Merger thresholds
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GERMANY

Christoff Soltau, LL.M.
Partner

christoff.soltau@cms-hs.com

Tel: +49 40 376 30 273

Dr. Markus Schöner, M. Jur
Partner

markus.schoener@cms-hs.com

Tel: +49 40 376 30 365

Dr. Denis Schlimpert, LL.M.
Senior Associate

denis.schlimpert@cms-hs.com

Tel: +49 40 376 30 448

Dr. Robert Bodewig, LL.M.
Associate

robert.bodewig@cms-hs.com

Tel: +49 40 37630 313

No new regulation adopted or proposed

Note that relevant regulations may be changed before your contemplated transaction is completed. Mergerfilers.com and our national experts keep information on regulations up to date and even provide alerts on adopted or proposed changes that have not come into force yet but may come into effect before the transaction is completed. When this field is green, we have no knowledge of such imminent changes to the relevant regulations.
Confirmed up-to-date: 21/06/2021

(Content available free of charge at Mergerfilers.com - sponsored by CMS)

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. National Merger control regulation was introduced in the Act against Restraints of Competition (“ARC”) in 1973.

2) Which authorities enforce the merger control regulation?

The German Federal Cartel Office (“FCO”) enforces the merger control rules. In very exceptional cases, the Federal Ministry for Economic Affairs and Energy may authorise a merger prohibited by the FCO if the restraint of competition is outweighed by advantages to the economy as a whole resulting from the merger or if the merger is justified by an overriding public interest. 

Decisions of the FCO may be appealed to the Higher Regional Court in Düsseldorf. The decisions of the Higher Regional Court in Düsseldorf may be appealed to the Federal Supreme Court.

3) Relevant regulations and guidelines with links:

Original German version Unofficial English translation

Gesetz gegen Wettbewerbsbeschränkungen

Act against Restraints of Competition

Merkblatt zur deutschen Fusionskontrolle (Juli 2005)

Guidance on German merger control (English translation not available)

Merkblatt Inlandsauswirkungen in der Fusionskontrolle

Guidance on domestic effects in merger control

Leitfaden zur Marktbeherrschung in der Fusionskontrolle

Guidance - Substantive Merger Control

Leitfaden Zusagen in der Fusionskontrolle

Guidance on Remedies in Merger Control

Standards für ökonomische Gutachten

Notice - Standards for economic opinions

Leitfaden Transaktionswert-Schwellen für die Anmeldepflicht 
von Zusammenschlussvorhaben

Guidance on Transaction Value Thresholds for Mandatory Pre-merger Notification

Mustertext für aufschiebende Bedingungen

Model text for conditions precedent (up-front buyer)

Mustertext für auflösende Bedingungen

Model text for conditions subsequent 

Mustertext für Auflagen

Model text for obligations

Mustertext Treuhändervertrag

Model text for trustee mandate

(English translation not available)

4) Does general competition regulation apply to mergers or ancillary restrictions?

With respect to restrictions of competition that are ancillary to the merger, for instance a standard non-competition obligation on the seller, such restrictions are considered as integral parts of the merger and are not subject to a separate review under the general competition regulation. However, restrictions that go beyond what may be considered directly related to and necessary for the merger may be caught by the general prohibition on anti-competitive agreements. The assessment whether a restriction is ancillary or not is generally not part of the merger control proceedings but within the responsibility of the parties to the merger. 

The general prohibition on anti-competitive agreements may be applicable in parallel to joint ventures which have as their object or effect the coordination of the market behaviour of the parent companies or of a parent company and the joint venture (please note that under German merger control law also the acquisition of a non-controlling minority stake can be subject to merger control).

5) May an authority order a split-up of a business irrespective of a merger?

The FCO has the power to impose structural measures, including a split-up of a business, to bring an infringement of Article 101 or 102 TFEU or an infringement of German competition law to an end. Such structural remedies may, however, only be imposed if there is no behavioural remedy which would be equally effective, or if the behavioural remedy would entail a greater burden for the undertakings concerned than the structural remedies.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Financial services 

In the financial services sector, there are specific notification requirements for relevant financial services undertakings, namely:  

  1. credit or financial services institutions;
  2. insurance undertakings, pension funds or insurance holding companies.

According to the German Banking Act and the German Insurance Supervision Act, anyone must immediately notify the supervisory authorities (depending on the undertaking: Deutsche Bundesbank and/or German Federal Financial Supervisory Authority or the competent authority of the federal state) in writing if intending 

  1. to acquire, either alone or in conjunction with other persons or undertakings, a significant participation (direct or indirect holding of at least 10% of the share capital or of the voting rights of an undertaking, or any other possibility of exercising a significant influence on the management of that undertaking) in a relevant financial services undertaking or
  2. to increase, either alone or in conjunction with other persons or undertakings, a significant participation in such a way that the threshold of 20%, 30% or 50% of the share capital or voting rights is reached or exceeded in any of the relevant financial services undertaking or that control is exercised over the undertaking, or
  3. to dispose of a significant participation in a relevant financial services undertaking or to reduce the amount of such a significant participation below the thresholds of 20%, 30% or 50% of the share capital or voting rights or to modify the participation in such a way that control over the undertaking is no longer exercised.

The supervisory authorities may either prohibit the intended acquisition of the significant participation (no. 1) or its increase (no. 2) or clear the transaction within the assessment period, which normally lasts 60 business days. Non-compliance with the notification obligation is furthermore an administrative offence which can be subject to fines. 

Undertakings for collective investments in transferable securities and payment institutions and e-money institutions

The same notification requirements as for the financial services sector also apply with respect to the participation in an undertaking for collective investments in transferable securities and the participation in a payment institution or an e-money institution. 

Banking

Under the German Banking Act, banks must notify their intention to merge without delay to the supervisory authority (ECB or German Federal Financial Supervisory Authority) and the Deutsche Bundesbank as soon as it can be assumed on the basis of the negotiations that the merger will come about. The failure of the merger negotiations must be notified immediately. The same applies to the legal implementation of the merger if the merger negotiations are successful. 

Any breach of this notification requirement can be sanctioned with fines, but the notification does not entail separate assessment and clearance proceedings (the above-mentioned provisions for financial services institutions and merger control rules may apply). 

The supervisory authority may prohibit the intended acquisition of the major holding (no. 1) or its increase (no. 2) within the assessment period, which normally lasts 60 days.

 

Foreign investment control

Rules applicable to non-EU/non-EFTA investors:

A non-EU/non-EFTA investor has to notify to the German Federal Ministry for Economic Affairs and Energy ("Ministry") the direct or indirect acquisition of significant assets or reaching at least 10% of the voting rights in a German company which:

  1. is active as operator of "critical infrastructure" (as further defined in the German Act to Strengthen the Security of Federal Information Technology);
  2. is active in the development or modification of software for the operation of critical infrastructure;
  3. is entrusted with organizational measures for telecommunications monitoring, or manufactures or has manufactured technical equipment for implementing legally prescribed measures for telecommunications monitoring and has knowledge of the technology;
  4. is active in the provision of cloud computing services with certain infrastructures;
  5. has a permit for components or services of so-called telematic infrastructure;
  6. is a company in the media industry which contributes to the formation of public opinion by means of broadcasting, tele-media or print products and is characterised by its particular topicality and broad impact;
  7. provides services necessary to ensure the continuity and functioning of public communications infrastructure;
  8. is active in the development or manufacture of personal medical protective equipment (such as masks);
  9. is active in the development, manufacture, distribution, or holds a corresponding marketing authorization, for essential medicinal products or their raw materials and active ingredients;
  10. is active in the development or manufacture of medical devices intended for the diagnosis, prevention, monitoring, prediction, prognosis, treatment or alleviation of life-threatening and highly infectious contagious diseases;
  11. is active in the development, manufacture or distribution of certain in vitro diagnostic medical devices relating to life-threatening and highly infectious contagious diseases.

It is important to note that the notion of an "indirect acquisition" is extremely wide and also covers situations where a non-EU/non-EFTA shareholder directly or indirectly holds at least 10% of the voting rights in the acquirer or in a company holding at least 10% of the voting rights in the acquirer. 

An "acquisition" that meets the above criteria has to be notified to the Ministry immediately after the signing of the agreement. The Ministry has up to two months from the notification to decide whether it opens an examination procedure and, if it does so, up to four months from the receipt of all required documents to clear or prohibit the acquisition or to impose conditions. During the review period, the parties are not allowed to implement the acquisition, and failure to comply with the standstill-obligation bears the risk of fines and even imprisonment of up to five years. 

The Ministry may also review – without an obligation on the parties to notify – any direct or indirect acquisition by a non-EU/non-EFTA investor of significant assets or at least 25% of the voting rights in a German company if the acquisition endangers the public order or security. 

Rules applicable to all foreign investors - domiciled outside Germany:

A foreign investor (even if domiciled within the EU/EFTA) has to notify to the Ministry the direct or indirect acquisition of significant assets or reaching at least 10% of the voting rights in a German company which:

  1. is active in the development or manufacture of certain war weapons or goods (as further specified in other regulations);
  2. is active in the development or manufacture of specially designed engines or transmissions for battle tanks or military warfare vehicles;
  3. manufactures or has manufactured products (approved by the German government) with IT security functions for processing government classified information, or of specific components for such products, and still has access to or control over the technology. 

The same procedural rules apply as in case of the mandatory notification requirement for the investment of non-EU/non-EFTA investors as described above. 

7) Are any parts of the territory exempted or covered by particular regulation?

No.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory if the filing thresholds are met.

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

According to Section 37(1) ARC, a transaction subject to merger control is defined as: 

  1. acquisition of all or of a substantial part of the assets of another undertaking; or
  2. acquisition of direct or indirect control by one or several undertakings of the whole or parts of one or more other undertakings; or
  3. acquisition of shares in another undertaking if the shares, either separately or in combination with other shares already held by the undertaking, reach 50% or 25% of the capital or the voting rights of the other undertaking (if several undertakings simultaneously or successively acquire shares in another undertaking to the extent mentioned above, this shall also be deemed to constitute a concentration);
  4. any other acquisition of the possibility to exercise directly or indirectly a material competitive influence on another undertaking.

Note that German merger control law does not distinguish between full function and non-full-function joint ventures. Nor is it decisive whether an acquiring undertaking will have (joint) control in the joint venture. The fact that a joint venture has at least two parent companies who will each hold at least 25% of the capital or voting rights is sufficient. Furthermore, also the acquisition of a stake of less than 25% in an undertaking can be subject to merger control if the acquirer obtains material competitive influence (i.e. rights which are comparable to the rights of a 25% shareholder). 

10) Is "change of control" of a business required?

No. Also the acquisition of non-controlling minority stakes can be subject to merger control (see topic 9).

11) How is “control” defined?

Pursuant to Section 37(1) no 2 ARC, “control” shall be constituted by rights, contracts or any other means which, either separately or in combination and having regard to all factual and legal circumstances, confer the possibility of exercising decisive influence on an undertaking, in particular through:

  1. ownership or the right to use all or part of the assets of the undertaking;
  2. rights or contracts which confer decisive influence on the composition, voting or decisions of the bodies of the undertaking.

12) Acquisition of a minority interest

The acquisition of a non-controlling minority interest can be subject to merger control pursuant to Section 37(1) no 3 or 4 ARC (see topic 9).

13) Joint ventures/joint control – which transactions constitute mergers?

The following transactions may be subject to merger control:

  1. Establishment of a (jointly controlled) joint venture, regardless of whether it is full-function or not;
  2. Establishment of a joint venture, regardless of whether it is full-function or not and regardless of joint control if there are at least two parent undertakings who each hold at least 25% of the capital or voting rights;
  3. Change from joint to sole control;
  4. Change in parent undertakings of a joint venture within the meaning of no 1 or 2, for instance if one of the controlling parent undertakings sells its share to another undertaking, or if one of the parent undertakings sells it non-controlling 25% stake to another undertaking; 
  5. Change in or extension of the activities of a joint venture, provided that the joint venture acquires further assets, contracts, know-how, rights etc. to form the basis for the new activities;
  6. Dissolution, provided (part of) the business of the joint venture is transferred to one or more of the businesses controlling the joint venture or to a third party.
Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

A notification must be filed if in the last business year preceding the concentration

  1. the combined aggregate worldwide turnover of all the undertakings concerned was more than EUR 500 million, and
  2. the turnover in Germany of at least one undertaking concerned was more than EUR 50 million and that of another undertaking concerned was more than EUR 17.5 million.

Even if the turnover thresholds are not met, a notification is required if the conditions of the – subordinate – ”value of the transaction threshold” (see below) are met.

b) Market share thresholds

See under “other” below.

c) Value of transaction thresholds

A notification must be filed if in the last business year preceding the concentration

  1. the combined aggregate worldwide turnover of all the undertakings concerned was more than EUR 500 million, and
  2. the turnover in Germany of one undertaking concerned was more than EUR 50 million and
  3. neither the target undertaking nor any other undertaking concerned achieved a turnover in Germany of more than EUR 17.5 million, and
  4. the consideration for the acquisition exceeds EUR 400 million and
  5. the target undertaking has substantial operations in Germany.

Note that the FCO published together with the Austrian competition authority a joint guidance paper on the application of the transaction value threshold (see topic 3).  

d) Assets requirements

N/A

e) Other

The FCO can order an undertaking to notify any concentration in one or more specific economic sectors for a period of three years if

  1. the undertaking receiving the order had a worldwide turnover of more than EUR 500 million in the last business year, and
  2. there are objective reasons to assume that future concentrations could significantly impede effective competition in Germany in the economic sectors(s) concerned, and 
  3. the undertaking receiving the order has a share of supply or demand of at least 15% in Germany in the economic sector(s) concerned.

The order to notify only relates to concentrations where

  1. the target had worldwide turnover of more than EUR 2 million in the last business year, and
  2. the target generated more than 2/3 of its turnover in Germany.

An order by the FCO would require that the FCO has previously conducted a sector enquiry regarding at least one of the economic sectors concerned. 

15) Special thresholds for particular businesses

The thresholds indicated in topic 14 apply to all transactions. 

Note, however, the “turnover multiplication rules” for certain industries (see topic 17), which have the effect of lowering the turnover thresholds. 

16) Rules on calculation and geographical allocation of turnover

Turnover is calculated for the last financial year before closing, where available on the basis of the audited accounts of the undertakings concerned. In the event of permanent changes to the businesses of the undertakings concerned (such as acquisitions or divestments) which are not already (fully) reflected in the accounts of the last financial year before closing, the turnover must be adjusted accordingly.

"Turnover" is the net turnover derived from the sale of products and services after deduction of (i) sales rebates, (ii) value added tax and other taxes directly related to the sales, and (iii) any turnover between undertakings that belong to the same group (intra-group/internal sales). 

For trade in goods, only 75% of the turnover achieved has to be taken into account.

The geographical allocation of turnover is made in accordance with the rules set out in the European Commission's Consolidated Jurisdictional Notice. Thus, the general rule is that turnover should be attributed to the place where the customer is located, based on the underlying principle that turnover is to be allocated to the place where competition for the customer in question takes place.

17) Special rules on calculation of turnover for particular businesses

Media

A multiplication factor of 8 has to be applied to the turnover achieved with (i) the publication, production and distribution of newspapers, magazines and parts thereof, (ii) the production, distribution and broadcasting of radio and television programmes, and (iii) the sale of radio and television advertising time.

Finance

In the case of credit institutions, financial institutions, building and loan associations and external investment management companies within the meaning of Section 17(2) no. 1 of the German Investment Act, turnover shall be replaced by the total amount of the income referred to in Section 34(2) sentence 1 no. 1 a) to e) of the Regulation on the Rendering of Accounts of Credit Institutions, minus value added tax and other taxes directly levied on such income.

Insurance

In the case of insurance undertakings, the premium income in the last completed business year shall be relevant. Premium income shall be income from insurance and reinsurance business including reinsurance cessions.

18) Series of transactions that must be treated as one transaction

If two or more transactions take place between the same persons or undertakings within a two-year period, these must be treated as one transaction if, as a result, the filing thresholds are met for the first time.

Additionally, several transactions will be deemed interrelated if they are unitary in nature and mutually interdependent (legally or economically) so that they represent one and the same merger. The guidance provided by the European Commission in its Consolidated Jurisdictional Notice is helpful for the assessment under German merger control law as well.   

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

It is important to note that German merger control law does not only cover the acquisition of control, but also provides for notifiable concentrations which are unrelated to the acquisition of control (see topic 9).

With respect to the specific type of concentration "acquisition of control" under German merger control law, a merger filing is only required if there is a change of control on a lasting basis. In general, one can refer to the guidance provided by the European Commission in its Consolidated Notice as to under which circumstances a merger might be lacking the required change of control on a lasting basis. 

20) Special industries, owners or types of transactions

The ARC specifies that there is no obligation to file a notification in the following situations:

  1. Mergers of public entities and enterprises arising from the territorial reform of municipalities;
  2. Mergers of members of a banking association within the meaning of Section 8b(4) sentence 8 of the German Corporation Tax Act which mainly provide services for the other members of that banking group, and, in such activities, do not themselves maintain any contractual relations with end consumers (this exemption does not apply to concentrations of cooperative central banks and regional institutions of savings banks within the meaning of Section 21(2) no. 2 of the German Banking Act);
  3. Acquisition of shares (not assets) by credit institutions, financial institutions or insurance undertakings  in another undertaking for the purpose of resale, as long as they do not exercise the voting rights attached to the shares and provided the resale occurs within one year (this time limit may, upon application, be extended by the FCO if it is substantiated that the resale was not reasonably possible within this period).

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no general exemption for foreign-to-foreign transactions. But there is a requirement that a merger has domestic effects in Germany in order for the transaction to be subject to merger control.

The FCO has published "Guidance on Domestic Effects in Merger Control" (see topic 3) in which it elaborates on when a merger that exceeds the turnover thresholds does not have sufficient domestic effects. In its guidance, the FCO distinguishes the following three basic scenarios:

Domestic effects can clearly be identified

Mergers involving only two parties (e.g. acquirer and target company in case of an acquisition of sole control) always have sufficient domestic effects provided the turnover thresholds of Section 35 ARC (see topic 14) are exceeded. If the transaction involves a joint venture, there are sufficient domestic effects if the joint venture is active in Germany and its turnover in Germany exceeds EUR 5 million.

Domestic effects can be clearly ruled out:

Cases involving a joint venture will not have sufficient domestic effects if the following (cumulative) conditions are met: 

  • The joint venture is neither currently active on a domestic market (i.e. on a relevant geographic market that covers part of or the entire territory of Germany) nor is it a potential competitor.
  • Not more than one parent company (on group level) is active (or is a potential competitor) domestically on the same relevant product market as the one on which the joint venture is active abroad.  
  • Not more than one parent company (on group level) is an actual competitor in a domestic market upstream or downstream of the joint venture’s product market abroad.

All other cases: 

For all other scenarios (which will in any case be joint venture scenarios with more than two parties involved in the merger), a case-by-case assessment will be required for the assessment of sufficient domestic effects. 

22) No overlap of activities of the parties

There is no general exemption for transactions with no overlap of activities.

However, in case of transactions which involve more than two parties the absence of horizontal overlaps between the parties may indicate that the merger is lacking the necessary domestic effects so that no filing obligation is triggered even though the filing thresholds are met (see topic 21).

23) Other exemptions from notification duty even if thresholds ARE met?

As a consequence of the EU “one-stop-shop” principle, German merger control rules do not apply if the thresholds for EU merger control are exceeded, unless the European Commission refers the transaction to the FCO.

Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No. The FCO will only review a merger notification if the thresholds are met or if a referral from the European Commission allows it to review the notification. 

However, if it is not entirely clear whether the thresholds are met (or whether the merger qualifies as concentration within the meaning of Section 37(1) ARC), it is possible to submit a "precautionary" notification in which the notifying party/parties outline their point of view. If the FCO concludes that the transaction is not subject to German merger control, it will usually give the notifying party/parties the opportunity to withdraw the "precautionary" notification, which will in turn reduce the administrative fees to be imposed by the FCO. 

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

The FCO cannot request a merger notification if the thresholds are not met.

The FCO can, however, potentially investigate a merger that does not meet the thresholds based on the general prohibition of anti-competitive agreements or on the rules governing the abuse of a dominant position. The former is particularly relevant for joint ventures which entail the risk of market coordination between the parent undertakings. 

Referral to and from other authorities

26) Referral within the jurisdiction

N/A

27) Referral from another jurisdiction

The FCO only accepts referral of mergers from the European Commission.

If a merger is subject to EU merger control, the notifying party/parties may – prior to an EU merger notification – request that the merger is referred to the FCO provided that the merger may significantly affect competition in a distinct market in Germany. If the FCO does not oppose such referral, the European Commission may decide to refer the merger in whole or in part. The European Commission must decide whether to refer a merger within 25 working days of receipt of the request (reasoned submission).

The FCO may – after an EU merger notification – request that the merger is referred to the FCO provided that the merger may significantly affect competition in a distinct market in Germany. The European Commission may invite the FCO to submit such referral request. The referral decision must be taken within 65 working days after the merger notification has been filed. The notifying party/parties cannot oppose such a referral decision.

In the case of a partial referral, the European Commission will assess the non-German aspects of the merger, whereas the FCO will assess the German aspects.

A referral of a merger from the European Commission to the FCO may only be made if the merger qualifies as "concentration" and meets the filing thresholds under German merger control law (see topics 9 and 14).

28) Referral to another jurisdiction

If the thresholds for merger notification are met in at least three EU member states, the notifying party/parties may request that a single merger notification is made to the European Commission in place of notifications to each of the relevant national authorities (see topic 29).

The FCO may also request the European Commission to examine a merger that does not have an EU dimension within the meaning of Article 1 of the EU Merger Regulation but affects trade between EU member states and threatens to significantly affect competition in Germany. Such a request shall be made within 15 working days of the date on which the merger was notified to the FCO. The European Commission shall immediately notify the other EU member states of the request and will decide whether to examine the merger within 25 days after this notification.

Besides a referral to the European Commission, a merger cannot be referred to competition authorities in other jurisdictions.

29) May the merging parties request or oppose a referral decision?

The notifying party/parties may request a referral to or from the European Commission (see topics 27 and 28). 

If the FCO requests a referral to or from the European Commission, the notifying party/parties can not formally oppose the referral decision by the European Commission (they can, however, submit comments on the referral request).

Filing requirements and fees

30) Stage of transaction when notification must be filed

There is no specific stage of a transaction at which the notifying party/parties have to file the notification. A notification can usually even be filed before a binding agreement has been concluded, provided that the parties have agreed on the structure of the merger and intend to implement the merger within reasonable time. 

However, the merger notification must be filed prior to the implementation of the merger as the merger may not be implemented before merger clearance (standstill obligation).

31) Pre-notification consultations

It is advisable and customary to engage in pre-notifications discussions with the FCO in complex cases which could raise substantial concerns. Pre-notification consultations may also be warranted in cases where the jurisdiction of the FCO is unclear.  

In straightforward cases which do not raise particular issues, pre-notification consultations are not necessary and not customary, i.e. the notifying party/parties can submit their notification without such consultations. 

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

Mergers that are a consequence of acquisition of securities on a stock exchange or a public takeover bid must be notified after the acquisition/publication of the takeover bid. 

The standstill obligation (see topic 37) does not prevent the implementation of a public bid or of a series of transactions in securities (including those convertible into other securities admitted to trading on a market such as a stock exchange), by which control is acquired from various sellers, provided that the merger is notified to the FCO without delay and the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of its investments based on a derogation granted by the FCO (see topic 38).

Please also note that securities law regulations apply to acquisitions of listed shares and public takeover bids, including a requirement for approval of offer documents from the German Financial Supervisory Authority.

33) Forms available for completing a notification

There are no specific forms for a notification. 

It is, however, required by law to indicate the form of the merger and to submit the following information with respect to each of the undertakings concerned (failure to do so leads to an incomplete notification, which does not trigger the phase 1 deadline): 

  • name and place of business or registered seat;
  • type of business;
  • turnover in Germany, in the EU and worldwide (please note the provisions in the case of credit institutions, financial institutions, building and loan associations and external investment management companies or insurance companies, see topic 17);
  • the market shares, including the basis for their calculation or estimate, if the combined shares of all undertakings concerned amount to at least 20% in a market which comprises Germany;
  • a person authorised to accept service in Germany if the registered seat of the undertaking is not located within Germany;
  • only in the case of an acquisition of shares in another undertaking: the size of the interest acquired and of the total interest held;
  • only in case of a filing triggered by the transaction threshold: information on the nature and scale of the operations of the target in Germany and the value of the consideration, including the basis for its calculation.

34) Languages that may be applied in notifications and communication

The notification has to be submitted in German language. The FCO usually accepts if the notifying party/parties submit annexes to the notification in English language.

35) Documents that must be supplied with notification

The following documents should generally be supplied with a merger notification:

  • the most recent audited annual financial statements and annual reports for each of the parties to the merger (if those documents are published on the internet, a link normally suffices);
  • group chart/overview for each of the parties to the merger;
  • any documentation on which the parties have based their market definition and assessment of market shares.

It is not necessary to submit transaction documents (e.g. share or asset purchase agreements, shareholders' agreements, etc.), but the FCO may request these documents (and other documents) during the proceedings if it deems them necessary for its assessment of the merger. 

36) Filing fees

The amount of the filing fee to be imposed by the FCO will depend on the level of the expenses (in terms of personnel and material) for the FCO and the economic significance of the merger for the parties. The filing fee cannot exceed an amount of EUR 100,000.

In straightforward phase 1 cases which do not raise particular issues, the filing fee is usually within the range of EUR 3,500 to 10,000.

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Yes. The merging businesses must be run separately and independently until the merger has been approved. Completion of the merger prior to the merger approval is subject to fines, and the legal transactions implementing the merger are, as far as German civil law applies, invalid.

However, normal preparatory reversible steps are not prohibited (see topic 39).

38) May the parties get permission to implement before approval?

Yes, the parties can obtain permission from the FCO if the undertakings concerned put forward important reasons, in particular to prevent serious damage to an undertaking concerned or to a third party. The permission may be granted subject to conditions and obligations in order to ensure effective competition. 

The FCO is usually reluctant to grant a permission and it will do so only in very exceptional circumstances. So far, the most cases where it granted a permission concerned mergers where the target undertaking was bankrupt and close to "collapsing". 

39) Due diligence and other preparatory steps

The merging parties have to ensure that the due diligence and other preparatory steps do not violate the standstill obligation and the general prohibition of anti-competitive agreements (including the exchange of competitively sensitive information between competitors). 

There are no guidelines on what may be considered acceptable preparatory steps. 

As a minimum, the same standards apply for the permissibility of preparatory actions as under the EU merger regulation, i.e. mere preparatory steps are allowed provided that these do not lead to even a partial implementation of the merger, in particular by enabling the acquirer to influence the strategic behavior of the target undertaking. 

In addition, the German Federal Supreme Court has recently ruled that even measures which do not (fully or partially) fulfill the criteria of a concentration within the meaning of Section 37(1) ARC, but which at least partly anticipate the effects of the merger, can violate the standstill obligation. Therefore, it has to be thoroughly assessed on a case-by-case basis whether intended preparatory steps are likely to be caught by the strict case law of the German Federal Supreme Court. 

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary course of business" clause that prevents the target company from taking decisions outside the course of its ordinary business until the closing date in order to preserve the value of the target company is generally considered acceptable.

Veto rights for the acquirer have to be assessed on a case-by-case basis as to whether they lead to a partial implementation of the merger in violation of the standstill obligation.

41) Implementation outside the jurisdiction before approval – "Carve out"

There are no specific rules on “carve out” of the German part of a transaction to avoid delaying implementation in the rest of the world due to a pending approval in Germany. 

Thus, it must be assessed on a case-by-case basis whether the implementation of a merger outside Germany and the German part of the transaction being "carved out" are sufficiently autonomous so that there are no domestic effects caused by the implementation of the merger outside Germany. The FCO usually takes a strict stance and a "carve-out" may therefore often not be possible.

42) Consequences of implementing without approval/permission

The parties may be fined if the merger is implemented before approval is obtained. The amount of the fine will be fixed based on the gravity and duration of the infringement, and the fine cannot exceed 10% of the parties’ worldwide group turnover in the last financial year.

As far as the implementation of the merger is subject to German civil law, the legal acts bringing about the implementation are invalid as long as the FCO has not approved the merger (upon the FCO's approval the legal acts bringing about the merger become valid ex-tunc). The civil law consequences do not apply to the following types of transactions:

  • real estate agreements once they have become legally valid by entry into the cadastral register; and
  • agreements on the transformation, integration or formation of an undertaking, and enterprise agreements within the meaning of Sections 291 and 292 of the German Stock Corporation Act, once they have become legally valid by entry into the appropriate register.

Furthermore, the FCO may prohibit the merger because of substantive concerns and order the parties to dissolve the merger, i.e. to split up the merged entity or take any other measures necessary to restore efficient competition.

The process – phases and deadlines

43) Phases and deadlines

Phase Duration/deadline

Pre-notification phase:

It is advisable to inform the FCO of the intended transaction at an early stage in case the transaction is likely to raise substantive concerns. Such pre-notification will include submitting one or more draft notifications.

No fixed duration or deadline.

Phase I:

The merger is either approved or it is decided to initiate a phase II investigation.

1 month from the receipt of a complete notification.

Phase 2:

The merger is either approved, approved with conditions/commitments or prohibited.

The FCO will provide the parties with a statement of objections if it intends to prohibit the merger approximately 3 weeks prior to the expiry of the phase 2 deadline. 

The investigation is likely to involve detailed market surveys, economic analysis and possibly negotiation of commitments to address the concerns of the FCO.

 

5 months from the receipt of the complete notification. 

Extension: 

There are two extension options (which may be combined):

- 1 month extension in case of the initial offer of commitments by one of the notifying parties (i.e. no extension in case of any subsequent commitments offer);

- any extension as agreed between the FCO and the notifying parties.

"Stop the clock"-option: 

If the parties have not completely, or not in a timely manner, responded to a formal information request by the FCO for reasons that the undertaking is responsible for and the FCO hence has to issue a second information request, the FCO can pause the deadlines until the requested information is provided. 

The 4 months period is not applicable if

- the FCO has not initiated phase 2 proceedings or not prohibited the merger because the parties provided inaccurate information or did not respond to a request for information in a timely manner, or

- if a notifying party located outside Germany has no longer appointed a person authorised to accept service in Germany.

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

It is assessed whether the merger will "significantly impede effective competition in particular due to the creation or strengthening of a dominant position" (SIEC test).

The FCO cannot prohibit a merger if 

  1. the undertakings concerned prove that the merger will also lead to improvements of the conditions of competition and that these improvements will outweigh the impediment to competition; or
  2. the requirements for a prohibition are fulfilled on 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 EUR 20 million in the last calendar year, unless goods or services are provided free of charge on the relevant market or the value of transaction threshold (see topic 14 c) applies: or
  3. the merger involves a newspaper or magazine publisher acquiring a small- or medium-sized newspaper or magazine publisher and it is proven that the publisher that is acquired recorded a significant net annual deficit in the profit and loss account under § 275 of the German Commercial Code [Handelsgesetzbuch] in each of the three preceding years and its existence would be jeopardised without the merger. Furthermore, it must be proven that no other acquirer was found that could have ensured a solution that would have been less harmful to competition.

45) May any non-competition issues be considered?

No, the FCO may only consider competition-related issues.

If the FCO prohibits a merger due to competition concerns, the notifying party/parties can apply to the Federal Ministry for Economic Affairs and Energy for an authorization of the merger if the restraint of competition is outweighed by advantages to the economy as a whole resulting from the merger or if the merger is justified by an overriding public interest.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is the same as for other mergers, but if the joint venture also has coordination between the owners as its object or effect, it will also be assessed whether such coordination is acceptable under the general prohibition against anti-competitive agreements. The FCO in its practices often clears transactions involving joint ventures only under the SIEC test within the timeframe of its merger control proceedings, but makes clear that this clearance is independent from any assessment under the general prohibition against anti-competitive agreements.

47) Decisions and remedies/commitments available

A merger may be approved, approved with conditions/commitments or prohibited. A prohibition or an approval with conditions/commitments is only possible in phase 2 proceedings, but not in phase 1 proceedings. 

If the FCO expresses serious concerns about the merger, it is important that the notifying party/parties enter into negotiations of possible commitments well before the expiry of the deadlines as the FCO can only consider an approval with commitments if the notifying party/parties have offered such commitments.

Commitments can be either structural or behavioural, but the latter only if they do not require a permanent monitoring. The FCO has outlined its general approach to commitments/conditions in its "Guidance on Remedies in Merger Control" (see topic 3), and it makes clear in its Guidance that it has a clear preference for structural remedies since these address the competition concerns quickly and durably and do not require protracted monitoring. 

Publicity and access to the file

48) How and when will details about the merger be published?

The FCO will publish a short summary of the transaction on its website shortly after receipt of the formal notification (i.e. there will be no publication in case of pre-notification contacts), indicating when it has received the notification, the parties concerned, the type of transaction, the affected business sector and the affected German states.

The FCO usually publishes a non-confidential version of its phase 2 decisions. 

The FCO also publishes from time to time short summaries (case reports, "Fallberichte") about phase 2 decisions, phase 1 clearances or even cases where the notifying party/parties have withdrawn the notification due to competitive concerns by the FCO.

49) Access to the file for the merging parties and third parties

The merging parties:

The merging parties have a right to access to the file including market survey questionnaires as well as an overview of all documents/correspondence in the file. However, the FCO will redact third parties’ confidential information (in particular trade and business secrets), often including the identity of such third parties. There is no right of access to the FCO’s internal draft decisions and the documents preparing the FCO's decisions.

Third parties:

Third parties have a right to access to the file under German merger control law if they have been, upon their application, admitted by the FCO to the proceedings because their interests are substantially affected by the decision. The same limitations apply to the access right as for the access right for the merging parties.

"Anyone" (i.e. not only the merging parties and third parties who have been admitted by the FCO to the proceedings) can apply for access to the file under the German Information Freedom Act, but trade and business secrets and the FCO’s internal draft decisions and the documents preparing the FCO's decisions are normally protected against such access.

Judicial review

50) Who can appeal and what may be appealed?

It is not possible to appeal phase 1 clearances.  

The merging parties, and in case of an acquisition of assets (Section 37(1) no 1 ARC or shares (Section 37(1) no 2 ARC) also the seller, can generally appeal any phase 2 decisions by the FCO including conditions contained in an approval decision – even if they are based on commitments suggested by the parties themselves. Third-parties can only appeal phase 2 decisions if they have been admitted by the FCO as third-party interveners in the proceedings.


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