German Government approves draft proposal while further reshaping German merger control rules
Significant changes to German Competition law are coming closer. The German Government approved the key provisions of the reform officially proposed by the Federal Ministry of Economic Affairs and Energy. We provide a recap of these rules below. The new governmental draft sets out further amendments relating to merger control. Following the legislative process, the reform is expected to enter into force by the end of this year.
A brief recap of the key provisions proposed by the Federal Ministry (see our related publication here) which have now been approved by the Government:
- Extended review powers for the Federal Cartel Office (“FCO”) to intervene vis-à-vis companies in the digital economy, including new rules addressed to companies with market power as intermediaries in two-sided markets and prohibiting the refusal of access to essential data and networks; and rules addressed to companies with a “paramount significance across markets”, prohibiting certain types of behaviour, such as self-preferencing on trading or brokerage platforms.
- Adjusted and re-focused merger control rules, including an increase of the second domestic turnover threshold and the introduction of a new provision enabling the FCO to impose an extended filing obligation for transactions in specific sectors which do not meet the monetary thresholds.
- Possibility for companies to informally consult the FCO regarding cooperation projects with competitors and apply for a “comfort letter”.
- Accelerated FCO intervention via interim measures if an infringement appears to be highly likely, or if there is an imminent threat of serious harm to another company.
- Implementation of the ECN+ Directive, including a codification of the FCO’s leniency programme; the extension of the FCO’s powers of investigation in cartel proceedings; and far-reaching changes in the field of cooperation and disclosure obligations of companies affected by cartel fine proceedings.
- Adjustment of cartel damage claims provisions, introducing a rebuttable presumption that certain transactions with cartel participants are affected by the cartel.
Further amendments in the area of merger control introduced in the draft approved by the government
In view of numerous unproblematic notifications, the governmental draft pursues an even stronger focus on complex cases:
- Beyond the ministry’s proposal to increase the second domestic turnover threshold from EUR 5 million to EUR 10 million, the governmental draft now increases also the first domestic turnover threshold from EUR 25 million to EUR 30 million.
For companies, this change will likely lead to a noticeable relief by reducing costs and burdens associated with merger control proceedings in Germany. It is expected that the number of merger control filings in Germany will drop by c. 20%.
The governmental draft further introduces important amendments to the new far-reaching provisions which enable the FCO to impose an extended filing obligation on companies operating in specific sectors in circumstances where the target falls below the standard turnover thresholds, but has achieved more than EUR 2 million, of which two thirds were generated in Germany:
- The worldwide turnover threshold for the acquirer has been increased from EUR 250 million to EUR 500 million;
- The acquirer must command a share of at least 15% of the supply or demand in the relevant economic sector in Germany; and
- The FCO must have carried out a sector inquiry by means of which the structures and competitive conditions in the relevant economic sector were examined and analysed.
While these amendments introduce important hurdles for the FCO to impose an extended filing obligation, the new 15% threshold which – apart from not being a ‘market share’ threshold – remains blurry and will be difficult to handle in practice.
Finally, aiming to support public health care objectives and to provide better and close-to-home health care, the governmental draft introduces a remarkable exemption from merger control in the health sector:
- Concentrations between hospitals will be exempted from merger control, provided that such hospitals qualify for government subsidies by the hospital structure fund (Krankenhausstrukturfond) and that the Federal State responsible for handling the application for such subsidy confirms that the merger otherwise complies with competition law.
- Such transactions will need to be closed by 31 December 2025 in order to benefit from the exemption.
- The government draft notes, however, that based on a continuous evaluation of the relevant use cases and their impact on the competitive environment, the exemption might possibly be extended beyond 2025.
The key objective of the German reform is to enable more effective control of large digital companies, which may turn the FCO into a “gatekeeper” for the digital sector (for more details see here). These notable rules are now coming closer.
While the ministry’s draft proposal raised an important debate around the need for special rules to intervene against the GAFA-players and other large companies in the digital economy, the key provisions of the reform have now been approved by the German Government, including a number of amendments which primarily relate to merger control.
It remains to be seen whether in the course of the legislative process relevant stakeholders will take the opportunity to shed more light on the systematic relationship of the new rules with established concepts in the abuse of dominance framework and the interpretation of several new and vague terms which are foreseen by the reform.