A merger must be prohibited by the BKartA if it ‘would significantly impede effective competition’, in particular if it leads to the creation or strengthening of a dominant market position.
In 2013 the dominance test was replaced by the EU significant impediment to effective competition (SIEC) test. However, the dominance test remains the key standard example of SIEC. In the context of dominance (as an example of an SIEC), the principles set out in the 2012 Guidance document on the dominance test continue to be relevant. The BKartA applies the analytical framework of the SIEC test in a similar way to the European Commission.
According to the definition of dominance under the GWB, a dominant position exists if one or more enterprises have no competitors at all, are not subject to material competition, or are in a superior market position that enables them to act independently of competitors, customers and other market participants. The GWB contains a number of rebuttable presumptions as to the existence of dominant market positions. There is a presumption of single dominance where a single company has a share of at least 40 per cent of the market. Collective dominance is presumed if three or fewer enterprises have a combined market share of at least 50 per cent, or if five or fewer enterprises have a combined market share of at least two-thirds. Collective dominance is an issue that was at the heart of a number of recent high-profile mergers reviewed by the BKartA and the German courts. In contrast to the presumption of single firm dominance, the parties themselves must rebut the presumption of collective dominance (by showing, inter alia, that there would be no implicit collusion between the presumed jointly dominant companies). Because the BKartA is under a statutory obligation to fully investigate all relevant factors, these presumptions function more like soft safe harbours. Before the courts, they continue to play a slightly more important role.
The BKartA often considers complex economic arguments. Besides market share levels, the factors it takes into account include the competitive structure of the market, barriers to entry, potential competition, closeness of competition (a factor whose weight appears to have gained importance in recent years), switching costs, access to customers (eg, importance of distribution networks and brands), access to suppliers, vertical integration, structural links to competitors, suppliers and customers, and also, if relevant, the parties’ financial resources. This trend has been further evidenced by the Guidance on Substantive Merger Control. One of the two prohibition decisions of 2019 concerned a horizontal overlap case in the area of plain bearings that are used in large bore engines. The BKartA concluded that the two parties were the major competitors in a market which was already highly concentrated and where it is already complex and costly for customers to switch to one of the few alternative suppliers. The BKartA also noted that no new companies were likely to enter the market for the production of the special bearings because this would require extensive knowledge of technological development and manufacturing processes and a high level of investment.
There are three exceptions to this rule. A concentration cannot be prohibited by the BKartA even if it would significantly impede effective competition in three situations.
The first is where the parties can show that the merger will result in an improvement of market conditions on another market, which outweighs the detrimental effects on competition. The most recent application of this clause can be found in the clearance by the BKartA of the takeover of Mediengruppe Frankfurt by the Ippen Group, with both companies publishing newspapers in the Hesse region in Germany (possible negative effects existed on some regional reader markets; however, improvements on the reader market in another region were viewed, on balance, as being significantly more important).
The second applies if the relevant market has been in existence for at least five years and had a total annual value of less than €15 million in the last calendar year (de minimis market clause). It is worth noting that this rule does not apply where a concentration is notifiable pursuant to the second set of thresholds. This de miminis rule does also not apply in relation to markets in which the service is provided free of charge to users. For the purposes of assessing the €15 million threshold, only the value of the German market has to be taken into account, even if the geographical market is wider than the national market. If the relevant geographical market is narrower than the national market, the relevant geographical market must be taken as the reference point for the calculation.
However, the clause should be assessed carefully, as, in a limited number of cases and under clearly defined conditions, the BKartA is allowed to bundle closely related geographic and product markets and to aggregate their volumes of sales when calculating the total size of the German market for the purposes of the de mimimis market clause. This can be the case in particular where:
- a product market has been artificially separated into different de minimis markets within Germany;
- the transaction affects several homogeneous geographically neighbouring de minimis markets;
- the transaction affects several neighbouring product markets that have comparable competitive market structures; or
- the parties operate on a local de minimis market but also on non-de minimis upstream and downstream markets where the conditions of competition on the de minimis market directly determine which competitors are able to operate on the upstream or downstream markets.
Although the above principles were developed at a time where the legal framework was different (the question of de minimis markets played a role in determining whether there was a notification obligation in the first place), it is likely that the jurisprudence of the courts continues to be applied.
The third exception is a specific rule for the failing firm defence in the press sector. Dominant publishers will be allowed to acquire a small or medium-sized competitor even if this leads to the strengthening of a dominant market position, provided that the acquired publisher meets specific financial underperformance criteria (which are clearly defined by the law and differ from the failing firm defence criteria) and that no other acquirer could be found.
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