German Federal Minister of Economics and Energy overrides the prohibition of a slide-bearing business joint venture for environmental policy reasons
German Economics Minister Peter Altmaier granted a ministerial approval for the Miba/Zollern joint venture which was previously prohibited by the Federal Cartel Office. The authorisation is subject to R&D investment commitments.
The Austrian company Miba AG (“Miba”) and Germany-based Zollern GmbH & Co. KG (“Zollern”) plan to merge their hydrodynamic plain bearing production activities in an Austria-based joint venture in which Miba would hold 74.9% and Zollern 25.1%. The slide bearings of the joint venture play an important role for the energy turnaround which is an essential element of the sustainable environment policy of the German government. The positive effects of the transaction for the environment and climate protection are held to outweigh the competitive disadvantages of the merger. Together with the authorisation issued on 19 August 2019 the Minister imposed several conditions and commitments on the parties, especially that they operate the joint venture for at least five years and invest at least €50 million in Germany during this period.
The instrument of the German “Ministererlaubnis”
If a merger is prohibited by the Federal Cartel Office (Bundeskartellamt, FCO), the parties may appeal to the Higher Regional Court of Düsseldorf (Oberlandesgericht Düsseldorf) and, subsequently on points of law, to the Federal Court of Justice (Bundesgerichtshof). Instead, or in addition, a special application for approval may be made to the Minister of Economics and Energy. The two legal remedies differ insofar as the Courts review the FCO’s prohibition decision as to its legality on competition law grounds, while the Minister does not review the FCO’s assessment. Rather, he is bound by the FCO’s statement of facts (although he may identify new facts subsequent to the FCO’s decision) and its finding that the concentration would present a significant impediment to effective competition.
However, the Minister may authorise a merger if the restriction of competition is outweighed by the overall economic advantages of the merger, or if it is justified by an overriding public interest. A factor that has to be taken into consideration is ensuring the international competitiveness of important industries. Public interest factors that have been accepted in past cases are, e.g. safeguarding technical know-how of companies being in financial or industrial difficulties, the potential for reductions of subsidies (Daimler-Benz/MBB), the long-term security of energy supply (E.ON/Ruhrgas), research in the health sector (Universitätsklinikum Greifswald) or the protection of employees through collective agreements and operational co-determination (Edeka/Tengelmann).
It is commonly accepted in Germany that the ministerial approval should only be applied with utmost caution and prudence. This conviction is reflected in the ministerial practice. Since 1973 when the instrument was introduced in German competition law (together with the merger control regime), only ten ministerial authorisations have been granted, most of them with far-reaching conditions and commitments. In the last more than 25 years, the number of approvals (including the Miba/Zollern joint venture) is limited to four cases.
In the beginning, the ministerial approval was a particularity of the German competition law. Since then, public interest criteria have been introduced in an increasing number of national legislations, most recently in South Africa. On the other side, a ministerial approval is not known in the European merger control regime.
Public interest: Know-how and potential for innovation for the energy turnaround and sustainability
In his decision the Minister highlights that “know-how and potential for innovation for the energy turnaround and sustainability” are paramount public interests. He sets out that Miba/Zollern’s know-how and innovation potential will have a positive impact on transforming the energy system and thus on climate protection. It is only through joint research that the parties will make decisive technological progress in slide bearings for wind turbines, for example, by increasing their efficiency and reducing noise reduction. Furthermore, the slide bearings of the joint venture will reduce the fuel consumption of other big renewable-energy power plants and of large marine engines. The transaction will therefore make an important contribution to moving forward the sustainable environment policy.
In the present case, the Minister deems it necessary to safeguard the positive effects of the joint venture by extensive binding conditions and commitments. Therefore, Miba and Zollern are obliged to operate their joint venture for at least five years and to invest at least €50 million in Germany during this period. This again follows the example of previous cases.
Points of discussion
The Miba/Zollern case particularly raised the public’s attention for two reasons. The first question was if medium-sized companies acting on relatively small markets can qualify for a ministerial approval. The decision strengthens the exceptional character of the ministerial approval and the high standards of proof for the alleged overall economic advantages. If these requirements are met the size of the company is not estimated to be significant. The second question concerned the proposals of the French and German Economics Ministers for a reform of the European industry policy. Here the Miba/Zollern decision explicitly underlines that the German ministerial approval takes only national aspects into consideration. The public interest criteria can be manifold and diverse but, in any case, must have a sufficient impact on the national economy as a whole.
The Minister announced in his press release that in the upcoming reform of German competition law the government will propose an amendment designed to specify the conditions for ministerial approval, both regarding the procedure and the substantive conditions of the authorisation. This is intended to clarify the exceptional nature of the ministerial approval.