Legal and enforcement framework
Which legislative and regulatory provisions govern merger control in your jurisdiction?
The provisions governing merger control in Germany are set out in the Act against Restraints of Competition (ARC), in particular Sections 35 to 43a. In addition, the Federal Cartel Office (FCO) has published several guidance papers and notices summarising its interpretation of certain provisions and best practices. Most of these documents are also available in English on the FCO website (although only the German language versions are authentic).
Do any special regimes apply in specific sectors (eg, national security, essential public services)?
Direct or indirect acquisitions by a foreign investor of 10%, 20% or 25% of the voting rights in a German company may be subject to the German foreign investment review regime set forth in the Foreign Trade Act and its accompanying ordinance. On 27 April 2021, the German Federal Government passed the 17th Ordinance amending the Foreign Trade Ordinance (the 17th FTO Amendment), which aims to conclude the reforms of Germany’s national investment control legislation that began in the year 2020. The German government may ultimately prohibit such acquisitions or impose obligations if this is necessary to safeguard public order or security. In this regard, an acquisition by a German company in which a foreigner holds 10%, 20% or 25% of the voting rights may be considered to constitute an indirect acquisition by a foreign investor.
A notification requirement applies to direct or indirect acquisitions of at least 10% or 20% of the voting rights if the German target is active in certain areas. Such transactions must be reported to the Federal Ministry of Economic Affairs and Climate Action (FMEC). Notification requirements apply for direct and indirect holdings by non-EU/EFTA purchasers of at least 10% of German companies active in the following sectors: critical infrastructure, the provision of critical components, software or cloud computing services in this area, telecommunications surveillance, telematics infrastructure, radio, telemedia and print media with a wideranging impact.
The 17th FTO Amendment recently increased the review thresholds for certain already covered sectors from 10% to 20% of voting rights: certain pharmaceuticals, medical devices, personal protective equipment and in vitro diagnostics.
Following the 17th FTO Amendment, new notification requirements apply for direct and indirect holdings by non-EU/EFTA purchasers of at least 20% of German companies active in the following sectors: satellite systems, semiconductors, automatized or autonomous driving or flying, air and space travel, robotics, artificial intelligence, cybersecurity, network technologies, access to sensitive information, nuclear technology, quantum technology, additive manufacturing, access to vital facilities, critical raw materials, access to smart meter gateways and food security.
Further, a notification requirement applies if the target manufactures or develops goods that are subject to export control, certain weapons, military equipment or technology used to process classified government information or components thereof, provided that the acquirer is foreign (including acquirers from EU or EFTA states).
According to a general ruling dated 27 May 2021, some additional mandatory information (such as purchase price and number of employees) must now be provided as part of the notification. Furthermore, since the middle of last year, a mandatory Excel sheet is a prerequisite for a complete filing.
The FMEC may ex of icio review across sectors acquisitions of at least 25% of the voting rights in a German target by acquirers from outside the European Union or EFTA. There is no notification requirement for such acquisitions. However, in order to obtain legal certainty, an acquirer may request a certificate of non-objection from the FMEC.
Which body is responsible for enforcing the merger control regime? What powers does it have?
The FCO, based in Bonn, is mainly responsible for enforcing the merger control regime. The FCO is an independent federal authority assigned to the FMEC. The FCO has approximately 400 employees. Decisions are taken by a total of 13 decision divisions, organised mainly by economic sector. Within the decision divisions, each case is decided by a collegiate body consisting of the respective division’s chairman and two associate members. All decisions must be majority decisions. The decision divisions decide autonomously and are not subject to instructions in their decision making.
The FCO has a wide range of powers. In particular, it may prohibit transactions or clear them subject to obligations or conditions. To safeguard its review powers, it may issue cease and desist orders or order the dissolution of a merger under certain circumstances. The FCO may impose substantial fines for failure to comply with merger control rules. It also has considerable information-gathering powers.
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Mondaq_Merger Control Comparative Guide
This article was first published in: Mondaq, Merger Control Comparative Guide, 1 February 2022