Anti-competition laws - take heed!

Tuesday 28 February 2012

Watch out for unexpected application of anti-competition laws

Groups with any activity in Germany - take heed! Recent proceedings of the German Federal Cartel Office (FCO) (i.e., the Bundeskartellamt) highlight the underestimated risks of not complying with filing obligations under German merger control laws (i.e. anti-trust or anti-competition laws), even in foreign-to-foreign-mergers.

The FCO recently published a case summary on its strict ruling in the EMC / CISCO case.

Two companies incorporated in the U.S., EMC and CISCO, formed a joint venture in 2009 in the U.S. without complying with German merger-control filing requirements. The FCO affirmed in its ruling that the joint venture would have a "domestic effect" in Germany and, therefore, EMC and CISCO should have complied with German merger control law filing requirements. Even though the joint venture’s business activities initially took place in the U.S., the FCO considered that since both parties had offices in Germany and transferred assets to the joint venture and expanded the joint venture activity to Europe, the joint venture was considered to have a "domestic effect" on the German market from a competition perspective. Furthermore, the merger control filing thresholds, which are not very high in Germany, were exceeded.

The FCO typically does not grant clearance for mergers to occur if filing obligations are not met. The FCO then undertakes proceedings to impose fines. Even though the FCO decided not to impose a fine against the joint venture, the case summary demonstrates the necessity to comply with the filing obligations before the FCO. EMC and CISCO risked, as well as any companies that disregard the German merger control obligations risk, a fine of up to 10% of the worldwide group turnover.

Thus, mergers which may have the slightest impact on the German market should be evaluated in light of German merger control laws before the mergers in order to avoid costly and time intensive procedures.

Contributed by Elena Samaan, LL.M., Partner at Esch & Kramer Rechtsanwälte in Wuppertal, Germany. Phone: +49 202 255 505 0;