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German Court Protects the Confidentiality of Leniency Submissions

by David Henry, Martina Maier and Philipp Werner

In the wake of the seminal European Court of Justice (ECJ) ruling in case C-360/09 – Pfleiderer AG v Bundeskartellamt, Amtsgericht Bonn (Bonn local court), in a decision rendered on 18 January 2012 (case 51 Gs 53/09), has refused to give a damages claimant access to leniency submissions held by the German Federal Cartel Office (FCO).  Although strongly welcomed by the FCO, the decision is a blow to potential damages claimants in Germany, especially as it is not open to appeal.

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German Federal Cartel Office Consults on Substantive Merger Control – Draft Guidance Focuses on Market Dominance

by Philipp Werner, Martina Maier and David Henry

On 21 July 2011, the German Federal Cartel Office (FCO) published a consultation paper on substantive merger control called “Draft Guidance on Substantive Merger Control” (Draft Guidance).  This is the first time the FCO has consulted on a guidance paper.  Comments on the draft guidance can be submitted until 21 September 2011.

Against the fact that the German merger control regime catches a large number of mergers (around 1000 mergers a year) and that the FCO has a strong enforcement record (15 Phase II- proceedings in 2010), the Draft Guidance provides detailed insight in the approach taken by the FCO in assessing mergers.

German merger control is applicable if the following three cumulative turnover thresholds are met: the aggregate worldwider turnover of all undertakings concerned exceeds € 500m, the turnover in Germany of one undertaking concerned exceeds € 25m and the turnover in Germany of another undertaking concerned exceeds € 5m.  In addition, German merger control catches the acquisition of control as well as the acquisition of a minority shareholding of 25 percent or – in cases of “competitively significant influence” even shareholdings below 25 percent.  The Draft Guidance does not deal with the question under which conditions German merger control is applicable, it only concerns the substantive analysis of mergers which fall under German merger control.

The Draft Guidance reflects the existing approach of the FCO rather than proposing an new way of thinking. While it also encorporates economic considerations, it largely provides a agency friendly interpretation of the FCO’s decision practice and relevant case-law.  Still, it shows a move towards more economic analysis and a deviation from the FCO’s traditional, more market structure oriented approach.  But it seems unlikely that the strict enforcement policy of the FCO will change as a result of the new guidance paper.

The Draft Guidance focuses on the question whether a merger will lead to the creation or strengthening of dominance.  Unlike in other jurisdictions, such as the US and EU, the creation or strengthening of a dominant position is the criterion for the prohibition of a merger in German merger control.  While discussions are under way about the introduction of the  SIEC test (“significant impediment to competition”) in an effort to harmonize German with EU merger control rules, the FCO makes it clear that it anticipates that the Draft Guidance will remain relevant even if the underlying test changes.

In terms of substance, the Draft Guidance distinguishes between horizontal, vertical and conglomerate mergers and between single firm dominance and collective dominance.  The definition of dominance and the substantive assessment relies on standard theories of harm and recognised economic theories that are also used by other competition authorities such as the European Commission.

Some elements of the Draft Guidance reflect a traditional German understanding of merger control which may differ from the approach in other jurisdictions.  Thus, the Draft Guidance suggests that the purpose of merger control is to protect competition as [...]

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German Antitrust Regulator Steps Up the Fight Against Gun-Jumping

by Martina Maier and Philipp Werner

More than 100 countries worldwide have merger control regimes.  In the majority of these regimes, including the U.S., EU and most EU Member States, parties to a transaction may not close a deal without approval from the competition antitrust regulator.  An infringement of this obligation, or "gun-jumping", carries risks that are generally well understood.  But companies should be aware that the German Federal Cartel Office (FCO) has recently taken a more aggressive approach in its enforcement of gun-jumping, in particular concerning the fining policy for gun-jumping.

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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.

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.