Germany and Austria have finalized new guidelines clarifying the application of purchase price merger control thresholds a month after closing a public consultation on the proposed guidance.
The transposition of the EU Damages Directive encouraged a number of countries across Europe to update their competition laws more broadly, amid concerns that the existing rules do not fit the challenges of the digital age.
This issue became particularly apparent with Facebook’s plans to acquire WhatsApp. Despite a transaction value of US$19 billion, WhatsApp did not reach the necessary domestic turnover thresholds of most EU member states’ merger control regimes, let alone the thresholds of the European Commission. The European Commission obtained jurisdiction over this transaction only through the backdoor.
Until now, the parties to a transaction needed to exceed certain merger control thresholds in order for a transaction to be notifiable in Germany. The ninth amendment to the Act against Restraints of Competition (which is expected to come into force in June 2017) will add a transaction value threshold based on deal value. According to the new test, a transaction will be subject to review by the Federal Cartel Office if in the business year immediately preceding the transaction:
1. The combined aggregate worldwide turnover of all participating undertakings was more than €500 million (US$576.8 million); and
2. The domestic turnover of at least one participating undertaking was more than €25 million (US$29.3 million); and
3a. The domestic turnover of another undertaking concerned was more than €5 million (US$5.9 million);
3b. (i) Neither the target nor any other party had an individual turnover in Germany exceeding €5 million (US$5.9 million); and
(ii) The value of the consideration paid in return for the transaction exceeds €400 million (US$469.4 million); and
(iii) The target is active in Germany to a significant extent.
The transaction value includes the purchase price and any other monetary benefits paid by the buyer as well as the value of any liabilities the buyer assumes. The target will be considered to have a local nexus if it carries out activities in Germany that it might monetize in the foreseeable future, e.g. a significant user base in Germany or substantial R&D activities.
Austria has included a similar update of is merger control thresholds in its planned legislative amendment package.
Currently, a transaction is notifiable to the Austrian Cartel Office if the combined worldwide turnover of undertakings exceeds €300 million (US$352.1 million); the combined Austrian turnover of the undertakings exceeds €30 million (US$35.2 million); and each of at least two undertakings’ worldwide turnover is over €5 million (US$5.9 million). No notification is required if only one undertaking concerned has a domestic turnover exceeding €5 million (US$5.9 million) while the other undertakings’ combined worldwide turnover is less than €30 million (US$35.2 million).
The new amended regime, which will be effective from November 1, 2018, introduces an additional transaction value test. Even if the turnover criteria are not met, a transaction must be notified to the Austrian Cartel Office where in the last business year preceding the transaction:
⋅ The combined worldwide turnover of the undertakings exceeds €300 million (US$352.1 million); and
⋅ The combined Austrian turnover of the undertakings exceeds €15 million (US$17.6 million); and
⋅ The value of the consideration paid in return for the transaction exceeds €200 million (US$234.7 million); and
⋅ The target is active in Austria to a significant extent.
Full Content: Osborne Clarke