New FCO guidance paper on domestic effects test for foreign-to-foreign mergers

On 30 September 2014, the Federal Cartel Office (FCO) has published a guidance paper on how the authority will assess possible domestic effects of (in particular foreign-to-foreign) transactions for the purpose of merger control. The document which was released after a public consultation replaces a guidance paper that was published 15 years ago by the authority.

The new paper shall enable foreign companies to better assess whether they have to notify a transaction with the German authority. The paper gives some useful guidance in which constellations the FCO typically will (and in which it will not) claim competence for reviewing a deal. In the past, in particular in joint venture scenarios transactions often had to be filed with the FCO only due to the parties‘ domestic turnover although it was doubtful if the deal had any domestic effects at all.

Now, the new paper gives more certainty when a filing is not necessary (e.g. when two non-competing firms found a joint venture that is active only outside of Germany). On the other side, the document clarifies when a filing is always deemed to be required (e.g. when the target meets the second domestic turnover threshold test in a transaction with only two parties). The FCO also gives criteria (e.g. relating to market shares and turnover) for borderline cases.

The approach not to simply rely on turnover thresholds is commendable and will help to reduce filing (and from the FCO’s perspective: review) mergers that clearly do not affect domestic competition. Still, also in the future it has to be analyzed for each and every transaction if merger control is triggered – even if it is a foreign-to-foreign deal.