March 25, 2009
As of today, March 25, 2009, an important amendment to the German merger control regime has entered into force. This amendment will significantly decrease the number of de minimis and extra-territorial mergers that will need to be notified to the German Federal Cartel Office ("FCO", the Bundeskartellamt) in the future.
There are now basically two categories of transactions that no longer require a merger filing: (i) large international mergers where one of the parties does not have a strong position in Germany (i.e., German turnover of less than EUR 5 million); and (ii) mergers with or between small and medium-size undertakings in Germany. Under both scenarios, the economic effects on competition in Germany are deemed to be rather low.
Background of the Second Filing Threshold
Previously, an obligation to notify mergers to the FCO was triggered where the combined worldwide turnover of the parties to the transaction exceeded an amount of EUR 500 million, and at least one of the parties achieved a domestic turnover in Germany exceeding EUR 25 million (only very limited de minimis exceptions existed to this rule).
Under the previous regime, mergers where only one party met the notification thresholds were reportable, regardless of the domestic turnover generated by the other party in Germany and whether the transaction had any material impact on competition in Germany. As an example, when a US company with worldwide sales of EUR 1 billion and sales in Germany of EUR 30 million acquired another US entity with worldwide sales of EUR 50 million, of which only EUR 500 thousand were generated in Germany, such a transaction was reportable to the FCO.
The amendment to Sec. 35 (1) no. 2 of the German Act on Restraints of Competition (the "GWB" in German) now requires that, in addition to the domestic turnover of at least EUR 25 million generated by one party, another party to the transaction will need to achieve revenues in Germany in excess of EUR 5 million. Consequently, the transaction in the example above will no longer require the FCO’s approval due to the low domestic turnover of the target. Similarly, another example of an exempted transaction would be where a purchaser without significant turnover in Germany prior to the transaction (i.e., less than EUR 5 million) buys a large German company that generates revenues in Germany well above EUR 25 million.
The amendment to the GWB is part of a larger package of 23 deregulatory measures across various business areas, and is intended to abolish bureaucratic hurdles that have no or only little benefit for the public, and instead are time- and money-consuming for the firms affected.
The amendment has been discussed for some time, and has been long overdue in its enactment. It corresponds with the international "recommended practices" of the International Competition Network (ICN) for merger control, and also with the recommendations of the OECD. It is therefore highly welcome insofar as it reduces the comparatively high number of merger filings that were previously filed in Germany.
Based on past statistics published by the FCO, we expect that more than 20% of the merger filings previously made will no longer be required. In fact, the FCO even estimates this share will amount to up to one third of all previously notifiable transactions. As the number of mergers per annum notified to the FCO was approximately 1.700 in number over the past ten years, the amendment will have a significant impact by reducing the number of notifiable mergers by 300-600 per year.
The second filing threshold will obviously result in additional capacity being freed up at the FCO, which will hopefully lead to even faster merger clearance proceedings for those straight-forward mergers that will still need to be notified in the future. On the other hand, the additional capacity released might well be used in other areas of the FCO’s work program and thus might result in intensified antitrust and hard core cartel investigations. It can be expected that the income (i.e., fines) derived from these additional investigations may easily act as a counterweight to the expected decrease in merger filing fees.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work or Michael Walther (+49 89 189 33-180, [email protected]) or Kai Gesing (+49 89 189 33-180, [email protected]) from our Munich office.
© 2009 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.