German merger control: Federal Cartel Office has a „second string to its bow“

On 7 November 2023, the 11th Amendment to the German Act against Restraints of Competition (“ARC”) entered into force (see our Noerr News). It has significantly extended the intervention powers of the German Federal Cartel Office after the conclusion of a sector inquiry, specifically regarding merger review of transactions affecting the respective business sector (for more, see our Competition Outlook 2023).

Federal Cartel Office’s expanded intervention powers in merger control

Since July 2005, the Federal Cartel Office has been authorised to investigate individual business sectors or types of agreements if, on the basis of corresponding circumstances, it could be assumed that competition was restricted or distorted (sector inquiry). The Federal Cartel Office has made extensive use of this power.

Prior to the latest amendment of the ARC, publication of a final report generally constituted the final, formal end of a sector inquiry. Specific remedial measures could only be taken by the Federal Cartel Office if the authority established in separate proceedings an infringement of the cartel prohibition or an abuse of market power. Now that the 11th Amendment to the ARC added the new section 32f ARC, the Federal Cartel Office also has the right to take preventive action, even if an actual infringement of the antitrust laws has not yet occurred. This new power of intervention will also have an impact on German merger control.

Where there are objectively convincing indications that future concentrations will significantly impede effective competition in the sector investigated during the sector inquiry, the Federal Cartel Office can now require undertakings in that sector to notify all future M&A transactions. The usual turnover thresholds for German merger control will then not apply anymore. Instead, it will be sufficient for triggering the notification obligation if the acquirer generated turnover of more than EUR 50 million and the target company of more than EUR 1.0 million in Germany. This special notification obligation initially applies for three years but can be extended by up to three times by three years in each case.

The Federal Cartel Office will now also have the authority to order the divestment of parts of an undertaking or assets. To that end, the Federal Cartel Office must first establish that there is a significant and continuing distortion of competition on at least one Germany-wide market and that no other appropriate remedial measures are available. However, such a drastic order can only be issued against a market-dominant undertaking or an undertaking with paramount significance for competition across markets (section 19a(1) of the ARC).

Undertakings without significant market power but whose conduct and relevance for the market structure significantly contribute to the distortion of competition may only be subject to less invasive remedial measures. Such measures can be conduct-related or of a structural nature and, if necessary to end or mitigate the distortion of competition, can extend to unbundling obligations at most (i.e. the accounting or organisational separation of corporate or business divisions). Less intrusive remedial measures available to the Federal Cartel Office encompass, inter alia, ordering an undertaking to grant access to data, interfaces and networks, to require the use of certain contract types or contractual terms, or abiding by other requirements, or to establish transparent, non-discriminatory and open norms and standards.

Outlook

Orders by the Federal Cartel Office which make use of its new powers of intervention are supposed to be adopted within 18 months after the final report on the sector inquiry has been published. The Federal Cartel Office has published two final reports since the new legal provisions entered into force on 7 November 2023 and, respectively, in the preceding 18 months, the Federal Cartel Office published final reports of two sector inquiries: one concerning the Municipal waste collection and hollow glass processing sectoral inquiry (28 December 2023) (currently only available in German, but available as a press release in English) and the other concerning Online advertising sectoral inquiry (15 May 2023) (currently only available in German, but available as an executive summary and press release in English).The Federal Cartel Office may be considering the use of its new powers at least in these two sectors. This is all the more possible in case of the sector inquiries concerning Refineries and wholesale fuel trade and EV charging infrastructure sectors which are still ongoing (both press releases  currently only available in German).

 

This article is part of the Competition Outlook 2024. You can find all Competition Outlook articles here.