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Merger Control: Germany Facilitates Implementation of M&A Transactions

25 June 2009
Mayer Brown Legal Update

On Friday, 13 February 2009, the German Bundesrat, the upper house of the German parliament, passed the Dritte Mittelstandsentlastungsgesetz (MEG),1 the objective of which is to relieve the regulatory burden of small- and medium-sized companies in Germany. One element of the MEG concerns the amendment of the German merger control regime.

In general, a pre-merger notification by the companies, accompanied by the authority’s clearance, will be required where the worldwide turnover of the companies concerned is greater than EUR 500 million, one party has a turnover in Germany of more than EUR 25 million, and another party has a turnover in Germany of more than EUR 5 million. In this respect, the MEG will relieve not only small- and medium-sized companies of the notification obligation but also international corporations acquiring businesses with insignificant activities in Germany. The amendment entered into force on 25 March 2009.

Legal situation pre-amendment

Before the MEG, German pre-merger control clearance was required, with regard to transactions, where the companies concerned exceeded a worldwide turnover of EUR 500 million in the preceding fiscal year and at least one company concerned generated more than EUR 25 million in Germany. There were only a limited number of exceptions to this general requirement, such as where the merger had no domestic effect; where a so-called minor market was concerned; or where one of the undertakings involved did not generate total worldwide revenues of more than EUR 10 million.

The applicability of German merger control imposed the obligation — usually on the acquirer —  to notify transactions to the Federal Cartel Office (FCO), and parties had to wait to close any given deal until clearance from the FCO had been obtained. The filing obligation and timing effects also had to be taken into account in the transaction process where a “non-German deal” was concerned, i.e., where the deal was implemented abroad and had only negligible effects on the competitive structure of the German market.

Necessity for amendment

EU merger control applies two cumulative turnover thresholds in order to filter out transactions without sufficient impact in the European Union. German merger control, on the other hand, was applicable as soon as only one of the undertakings concerned had revenues of a certain size in Germany. This particularity, in addition to the fact that the FCO used to apply the no-domestic-effects exemption restrictively, led the FCO to frequently seize jurisdiction even though the competitive effects in Germany were marginal, or —in a not insignificant number of cases — the deal did not even have a real nexus to the domestic market.
Therefore, in cases where one company (usually the acquirer) had a presence in Germany with domestic turnover of more than EUR 25 million, almost each and every transaction it was involved in, technically, had to be notified to the FCO. As a precaution, in order to avoid a breach of the suspension obligation, and the risk of fines, most companies decided to notify, although it was often difficult to convey to company representatives the motivation of the FCO to investigate cases with marginal impacts on the domestic market, especially since most transactions with their focal point abroad received unconditional clearance in the first phase.
Besides the financial burden of filing fees and legal fees, parties had to factor the timing of the German clearance process into the transaction planning (although it is recognized that the FCO was prepared to clear unproblematic transactions speedily). The accumulation of several merger control regimes, which provide for different formalities and time limits, can delay even unproblematic mergers or potentially lead to their withdrawal. Additionally, the FCO had to dedicate non-negligible resources to assess, clear and administer these cases.

It was the International Competition Network, the international body devoted exclusively to competition law enforcement, and whose members represent national and multinational competition authorities, that recommended that “notification should not be required unless the transaction is likely to have a significant, direct and immediate economic effect within the jurisdiction concerned. This nexus to the jurisdiction should be measured by reference to the activities of at least two parties to the transaction in the local territory.”

Second domestic turnover threshold

By means of the MEG, an additional turnover threshold will complement the jurisdictional test. Hence, besides the worldwide turnover threshold of EUR 500 million, at least one of the undertakings concerned will have to generate more than EUR 25 million and another party more than EUR 5 million in Germany in the last fiscal year.

Notification requirement

If those turnover thresholds are met, transactions, including those that do not concern assets, or companies incorporated in Germany (foreign-to-foreign transactions), have to be notified to the FCO. Transactions have to be notified before closing — they can even be notified before signing — and the deal must not be consummated before the clearance of the FCO has been obtained, or the respective waiting period has been expired. Failure to pre-notify and closing prior to clearance are subject to fines: just recently, the FCO imposed such fines in two cases, amounting to more than EUR 4 million on both occasions. Legally, any act of implementation is considered invalid until the final clearance is obtained or deemed to have been obtained.
Technically, all undertakings concerned are responsible for submitting the notification. In practice, however, the purchaser not only leads the preparation of the notification, but also submits it on behalf of all other parties involved.

Unlike many other jurisdictions, the notification to the FCO does not require the submission of a lengthy filing form: companies can simply submit a letter. The level of detail of a notification depends on the extent to which the concentration raises competition concerns. A notification typically has to identify the transaction and the parties to the transaction, including their general activities, their global, EU-wide and domestic turnover, and their market shares if they exceed 20 percent in Germany. While the practice of submitting a letter may seem more relaxed than the requirements in other jurisdictions, companies should not forget that an incomplete or incorrect notification can lead to severe fines.

Companies seeking to submit a notification before signing need to be aware of the fact that the notification is made public on the FCO’s web site (, which is understood to be regularly monitored by press, financial institutions, etc. However, the notification itself, and therefore all sensitive information submitted to the FCO, remains confidential.

The FCO charges fees the amount of which are determined according to its personnel and material expenses, as well as the economic significance of the concentration. While in principle the fee will not exceed EUR 50,000, in simple cases, the fee should be below EUR 10,000.
Finally, as a pure formality, the FCO has to be informed when consummation of the concentration has occurred.


There is no deadline for the notification. However, as a concentration must not be consummated prior to clearance, a complete notification must be submitted before the contemplated closing date, taking into account the mandatory waiting periods. The FCO hardly exempts parties from the obligation to suspend. The waiting period is as follows:

  1. The first phase lasts for one month after submission of a complete notification. Concentrations that do not raise concerns are deemed to have been cleared after one month, or — as it happens in practice — within or at the end of the first phase. The FCO clears the deal by means of a simple letter of the FCO stating that the concentration does not fulfill the prohibition criteria. When the FCO considers that a concentration raises concerns and may be prohibited, it must initiate the main proceedings (second phase).

  2. The second phase takes four months after submission of a complete notification, during which the FCO conducts an in-depth investigation of the transaction. The period can be extended if the notifying parties consent to this. At the end of the second phase, the FCO either issues a clearance decision (potentially subject to conditions or obligations) or a prohibition decision. Unlike first-phase clearance decisions, both types of second-phase decisions are subject to judicial review.

Practical consequences of the amendment

The amendment will enhance legal certainty. The uncertainty that existed in relation to borderline cases where it was not clear-cut whether or not the domestic effects doctrine — as interpreted by the FCO — was available will disappear. Fail-safe notifications or precautionary “information letters” that companies may have sent in the past to the FCO regarding a transaction which was considered not to produce domestic effects will no longer be necessary. The number of transactions that will have to be notified to the FCO should be noticeably reduced — probably by around one-third.2 Companies that generate more than EUR 25 million in Germany will no longer be obligated to automatically include the notification requirement in the transaction planning. At least one obstacle to closing will be abolished. The amendment will also reduce bureaucracy and financial burdens for the companies involved while freeing FCO resources to allocate to other enforcement units (such as those fighting against cartels).

Furthermore, the concern that, post amendment, transactions capable of seriously impeding the competitive structure in Germany will escape from pre-merger control does not seem to be well-founded.

First, the additional EUR 5 million threshold is still set at a low level compared to those in other EU countries, and in particular compared to the size of the German economy. In addition, post amendment, a considerable number of transactions with potentially no substantive effects in Germany will have to be notified to the FCO. It might even be argued that the second threshold is still too low in order to relieve small- and medium-sized companies, considering that the European Commission defines micro-, small- and medium-sized enterprises as companies that employ fewer than 250 persons and have an annual turnover not exceeding EUR 50 million.3

Second, the FCO’s analysis of the notifications received in the last few years4 demonstrates only a few cases in which escape from pre-merger control under the new regime would raise competition concerns. Such cases, one could argue, could be dealt with adequately under the ex post investigation regime regarding abuses of a dominant position.

Third, the amendment is in line with the rationale of the already established minor-market exemption. The minor-market rule reflects the legislator’s intention to exempt transactions from pre-merger scrutiny where a business of insignificant economic size is concerned — i.e., in 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 15 million in the preceding calendar year.

Finally, also in relation to small- and medium-sized companies, German merger control continues to be applicable to many more transactions than merger control regimes in most other EU countries. This is because the German interpretation of the notion of “concentration,” which is the triggering event for the application of merger control, includes the acquisition of a minority stake of 25 percent, or even the acquisition of a competitively significant influence below the 25 percent stake. However, in the majority of EU countries and at Community level, a concentration is deemed to arise where there is a change in control of the acquired entity.


The introduction of a second domestic turnover threshold into German merger control law will facilitate the process and implementation of M&A transactions with effects in Germany. The double turnover threshold will lead to further harmonization of the German merger control system with merger control regimes at EU level and most other EU countries. It will relieve not only small- and medium-sized companies, but also  internationally operating corporations with not insignificant business activities in Germany, of regulatory hurdles.


1. Third Act to Alleviate the Burden for small and medium-sized companies, see
2. Estimate reproduced in the MEG’s preamble.
3. Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises; OJ L 124/36 of 20 May 2003. Within the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million. Within the SME category, a micro-enterprise is defined as an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million. The FCO does not follow this static approach but rather defines small and medium-sized companies in relation to the structure of the market it is active in; see Information leaflet of the Bundeskartellamt on the possibilities of cooperation for small and medium-sized enterprises.
4. Actiity Report of the FCO 2005/2006, see

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