Update: Peculiarities of the Merger Filing Requirements in Germany and Austria
As many dealmakers doing business in Europe have realized, German and Austrian merger filing requirements are sometimes a bit tricky, and in some respects different from the rules in place at EU level and in other EU member states. For instance, it may be that a transaction has to be notified in one of these two countries although the transaction leads to a mere minority shareholding or one of the undertakings involved achieved (almost) no local turnover.
In this context, it should be noted that companies violating a filing obligation are subject to appreciable fines and run the risk that the closing acts of the transaction are null and void under civil law. Particularly after the recent Spar decision of the Austrian Supreme Cartel Court, which led to a tenfold increase of the fine originally imposed by the Austrian Cartel Court, it can be expected that the amount of fines for competition law breaches will generally increase in Austria. Against this background, it is worth noting some existing peculiarities and some new developments regarding the filing thresholds:
Acquisition of Non-Controlling Minority Shareholding
Merging parties must carefully assess whether the acquisition of a minority participation falls within the scope of the German or Austrian merger control regimes:
In both Austria and Germany, share deals involving an acquisition of shares may also have to be notified if as a result of the transaction, a shareholding (in terms of voting rights or merely in terms of capital) of 25 or 50 percent is reached or exceeded.
The scope of German merger control is even broader: German merger control also catches transactions where the acquirer neither acquires control over the target company nor the shareholding thresholds are exceeded. Where a shareholding of below 25 percent is acquired, a transaction has to be notified if the acquirer may exercise “competitively significant influence” over the target company. Whether a merger filing is required under this test is very difficult to ascertain. As a rule of thumb, additional factors have to be identified that make the situation comparable to an acquisition of 25 percent. These so-called “plus factors” include any rights resulting from the shareholding position that may confer an (albeit non-controlling) influence over the decision-making process and the market behavior of the target company. The most common plus factors are the right to appoint members of the supervisory board and specific rights agreed in the shareholders’ agreement. However, as the decision-making practice of the German Federal Cartel Office (FCO) and the German courts has not led to clear and uniform rules, each situation has to be assessed on a case-by-case basis.
In both Austria and in Germany, whether a transaction is notifiable or not depends on the turnover achieved by the parties involved.
However, possible future developments in German antitrust legislation may lead to a retreat from the strict turnover thresholds. The German government has announced plans to generally extend merger control to cases where the transaction value (such as the purchase price) is extraordinarily high but the turnover thresholds are not exceeded (combined worldwide turnover: > EUR 500 million; turnover of one participating undertaking in Germany: > EUR 25 million; turnover of another participating undertaking in Germany: > EUR 5 million). Thus, a so-called “size-of-transaction test” — as recognised in the US — may be implemented in German merger control law. At the moment, such transactions fall “below the radar” of the FCO. The background to this initiative is the more frequent prevalence of cases where large companies buy innovative start-ups at a very high price. Due to the significant importance of the transaction for the acquirer, the German government assumes a risk of undesired market dominance in these circumstances. The relevant transaction value in this context has not yet been made definitive. However, in the preparatory discussions to the legislative process a transaction value of EUR 500 million has been proposed. At any rate, mergers may need to be notified in Germany in the near future even in the absence of local turnover of the target. A similar development may also take place at EU-level according to a recent speech of European Competition Commissioner Margrethe Vestager.
While in Austria no such development regarding start-ups is expected Austrian, merger control must also be taken into consideration for transactions involving targets with relatively low (Austrian) turnover. Under the Austrian merger control regime, a concentration has to be notified if the combined worldwide turnover exceeds EUR 300 million, the combined Austrian turnover exceeds EUR 30 million and the worldwide turnover of at least two of the undertakings concerned exceeds EUR 5 million each.
An important Austrian peculiarity is that when calculating the turnover for a possible filing obligation in Austria, not only do the controlling subsidiaries have to be considered, but also minority interests of at least 25 percent (in terms of voting rights or capital). In addition, the turnover of shareholders of the acquiring company has to be considered if the shareholding is at least 25 percent.
In addition, even though a kind of de minimis exemption applies (no notification obligation exists if the Austrian turnover of only one undertaking concerned exceeds EUR 5 million and the combined worldwide turnover of all other undertakings concerned does not exceed EUR 30 million) concentrations involving a target company generating no turnover in Austria can still be notifiable in Austria. In other words: the Austrian merger control regime does not operate two domestic turnover thresholds (as the German regime) and it is sufficient that the acquirer meets the domestic threshold.
Against this background, private equity companies with a large portfolio and worldwide turnover of more than EUR 270 million in particular should be aware of these Austrian provisions and should assess how much turnover their portfolio companies generate in Austria. If the acquirer already meets the domestic threshold and the target company has worldwide turnover of slightly more than EUR 30 million, a filing obligation in Austria is triggered.
It is only in very exceptional cases that it may be possible to successfully argue that a concentration has no effect on the Austrian market and that therefore there is no filing obligation. No general rule can be applied in this respect and a case-by-case analysis is required. The Austrian Federal Competition Authority has taken a very strict view in this respect.
Judith Feldner also contributed to the writing of this article.