12th Amendment to the German Act against Restraints of Competition: new rules especially for merger control

The ministerial bill for the 12th Amendment to the German Act against Restraints of Competition ("ARC") provides for extensive changes to German competition law and, in particular, to merger control. The planned changes include higher turnover thresholds, an increase of the transaction value threshold, a new short-form notification procedure ("Phase 0"), enhanced legal remedies against ministerial authorisations, additional powers for the German Federal Cartel Office in public procurement procedures and increased legal certainty with regard to vertical agreements. The reform is equally relevant to companies, M&A teams, investors and transaction advisers. This article explains the key changes being introduced by the 12th Amendment to the ARC and their practical implications for acquisitions, mergers, public procurement and cooperations.

Higher turnover thresholds in merger control under the 12th Amendment to the ARC

In order to protect companies and the German Federal Cartel Office from excessive notifications and to reduce the administrative burden they involve, the ministerial bill provides for a significant increase of the merger control turnover thresholds:

The proposed increase of the turnover thresholds makes sense in principle. The economic significance of the worldwide turnover threshold, which has remained unchanged for years, is no longer comparable to 20 years ago. However, the adjustment is relatively minor and, particularly with regard to the second domestic turnover threshold, rather conservative compared with other EU jurisdictions. There is also still no dynamic adjustment mechanism.

Increased transaction value threshold: future domestic activity as a new criterion

Although the higher turnover thresholds are intended to reduce the burden on companies, the transaction value threshold is simultaneously being increased. In future, it is to apply not only where the target company already has substantial operations in Germany but also where the target is "expected to become active" in Germany to a significant extent.

Even under current law, the application of the transaction value threshold raises numerous questions in practice. The ministerial bill extends the scope of application of the threshold to future domestic activity. This suggests further forecasting uncertainties: when is "expected" domestic activity sufficiently concrete? Although the explanatory notes to the ministerial bill provide detailed guidance on this point, the draft concludes the section on the transaction threshold value by stating that the German Federal Cartel Office can issue interpretative guidance on domestic effects by making appropriate statements. This indicates that the German Federal Ministry for Economic Affairs and Energy is itself expecting that further clarification may be necessary.

New "Phase 0": simplified short-form notification procedure for the transaction value threshold

A new short-form notification procedure called "Phase 0" is to be introduced for mergers caught by the transaction value threshold. Companies will initially file short-form notifications of the mergers with the German Federal Cartel Office. Less information must be provided for a short-form notification compared with a full notification. If the German Federal Cartel Office does not inform the company within two weeks that a full notification cannot be waived, there is no obligation to submit a full notification. The aim is to achieve faster and simpler clearance, reduce precautionary full notifications and ease the burden on the German Federal Cartel Office.

Ministerial authorisation: enhanced legal protection for third parties

Further changes concern legal remedies against ministerial authorisations, a German law-specific merger control mechanism that allows the Federal Minister for Economic Affairs and Energy to clear a merger prohibited by the German Federal Cartel Office. At present, third parties are only permitted to challenge such ministerial authorisations if their subjective rights have been infringed. The ministerial bill wants to remove this limitation and enhance legal protection. This could significantly prolong proceedings.

Ex-post review of mergers remains unresolved

The ministerial bill also leaves unresolved whether a statutory limitation period should apply to the ex-post review of mergers. As a result, the uncertainty created by the ECJ's Towercast case law — which allows antitrust abuse control to be applied to mergers below the merger control thresholds — remains a factor creating uncertainty for transaction practice.

New public procurement screening and additional powers for the German Federal Cartel Office

In future, the German Federal Cartel Office is to be authorised to screen bids in public procurement procedures even where there is no initial suspicion of wrongdoing and to use the information obtained in further investigations.

Right to request a decision by the German Federal Cartel Office for vertical agreements

The right of companies to request a decision from the German Federal Cartel Office confirming that there are no grounds for action is to be extended to vertical agreements. Such a request is to require a substantial legal and economic interest in obtaining such a decision. To date, this right has applied only to horizontal cooperations. The extension to vertical agreements is intended to provide companies with increased legal certainty, particularly in relation to innovative and novel forms of cooperation.

Next steps in the legislative process

The ministerial bill is still at an early stage in the legislative process for the 12th Amendment to the ARC. Following consultation with the federal states and relevant stakeholder associations, the draft will need to be introduced into the parliamentary process – for example, by the German Federal Government after adoption of a government bill.

Conclusion: practical implications of the ministerial bill for the 12th Amendment to the ARC 

If adopted in its current form, the 12th Amendment to the ARC would reform key areas of German merger control law. However, further changes may still be made during the ongoing legislative process. The main implications for practice are as follows: 

• Higher turnover thresholds are likely to reduce the number of merger control notifications.
• The increase in the transaction value threshold may create new uncertainty for transaction planning.
• The new "Phase 0" short-form notification procedure for certain mergers is intended to reduce the burden on companies and the German Federal Cartel Office and to accelerate proceedings.
• The extension of legal remedies against ministerial authorisations may result in more lengthy proceedings.
• The absence of a statutory limitation period for ex-post merger reviews remains a significant source of uncertainty.
• The new procurement screening powers will strengthen the role of the German Federal Cartel Office.
• The right to request a decision from the German Federal Cartel Office will increase legal certainty for companies in the case of vertical agreements.
• Companies, investors, M&A teams and transaction advisers should continue to closely monitor further developments in the legislative process for the 12th Amendment to the ARC.