Mergers between companies are subject to merger control by the Bundeskartellamt if they fulfil certain requirements. They may only be implemented after clearance by the Bundeskartellamt.
- What does the Bundeskartellamt control?
- Which cases are examined by the Bundeskartellamt?
- Problematic cases
- Course of a merger control proceeding
What does the Bundeskartellamt control?
Unlike mere cooperations, a merger entails a stronger and usually permanent structural link between two or more companies under company law.
Mergers between companies are generally allowed and even welcomed as the outcome of a free economic and social system. Mergers enable companies to reorganize their areas of activity or increase their innovation potential and thus stimulate competition.
On the other hand, mergers can also harm competition. If, for example, two or more competitors merge, the opposite market side (i.e. suppliers or customers) has fewer alternatives to choose from. This in turn will make it easier for the merged company to enforce higher prices, lower quality or in any other way worsen its offer in the market.
The Bundeskartellamt examines the conditions on the markets affected by the merger and assesses its effects on competition.
Which cases are examined by the Bundeskartellamt?
Not every company transaction is subject to merger control by the Bundeskartellamt. An obligation to notify only exists where a transaction is considered a concentration within the meaning of the German Act against Restraints of Competition and where the turnover of the companies involved exceeds certain thresholds.
Not only mergers in the stricter sense and majority holdings constitute a concentration within the meaning of the law. In some cases, the acquisition of a minority interest can also qualify as a concentration. This is the case, for example, if at least 25 per cent of the voting rights or capital shares of another company are acquired. Minority participations must also be notified if they enable the acquiring company to exercise a material influence on the other company. The acquisition of significant assets, such as a production site or a business division, can also constitute a concentration within the meaning of the law.
Merger projects are only subject to examination if they have a certain economic size. The merging companies must have a combined aggregate worldwide turnover of more than 500 million Euros. At least one of the companies must have a turnover of more than 25 million Euros and another of more than 5 million Euros in Germany. In addition, there are legal exemptions for companies or markets whose size is considered to be of minor importance from a macroeconomic view.
On merger projects that are subject to notification and on exemption rules under the Act against Restraints of Competition see in detail: Information leaflet on German merger control.
Mergers with a so-called “Community dimension” are examined under the EC Merger Regulation. In such cases the European Commission in Brussels is the competent authority to examine the merger. The Bundeskartellamt cooperates closely with the European Commission and is closely involved in the examination proceedings of potentially problematic cases.
On this issue see also: overview of European merger control published on the EU Commission's website.
Mergers notified to the Bundeskartellamt - 2007 to 2016
Under the Act against Restraints of Competition a merger must be prohibited by the Bundeskartellamt if it significantly impedes effective competition. This is in particular the case if the merger is expected to create or strengthen a dominant position.
Effective competition is significantly impeded if with the merger the companies involved gain a scope of action that is no longer sufficiently controlled by competition. This would enable a company to raise its prices, lower product quality, cut back on innovation investments or worsen its offer in any other way without incurring the risk of losing its customers.
Such a situation can arise if, for example, the merger of two competitors leaves their customers without sufficient alternatives to switch to another supplier.
Competition problems can also arise where the conditions on a market in which several major suppliers are active are favourable for “tacit collusion”, i.e. competitors have an incentive to implicitly coordinate their competitive behaviour, e.g. on prices. Such coordinated effects can be observed, for example, on the fuel markets in Germany.
Under certain conditions, mergers between suppliers and customers (so-called vertical mergers) and between companies active on neighbouring markets (so-called conglomerate mergers) can also raise competition concerns.
There are several factors that are relevant for assessing the conditions on a market. Among these are: the market shares of the companies involved in the merger and of their competitors, the availability of competition-relevant resources (e.g. patents, production sites, distribution networks), barriers to entry for newcomers, limits to the expansion of suppliers already active on the market, switching costs for customers and the purchasing power of the opposite market side.
For further information see:
Course of a merger control proceeding
Merger projects have to be notified to the Bundeskartellamt and must not be implemented for the duration of the merger control proceeding. This prohibition prevents problematic mergers from having to be subsequently dissolved. In return, the law provides for strict time limits for merger control proceedings.
The proceeding begins upon receipt of the complete notification at the Bundeskartellamt. The authority then has one month to decide whether the merger project needs to be examined in more detail or can be cleared (so-called first phase). The vast majority of the more than 1,000 merger cases notified to the Bundeskartellamt every year can be cleared within the first phase of merger control proceedings.
If there is any indication that the merger may cause competitive problems which cannot be dispelled during the first phase proceedings, a formal in-depth investigation is initiated (so-called second phase), extending the time frame to up to a total of four months from the date of notification.
The Bundeskartellamt has extensive investigatory powers enabling it to obtain a comprehensive picture of the conditions of competition. It can, for example, demand all relevant documents and business data from companies and associations of companies. It also regularly conducts extensive market surveys and interviews market participants on specific issues.
As a rule, if a merger threatens to impede effective competition it has to be prohibited. Potential impediments to competition can to some extent be eliminated through commitments undertaken by the companies. For example, a company can be obliged to divest certain parts of the company or business divisions to its competitors.