The Higher Regional Court of Düsseldorf (OLG Düsseldorf) has resolved a case resulting from a conditional clearance decision of the German Federal Cartel Office ("BKartA"), in relation to the merger between Globus Fachmärkte GmbH & Co. KG ("Globus", a German DIY store chain) and Hela Profizentren ("Hela", a DIY store chain owned by the Distributa-Group). The merger was cleared in late 2007 by the BKartA with a conditional clearance, the clearance being subject to the resolutory condition that four DIY retail stores were sold within a period of ten months of the BKartA decision.
There are three ways in which the BKartA can impose structural remedies. The BKartA can impose:
- a requirement (Auflage) = here, clearance takes immediate effect. In case the requirement is not put into effect within the specified timeframe, the BKartA has to take action to reverse the clearance decision;
- a suspensory condition (aufschiebende Bedingung) = in this case, the clearance decision will only come into effect following the condition being implemented; and
- a resolutory condition (auflösende Bedingung) = here, the clearance decision is immediately effective. However, should the condition not be implemented within the set timeframe, the clearance decision issued with a resolutory condition automatically reverts to a prohibition decision. The BKartA does not have to take any further action but can initiate demerger proceedings immediately after the set time-period has elapsed.
Following the conditional clearance decision by the BKartA, imposing a resolutory condition, Globus immediately merged with the Hela DIY stores. However, following the end of the set ten month period, the four DIY stores which were subject to the resolutory condition imposed by the BKartA had not yet been sold. Consequently, the conditional clearance decision automatically became a prohibition decision and the BKartA started demerger proceedings against the Globus/Hela merger in 2008.
Globus then took action in two ways. Firstly, Globus went to the Higher Regional Court of Düsseldorf (OLG Düsseldorf) to object to the BKartA's conditional merger clearance decision; an application which was rejected by the court. Secondly, Globus applied to the Higher Regional Court of Düsseldorf (OLG Düsseldorf) to change the character of the remedy from a resolutory condition to a simple requirement of sale. Under a requirement, the onus is placed on the BKartA to actively revert the clearance decision into a prohibition of the merger. Globus argued against the effect of the conditional clearance decision, declaring the entire subject matter of the merger incompatible with competition law, purely by the clearance condition (which only related to four stores) not being adhered to within the timeframe.
Globus also argued that in this specific case, the set timeframe would have to be extended, as the purchase offers Globus had received for the four stores were financially unacceptable.
However, the court had little sympathy with Globus' line of argument. Firstly it held that in the case of a requirement as well as a resolutory condition, a situation is created where a merger is tolerated for a short period of time which leads to an unacceptable competitive situation on the market. This is only to be tolerated for the shortest possible time which is necessary for the condition or requirement to be fulfilled. Thereby no extension should be granted. Secondly, the court found that Globus itself had merged with Hela prior to ensuring that the conditions of the conditional clearance could be met without any financial implications. Ten months down the line and after having integrated its business with Hela, Globus only had itself to blame for any financial shortcomings which the merger, including its conditional divestment condition posed to it now. As a commercial undertaking Globus would have been free not to merge with Hela at any stage and that a conditional clearance decision would have to be adhered to within the time-frame set.
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