German federal court confirms FCO's interpretation of transaction value thresholds

In a 17 June 2025 decision in appeal proceedings KVR 77/22, the German Federal Court of Justice (BGH) confirmed the broad interpretation of the transaction value threshold under Section 35(1a) of the German Act Against Restraints of Competition (GWB) previously applied by the Federal Cartel Office (FCO). This ruling establishes legal certainty for the application of the transaction value threshold for acquisitions of companies with low turnover but a high purchase price in Germany.

Legal background

The classical notification threshold in Germany (Section 35(1) GWB) is based exclusively on turnover. A notification obligation exists only if cumulatively:

• the combined worldwide turnover of all parties exceeds EUR 500 million;
• the domestic turnover of one party in Germany exceeds EUR 50 million; and
• the domestic turnover of another party in Germany exceeds EUR 17.5 million.

Since 2017, acquisitions of companies whose turnovers in Germany fall below the regular thresholds are subject to merger control notification obligations under Section 35(1a) GWB if cumulatively:

• the combined worldwide turnover of all parties exceeds EUR 500 million;
• the domestic turnover of one party exceeds EUR 50 million;
• no other party's turnover in Germany exceeds EUR 17.5 million;
• the transaction value exceeds EUR 400 million; and
• the target is active in Germany to a significant extent.

This transaction value threshold was introduced primarily to capture “killer acquisitions” — transactions where established companies acquire young innovative firms with low domestic turnover (less than EUR 17.5 million) but with significant economic potential.

In recent years, however, the application of the transaction value threshold has proved challenging in practice. Parties have frequently faced uncertainties, particularly when trying to determine whether the target’s activity in Germany qualifies as “significant” within the meaning of Section 35(1a) GWB.

Facts of the case

The BGH’s decision relates to the acquisition of the customer service platform Kustomer by a globally leading technology and media company in 2022. Even though Kustomer did not have direct business customers (i.e. licensees) in the German market, the FCO considered the processing of data of German consumers on behalf of foreign direct clients sufficient to establish significant domestic activity, thus triggering a notification requirement under the transaction value threshold.

Although the FCO cleared the acquisition in a phase 1 procedure, the acquirer challenged the cost decision for the notification procedure in court. The competent Higher Regional Court Düsseldorf rejected the FCO’s jurisdiction in its judgment dated 23 November 2022 (Kart 11/22(V)) and revoked the cost decision.

According to the court, the mere processing of personal data of German consumers for Kustomer’s direct clients located abroad does not constitute substantive domestic activity under Section 35(1a) GWB. Only the licensees, as Kustomer’s immediate customers, can influence competitive conditions by choosing between different providers. The end consumers have no influence on this decision and thus no impact on the relevant competition.

BGH judgment

The BGH clarified that at least the processing of personal data of German end consumers for Kustomer’s German licensees can constitute a significant domestic activity within the meaning of Section 35(1a) No. 4 GWB. The BGH expressly left open whether this also applies to the processing of German end consumers data for licensees based abroad.

The court emphasised that data processing is an essential part of Kustomer's business activity and not just an ancillary service. The competitive potential of the company arises from its data-related activities with a domestic connection, which could become more relevant to competition following the merger due to the acquirer's presence and market position in Germany.

Neither a direct nor an indirect legal relationship between the target company (Kustomer) and the end consumers concerned is required for the assumption of domestic activity. The only decisive factor is whether the target company's activities are generally capable of having a competitive impact on domestic markets as a result of the merger.

Concerning the element of "significance", the BGH specified that, while some degree of perceptible market impact is necessary, the threshold for such an impact must be interpreted broadly. Only negligible effects can be excluded. Valid criteria for the assessment could be the number of consumers affected within Germany, whereas turnover-related criteria cannot be taken into account.

Conclusion

The BGH’s ruling broadens the FCO's ability to intervene in merger-control proceedings. Even acquisitions involving target companies with only indirect connection to the German market (e.g. through processing of data of German end consumers) may trigger a notification obligation under Section 35(1a) GWB. While this interpretation reflects the underlying purpose of the transaction-value threshold, which is to capture mergers with potential competitive relevance regardless of turnover, the ruling may continue to cause legal uncertainty. Acquiring companies are commonly unable to reliably assess the indirect effects of the target company's activities on German consumers. It remains to be seen whether the BGH’s decision will lead to clearer and more practicable guidance for the application of the transaction value threshold.

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