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German Regulator Steps Up Enforcement of Merger Standstill Obligation

by Martina Maier and Philipp Werner

The majority of merger control regimes around the world impose standstill or waiting period requirements for notifiable transactions, e.g. the US, the EU and most EU Member States. If a transaction meets the filing thresholds, it must be notified to the competent antitrust regulator and must not be closed without prior approval by the antitrust regulator or the expiration of the applicable waiting period.

Under German merger control rules, a notifiable merger must not be implemented without prior clearance decision. An infringement of the standstill obligation can (theoretically) lead to fines of up to 10 percent of the group’s worldwide turnover. In addition, the infringement of the standstill obligation renders the contracts ineffective under German merger control rules.

The German Federal Cartel Office (FCO) has recently taken a stricter approach to the enforcement of the merger standstill obligation. In the past, the risk of fines was minor if the merger did not lead to any serious competition concerns, if it was the group’s first infringement of the standstill obligation and if the company itself notified the FCO ex post of the implemented merger.

We see now a growing number of decisions imposing fines for the infringement of the standstill obligation (sometimes referred to as "gun jumping" in the United States). In May 2011, in the latest of a string of such decisions, the FCO imposed a substantial fine for infringement of the standstill obligation although the merger did not lead to any serious competition concerns and although the company had itself notified the implemented merger. These facts were only taken into account as mitigating factors for the calculation of the fine.

The European Commission has also recently imposed fines for the infringement of the standstill obligation.

In this changing environment, the filing requirement and the standstill obligation cannot be seen as a pure formality. It is therefore essential to always verify whether and in which jurisdictions a transaction is notifiable – and not to close the deal before the relevant competition authorities have cleared the deal.




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German Federal Cartel Office Launches Sector Enquiry into Food and Luxury Food Retail Market

by Martina Maier and Philipp Werner

The German Federal Cartel Office (FCO) announced yesterday that it has launched a sector inquiry into food retailers.  The FCO will focus its study on foodstuffs and luxury foodstuffs without explicitly naming particular goods in its press release but broadly stating that the enquiry will only focus on “selected product groups”.  According to the official statement from the FCO, which is only available in German, the authority seeks to improve its “understanding” of the relationship between retailers and suppliers.  The FCO plans to have a close look into the market power of the large retailers.  The assessment will also focus on “whether and to what degree the leading retailers enjoy a purchasing advantage over their competitors”.

The retailer market in Germany is very concentrated, with only four large retailers holding about 85 percent of the market.  The FCO thus plans not only to shed light into the  buyer power of the large retailers but will also focus on whether the “consolidation process” in the retail market has also led to a concentration in the procurement markets to the benefit of the largest retailers.

The sector enquiry should, according to the official statement from the FCO, support its analysis of the food purchasing market which is currently being investigated following dawn raids at the premises of more than 15 companies on the retail and the manufacturing level of branded products, mainly foodstuffs, on suspicion of co-ordinated retail price-fixing, in January 2010.

If the FCO will start an investigation into individual companies in the food retail market and how the sector enquiry will affect the investigation into branded goods, started in January 2010, remains unclear.  The case draws parallels to the UK where the Office of Fair Trading launched several market investigations and market studies into the UK food retailer and manufacturer markets.




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