The amendment to the anti-trust law, which entered into force on 1 May 2017, also contains a new consideration test. From now on, it must be taken in account during mergers.
The new consideration test concerns mergers implemented after the 1 November 2017, meaning that transactions may already require a corresponding check and notification. Failing to notify a merger that is subject to notification can be expensive, with the highest penalty imposed to date amounting to EUR 1.5 million! Up until now, the Austrian merger control was based on a system of turnover thresholds. The new Austrian anti-trust law has now introduced a consideration test, for which there is a complete lack of practical experience in Europe. Due to unspecific legal terms, it is also easily possible for the new regime to encompass more transactions than the legislator actually intended. This means that companies are still exposed to legal uncertainty.
About the background: International experiences, especially in digital markets and in the pharmaceutical sector, have shown that small but highly innovative companies were bought up by larger, already established companies without reaching corresponding thresholds, as start-ups often had no or only marginal turnover. But even such small enterprises can have a very high market potential and be of considerable importance for the economy, as was demonstrated by the Facebook/WhatsApp transaction, for example.
The new Austrian consideration test will record transactions that lie below the existing turnover threshold. To this end, a subsidiary test with four elements was introduced:
- The parties have a combined worldwide turnover of EUR 300 million,
- a combined Austrian turnover of EUR 15 million,
- the value of the consideration for the transaction is more than EUR 200 million, and
- the target company is active in Austria to a significant extent.
The term "consideration" includes, according to the preparatory materials, "... all assets and other benefits in kind which the seller receives from the purchaser in connection with the merger (purchase price), in addition to the value of any liabilities accepted by the purchaser".
To assess the criterion of significant activities in Austria, two questions must be answered: 1. How can activities be attributed to the Austrian territory, and 2. When do they reach a "significant extent"? In the absence of a specific Austrian statutory provision concerning the attribution of turnover, reference is made to European law and case practice. Consequently, for the rendering of services or the sale of goods, turnover is attributed to the residence or domicile of the customer, meaning the place where the service is actually rendered or the goods are actually delivered. Similar criteria are therefore also applicable for the geographical attribution of activities. In the case of digital services, the actual location the customer who uses the services will be relevant and not the position of any server used for the service. Whether the activity is free of charge is not relevant for the attribution, since such activities are also market related.
Because of the lack of case law on the topic, current mergers and takeovers should currently be reported in case of doubt in order to avoid any (considerable) sanction. The Austrian authorities will have to develop corresponding guidelines and precedents in this regard in order to clarify the situation and give companies greater certainty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.