In the wake of the global economic crises as triggered by the ongoing COVID-19 pandemic the Austrian Federal Competition Authority ("AFCA") expects a rising number of company takeovers for the coming months, although so far the number of mergers has been lower than in earlier years. The AFCA concludes that it would not be appropriate to relax merger control for such "shutdown mergers", as this was necessary to prevent damage to the structure of the Austrian market and protect Austria's economic development in the long run.
At the same time, the AFCA highlights in a handout1 their view of macroeconomic effects of market power and their assessment of acquisitions of financially distressed companies. Generally, the AFCA concludes that by preventing the accumulation of market power in the present crisis Austrian merger control makes a positive contribution to Austria's macroeconomic development, that merger control still is to be conducted in accordance with objective criteria and that no additional macroeconomic assessment of mergers is required.
After explaining their economic models, the AFCA sets out their tests and criteria for approving shutdown mergers. Based on the substantive test for the Austrian merger control, i.e. "the creation or strengthening of a dominate position" (Sec 12 para 1 Federal Cartel Act), the AFCA elaborates that the failing firm defense ("rescue merger"), might be acceptable under certain circumstances. The AFCA explicitly quotes the failing firm defense-test as lined out by the European Commission (EC)2 and the European Court of Justice (ECJ)3. Also, the Austrian Supreme Court of Justice (OGH) has recognized the European Court of Justice's Kali + Salz criteria for the failing firm defense4.
Based thereon, a checklist for shutdown mergers is presented and discussed in more detail by the AFCA:
- Assessment of shutdown mergers in merger control
- Market dominance test
- Criteria for acceptance of failing from defense
- Remedies in merger control
- State aid as a possible alternative to a merger?
- Macroeconomic relevance
- Distortions of competitions should be avoided
- Cost benefits analysis
- Remedies in state aid cases
As with other remedies in and against the present COVID 19 pandemic it remains to be seen if and how this is working, long-term and collateral consequences are uncertain. In any case the economic views of the AFCA and the discussion of the failing firm defense could provide useful guidance for future filings.
2. European Commission, December 14, 1993, IV/M.308, Kali + Salz/MdK/Treuhand, para 71-72.
3. European Court of Justice, March 31, 1998, C 68/94 and C 30/95, France, SCPA and EMC/Commission, para 91-92, 112 et sequ.
4. OGH October 4, 2010, 16 Ok 6/10 Holzhandel, clause 5.
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