demonstrating that there are no, or only insignificant, horizontal or vertical overlaps. In these cases, the FCO may clear the transaction although the notification is (formally) incomplete.
It is worth noting in this context, that such mergers may not only fall within the scope of merger control but may also be closely examined under Germany’s foreign direct investment (FDI) control regime. FDI control has become even more important in light of the increasing activity of third country investors, particularly (but not only) when state-owned or subsidised companies are involved. Notably, Germany’s FDI control regime has become significantly stricter in recent years.
Following three amendments in 2020, the most recent update came into force in May 2021. Transactions involving a foreign investor now require a mandatory FDI notification if “critical technologies” (such as satellite systems, artificial intelligence, robots, and autonomous driving/unmanned aircrafts) are affected and the relevant thresholds are met. This led to an increased workload of the Ministry for Economic Affairs and Climate Action as the FDI notifications almost tripled in 2021 due to the legislative changes. The ministry considered that the increased workload was well-absorbed as it cleared 87% of the 300 cases within two months. However, it needs to be taken into account that the review of more critical cases can take longer.
The complexity of some cases even led to a unique situation whereby the ministry was unable to complete its review before the relevant deadline under capital market law for the takeover bid. As the buyer, Taiwan’s GlobalWafers, was not successful with urgent proceedings before the Administrative Court of Berlin and a subsequent appeal before the Higher Administrative Court of Berlin-Brandenburg, their deal with Germany’s Siltronic failed after 14 months of proceedings. Before the courts, the Ministry successfully argued that they could not finish their review without analysing the merger control decision of China’s competition authority in detail and assess its potential effects on German security interests.
The national screening of state-owned investments will be supplemented on EU level: on 5 May 2021, the European Commission published a draft regulation to control foreign subsidies. The new rules would allow the Commission to investigate and remedy the potentially distortive effects of foreign subsidies in the EU internal market. On 4 May 2022, both the EU Member States and the European Parliament published their position as to the Commission’s regulation and endorsed the proposal with certain amendments. Now, the negotiations between these institutions will continue.
With regard to market definition, the FCO continues to leave open the question of whether brick-and-mortar and online retail belong to the same product market. In the Thalia/Mayersche Buch-handlung case, the FCO explicitly stated that, although there were some indications against full substitutability, there was strong competition between online and mail-order retailing and stationary book retailing due to substitution. In the Signa/SportScheck proceedings, the FCO also found significant competitive pressure from online retailers in the retail of sports and outdoor articles.
In 2020, after extensive market investigations, the FCO cleared the acquisition of the dating app Lovoo by the ProSiebenSat.1 group. The portfolio of ProSiebenSat.1 already included the dating platforms Parship and Elite Partner. Although the FCO found the parties to have market power in the dating app segment, a significant impairment of the market was not expected. This finding is supported by the fact that the online dating market is characterised by dynamic growth, market entries and competition. In particular, there would still be sufficient alternative platforms such as Tinder.
The FCO also considered the planned launch of Facebook Dating in Europe in its competitive assessment. Finally, the investigations in this case revealed that television advertising is diminishing and online advertising is growing significantly in importance, particularly when it comes to reaching younger target groups. Therefore, the strong position of the acquirer, ProSiebenSat.1, on the TV advertising market did not prevent the merger.
In April 2020, the FCO cleared PayPal’s acquisition of Honey. Honey operates a browser extension that finds and automatically applies promotional and discount codes in the process of online shopping. As Honey’s sales numbers in Germany were very low in the relevant fiscal year, it did not meet the second domestic threshold of (then) EUR5 million. Nonetheless, the merger had to be notified as the consideration provided by PayPal significantly exceeded the transaction value threshold of EUR400 million.
The fact that the target had not (yet) achieved noteworthy sales figures in Germany, did not reflect its significant economic and competitive potential. The FCO concluded that online-based business models such as those implemented by Honey are usually characterised by a high degree of scalability and can often be rolled out very quickly. Despite PayPal’s relatively strong market position for internet payment methods, the FCO did not expect any vertical or conglomerate effects. In this context, the FCO pointed out that various fast-growing payment providers have entered the market in the recent past, including Apple Pay and Google Pay.
Concentration in the hospital sector has been continuously growing in recent years despite the rather stringent approach of the FCO. Recently, there has been a relatively high number of prohibitions in this sector (or withdrawals to avoid a prohibition). However, in absolute terms, only very few hospital mergers were actually prohibited (7 out of 315 within the last 17 years). As a result of the lack of price competition due to regulation, the FCO strives to preserve competition between hospitals regarding the quality of services and ensure that patients in a particular region continue to have actual alternatives. In September 2021, the FCO published its final report on the sector inquiry into hospitals. It confirms the important and consistent role played by competition in ensuring the quality of healthcare for the population, especially at the local level.
Court Decisions Related to Merger Control
In Remondis/DSD, the Düsseldorf Higher Regional Court confirmed the prohibition of the foremost vertical merger in the waste management and recycling sector because of a horizontal overlap in one segment. In this area, market circumstances are currently fast-changing, which led the court to emphasise, in line with established case law, that when assessing the decision of the FCO, the factual and legal situation at the time of the oral appeal proceedings before the court is decisive. This is due to the character of the prohibition order as an administrative act with permanent effect. Changes in the legal and factual situation up to the conclusion of the oral proceeding must be taken into account. This may result in the FCO’s decision being overturned, even though it was correct at the time it was issued.
In Miba/Zollern, the Düsseldorf Higher Regional Court deemed the challenge of the FCO’s prohibition decision inadmissible. The reason for this was that the parties had previously been granted a ministerial approval – a special instrument allowing the Federal Minister of Economics to overrule the FCO’s decision for reasons of “public welfare”. While some wished for this rather political instrument to be abandoned or at least modified in the latest reform to the ACR, surprisingly, it was left untouched. The court found that once such approval has been granted, the parties lack legal interest in bringing proceedings against the FCO’s prohibition.
In EnBW/MVV the German Federal Court, for the first time, shed some light on the question of whether a target is entitled to appeal a clearance decision in the case of a “hostile takeover”. If a takeover is perceived as hostile, target companies typically defend themselves with all legal means. It now seems that merger control can also be brought into play.
The first instance court was of the opinion that only third parties outside the group of the parties to the concentration could be entitled to a substantive complaint. While it ultimately left this question open, the German Federal Court seemed to consider a different approach in a costs decision in this case (the parties have previously settled the case). The court pointed out that the target company may be adversely affected in its entrepreneurial and competitive activities by the clearance of a merger, for example if it is prevented from developing and implementing an independent competitive strategy as a result of a “hostile takeover”.
XXXLutz/ Tejo Möbel and Roller
In November 2020, the FCO approved the acquisition by XXXLutz Group of Tejo Möbel and Roller, subject to the divestment of 23 stores. The FCO’s decision was challenged by XXXLutz. The Court annulled the FCO’s decision and requires that the FCO adopts a higher threshold for finding SIEC without market dominance. In its decision, the court considered that the FCO should not have excluded Ikea from the category of “discount” furniture stores. The combined market shares of the merger parties, in addition to Ikea’s market share, may not have been high enough for the merger to threaten a significant impediment to effective competition.
Although the figures may suggest otherwise, the FCO continues to follow a stringent approach to merger control and is very diligent in its investigations. This is true for all sectors, but certainly when it comes to digital economy, hospital mergers and investments by foreign state-controlled investors. The recent legislative amendment means the FCO can now devote more resources to difficult cases. It will certainly continue to work on maintaining its reputation as a leading competition authority in the world.