A comprehensive reform of German antitrust law will take effect in the coming weeks. The reform package passed by the German parliament last week includes significant changes to the merger control regime.
Dealmakers will have to take these changes seriously since the jurisdictional thresholds in Germany are—and will continue to be—low, and the German antitrust authority, the Bundeskartellamt, is a very active enforcer of the merger control regime.
One of the main objectives of the Eighth Amendment to the German Competition Act, the Gesetz gegen Wettbewerbsbeschränkungen (GWB), is to bring German merger control rules more in line with the rules provided for by the EU Merger Regulation. The most significant changes include:
-
Reportable mergers:
-
Abolition of the de minimis market exception. In the future, mergers affecting markets with total sales of less than €15 million (and in existence for at least five years) will be reportable.
-
Treatment of staggered transactions as a single concentration. Deals sliced into a series of smaller transactions that each remain below the turnover thresholds may have to be notified.
-
Significantly higher turnover thresholds for mergers in the publishing sector in order to allow for further consolidation.
-
Substantive appraisal:
-
Introduction of the EU's Significant Impediment of Effective Competition (SIEC) test. The current dominance test remains relevant as a statutory example of a "significant impediment to effective competition."
-
Introduction of higher thresholds for the statutory presumption of single-firm dominance (increase from 33 percent to 40 percent market share).
-
Procedure:
-
Changes to the statutory time limits (including the introduction of the EU's "stop the clock" possibility and automatic one-month extension upon the submission of a remedy proposal).
-
Introduction of the EU's "limited" suspension obligation for public bids (allowing the acquisition of a controlling stake but not exercising any voting rights, pending the Bundeskartellamt's review).
-
Amendment to the civil law consequences of violations of the suspension obligation (the statutory nullity of contracts bringing about the concentration is lifted automatically and retroactively as soon as the authority closes its divestiture proceeding).
-
Remedies:
-
Behavioral remedies may be accepted if they are equally as effective as divestitures (provided that "effective control" of the remedies in each specific case is possible).
Even prior to the introduction of the SIEC test, the Bundeskartellamt had started to move its substantive review under German merger control rules more in line with the European Commission's review under the EU Merger Regulation, as evidenced by the antitrust authority's "Guidance on Substantive Merger Control," which is largely inspired by the analytical framework used by the European Commission in its merger guidelines and decisions.
However, it remains to be seen to what extent the Bundeskartellamt, in its enforcement practice, will be willing and—given its limited resources—able to embrace the economic analysis underlying significant parts of the European Commission's analytical approach. Furthermore, even after the significant changes take effect, German merger control still will continue to differ from the EU's regime and from most other jurisdictions in mainstream Europe in some important respects, including:
-
Reportable mergers. Continued relevance of a different concentration test (whereby transactions below the control threshold can be caught, including acquisitions of a 25 percent stake and even smaller stakes if they result in a "competitively significant influence" over the target company).
-
Substantive appraisal. Continued relevance of market-share thresholds for statutory presumption of dominance (single-firm dominance: 40 percent; collective dominance: combined market share of 50 percent held by three or fewer players or combined market share of 66 percent held by five or fewer players).
-
Procedure. Continued procedural flexibility as far as the formal requirements for a filing and the deadlines for the review are concerned, and continued separate review of any risk that a notified joint venture may lead to anti-competitive coordination between the parent companies.
-
Remedies. Continued use of remedies only in Phase II, with a strong preference for upfront buyer solutions.
Due to these and other differences, it remains essential for dealmakers to pay close attention to German merger control rules, even in cases where links with Germany are not obvious. For a detailed discussion of the German merger control regime and its particularities as reflected in recent decisions by the antitrust authority, please see http://www.wsgr.com/publications/PDFSearch/merger-control-review-germany.pdf.
