Answer ... Upon submission of a complete notification, the Federal Cartel Office (FCO) has one month (Phase 1) to decide whether to clear the transaction or to initiate an in-depth review (Phase 2). The vast majority of cases are cleared during Phase 1. In most cases the FCO clears the transaction before the end of the one-month period. If the FCO neither clears the transaction nor initiates Phase 2 within the one-month review period, the transaction is deemed to have been cleared by operation of law with the lapse of the one-month review period.
If the FCO intends to initiate Phase 2, it must inform the parties accordingly within the Phase 1 period. The FCO will initiate Phase 2 if it needs further time for its assessment. The initiation of Phase 2 extends the review period to four months in total (including Phase 1 and Phase 2). It can be initiated at any time during Phase 1. During Phase 2, the FCO can either clear or prohibit the transaction. If it does not take a decision, the transaction is deemed to be cleared with the lapse of the four-month review period.
The review period can be extended on agreement with the notifying party. It will be extended by one month if, for the first time, a notifying party offers a remedy (ie, commitments to remedy competition concerns) to the FCO.
Before issuing a prohibition decision, the FCO will send a statement of objections to the parties summarising its concerns and affording them the possibility to comment.
Answer ... There are no formal ways to accelerate the timetable for review. However, the FCO, within its sole discretion, often clears non-complex cases quickly, particularly if the parties can demonstrate a need for speedy review. The parties can accelerate the proceedings by providing additional information in the notification on relevant markets, competitive conditions and so on. In complex cases, informal pre-notification discussions with the FCO can be helpful – for instance, in order to clarify what information should be covered by the notification.
The four-month time limit can be suspended if a party has failed, for reasons for which it is responsible, to comply with a prior request for information in full or in a timely manner. The suspension ends as soon as the party has submitted all information requested to the FCO. The Phase 2 review period will be extended by one month if the notifying party offers remedies for the first time. Finally, the time limits do not apply if:
- the FCO has refrained from initiating Phase 2 or from prohibiting the transaction because of incorrect particulars or because information has not been provided in time; or
- a person authorised to accept service in Germany is no longer appointed as such.
Answer ... There is no simplified review process. However, the amount of information required to submit a complete notification in Germany (see question 3.5) is quite modest as compared to other jurisdictions.
Answer ... The FCO exchanges information within the European Competition Network and with certain other authorities. However, confidential information of the parties may be exchanged only if the parties have granted a waiver of confidentiality. Cooperation will typically take place if transactions raise similar substantive or jurisdictional issues in several jurisdictions. For instance, authorities may discuss conceptual frameworks, theories of harm or appropriate remedies.
Answer ... The FCO has the right to request all documents and information necessary for its competitive assessment of a transaction. Information can be requested informally or by way of a formal information request. Requests can be made not only to the undertakings concerned, but also to third parties (eg, customers, competitors and suppliers). If a formal information request is not complied with, fines of up to €100,000 can be imposed by the FCO. As explained in question 4.2, time limits may be suspended or may not apply if information is provided too late or in an incorrect manner.
Answer ... Third parties may formally participate in the proceedings as intervening parties upon application, provided that their commercial interests are materially affected by the transaction. In practice, this mainly applies to competitors, customers and suppliers. Intervening parties have the right to be heard, the right to access the non-confidential part of the file and the right to appeal the FCO’s decision (if adopted in Phase 2).
Answer ... A local carve-out may be possible in certain cases. Such a carve-out must ensure that closing has no effect on competition in Germany. It is highly advisable to assess the possibilities of a carve-out very carefully, as the FCO has demonstrated in the past that it will critically review such arrangements and may impose significant fines if considers that, despite the carve-out, competition in Germany is affected.
For instance, in 2008 the FCO imposed a fine of €4.5 million on Mars for acquiring shares in Nutro while clearance in Germany was pending. Although Mars had attempted to carve out Nutro’s German businesses by temporarily assigning the distribution rights for Germany to a separate entity held by the seller, the FCO concluded that Mars, by acquiring Nutro’s trademarks and production facilities, had already acquired the assets relevant to compete and that these assets were also essential to Nutro’s market position in Germany.
Answer ... The FCO will prohibit a transaction if it would significantly impede effective competition – in particular, if it would create or strengthen a dominant market position.
The Act against Restraints of Competition provides for rebuttable presumptions of market dominance which are often the starting point of the FCO’s analysis. An undertaking is considered to be dominant if it has a market share of at least 40%. Further, three undertakings or fewer are considered to be collectively dominant with a combined market share of at least 50% and five undertakings or fewer with a combined share of two-thirds. Besides market shares, a number of additional factors will be considered in assessing an undertaking’s market position. Ultimately, the market-share based presumption of dominance is relevant only for non liquet situations.
In the absence of market dominance, the FCO may also consider whether a transaction may significantly impede effective competition for different reasons, such as due to unilateral or coordinated effects.
Even if the requirements for a prohibition are met, the FCO cannot prohibit a transaction if an exemption is available. For instance, a transaction cannot be prohibited if the parties can prove that the concentration will also lead to improvements in competitive conditions which will outweigh the impediment to competition (the so-called ‘balancing clause’). Further, a transaction cannot be prohibited if it concerns a de minimis market – that is, a market on which goods or commercial services have been offered for at least five years and which had a sales volume of less than €15 million in the last calendar year in Germany(the so-called ‘de minimis clause’) – unless the market is a market on which services are provided free of charge or the transaction has been notified under the alternative thresholds. Some further exceptions to this rule may allow the FCO to bundle closely related geographical and product markets under certain circumstances. Finally, there is a specific failing firm defence for the press sector.
Answer ... Joint ventures are also subject to the substantive test set out in question 4.8. In addition, the FCO may assess cooperative aspects of joint ventures in separate proceedings under the rules relating to anti-competitive agreements. This review may be performed either in parallel or after the merger control proceedings. In particular, the FCO may initiate such separate proceedings if there is a concern that the joint venture will lead to coordination between the parent companies – in particular, if the parent companies continue to be active on the same market as the joint venture or a market upstream or downstream thereto.
Answer ... The FCO will assess all relevant aspects of competition, including unilateral and, less often, coordinated effects in horizontal, vertical or conglomerate mergers.
As regards horizontal mergers, the FCO will typically consider whether the merger will eliminate an important competitive constraint, allowing the merged entity to unilaterally exercise market power – for instance, by profitably raising prices. This analysis is typically based on factors such as:
- market shares and concentration levels;
- closeness of competition;
- capacities and capacity restraints;
- customer preferences and switching costs;
- the importance of intellectual property and know-how; and
- countervailing buying power.
In vertical mergers, a typical focus is on possible customer or input foreclosure issues. In conglomerate mergers, the FCO may look at tying or bundling issues or portfolio effects.
However, the FCO may also consider other factors, such as effects on buying markets, innovation competition and access to data.
The FCO will not consider any non-competition related issues. However, a prohibition decision may be overruled by the Federal Ministry of Economics and Energy (FMEE) if the anti-competitive effects of the merger are outweighed by the benefits to the economy as a whole or if the merger is justified by an overriding public interest. The FMEE enjoys a significant degree of discretion in this respect. In practice, the relevance of such ministerial permission is very limited. So far, there have been 22 applications for ministerial approvals, nine of which were successful.