German Merger Control: More clarity for foreign-foreign transactions?

On 30 September 2014, the Federal Cartel Office (FCO) published an updated leaflet on “Domestic effects in Merger Control“. The leaflet is intended to facilitate the assessment of whether a concentration, in particular between undertakings abroad, will be subject to German merger control.

In principle, a concentration is subject to German merger control if the relevant turnover thresholds are exceeded. This is the case if in the past financial year (1) all participating undertakings achieved worldwide turnover of more than 500 million Euro, (2) one participating undertaking achieved turnover in Germany of more than 25 million Euro and (3) another participating undertaking generated turnover in Germany of more than 5 million Euro. In addition, the concentration must be capable of affecting competition in Germany.

The leaflet distinguishes between two constellations:

1. If only two undertakings participate in the concentration, it will be subject to German merger control if the above turnover thresholds are exceeded.
2. If more than two undertakings participate in the concentration by, for example, the formation of a joint venture (JV), a more detailed review is required. The concentration is subject to German merger control if also the JV is doing  business in Germany and achieves turnover in Germany of more than 5 million Euro. If a new JV company is established, the fact that the JV is anticipated to exceed this threshold within three to five years is sufficient to trigger the notification obligation.

If the actual or anticipated turnover of the JV does not exceed 5 million Euro, the notification obligation can nevertheless apply if the JV has or is intended to have a market share of more than 5% or if significant resources are transferred (for example intellectual property rights or know-how). Finally, German merger control should apply if the parent companies are active on the same market as the JV and therefore 'spill over effects' are to be feared. The latter applies, however, only if the parent companies have a combined market share of more than 20%.

A potential domestic effect can only be excluded according to the FCO if the JV is neither actually nor potentially active on a market that includes Germany. No notification obligation arises either if the parent companies are not active on the same product market as the JV abroad.

For transactions between companies abroad (foreign-to-foreign transactions), the leaflet unfortunately provides more clarity and legal certainty only to some extent. In particular in the case of JV, a detailed review will therefore still be required.