German and EU Merger Control

Merger control in Germany: when to file

Merger control in Germany is carried out by the Federal Cartel Office (Bundeskartellamt) under the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB). A concentration must be notified before it is implemented if, in the last business year, the undertakings concerned had combined worldwide turnover of more than EUR 500 million, at least one of them had domestic turnover of more than EUR 50 million, and another had domestic turnover of more than EUR 17.5 million (§ 35(1) GWB).

A transaction-value threshold additionally catches acquisitions where the consideration exceeds EUR 400 million and the target has substantial domestic operations, even if the target's own German turnover is below EUR 17.5 million (§ 35(1a) GWB). Where the EU Merger Regulation applies, the European Commission reviews the deal instead, and German merger control does not apply.

German merger control is mandatory and suspensory: a notifiable concentration may not be implemented before clearance, and transactions implemented in breach of this prohibition are legally invalid (§ 41(1) GWB). Gun-jumping can also be fined. Because the thresholds are relatively low and the turnover of the entire group of each undertaking is counted, many transactions involving companies with modest German business are notifiable, including acquisitions by private equity funds whose portfolio companies have German sales.

This page explains the concept of a concentration, the thresholds, the procedure and timelines, the substantive test, gun-jumping, the interplay with EU merger control and referrals, and the power of the Federal Cartel Office to require notification of transactions below the thresholds after a sector inquiry. It is written for deal teams, general counsel and investors. See also our pages on mergers and acquisitions and foreign investment control.

Concentrations and thresholds

The GWB defines several types of concentration: the acquisition of all or a substantial part of the assets of another undertaking; the acquisition of direct or indirect control; the acquisition of shares reaching 25% or 50% of the capital or voting rights; and any other combination enabling one or more undertakings to exercise a competitively significant influence over another. The last category, which has no equivalent in EU law, can catch minority stakes below 25% if the acquirer gains influence through board seats, information rights or veto rights combined with its market position. Joint ventures are concentrations of the parents that acquire control or relevant shareholdings.

Turnover is calculated for the whole group of each undertaking concerned: on the buyer side, the acquirer and all companies controlling or controlled by it; on the seller side, only the target. The transaction-value threshold was introduced to catch acquisitions of innovative targets with low turnover but high value, such as technology and life sciences start-ups. Whether the target has substantial domestic operations is assessed by reference to its activities in Germany, for example the number of users, research and development sites or sales, and the Federal Cartel Office has published guidance on this criterion. Our insight on the transaction-value threshold explains it in detail.

Exemptions

A de minimis clause excludes certain markets that have existed for at least five years and had a German market volume below a statutory amount from prohibition, and acquisitions of small independent undertakings are excluded in some cases. However, these clauses are narrow, and companies should not assume that a small German business is outside merger control in Germany. Intra-group restructurings are not concentrations because no change of control occurs. Fees are charged for notifications and decisions, and their amount depends on the economic significance of the case.

Procedure and timelines

Notifications are filed with the Federal Cartel Office, usually electronically, and must contain the information required by § 39 GWB: the undertakings concerned, their turnover, market shares where they reach certain levels, and the form of the concentration.

Pre-notification contacts are possible and recommended in complex cases. The Federal Cartel Office has one month from receipt of the complete notification to decide whether to open an in-depth investigation (phase 2) (§ 40(1) GWB). If it does not inform the parties within that month that it has opened the main examination, the concentration is deemed cleared. In phase 2, the authority must decide within five months of receipt of the complete notification, a period that can be extended, for example with the parties' consent or if remedies are offered (§ 40(2) GWB).

Most notifications are cleared in phase 1, often well before the end of the month. In phase 2, the Federal Cartel Office may clear the concentration, clear it subject to conditions and obligations (remedies such as divestments), or prohibit it. A prohibition can be appealed to the Higher Regional Court of Düsseldorf and further to the Federal Court of Justice, although appeals take time and rarely save a transaction with a fixed timetable. In exceptional cases, the Federal Minister for Economic Affairs can authorise a prohibited concentration on grounds of overriding public interest (ministerial authorisation).

Third parties and information requests

During the review, the Federal Cartel Office sends questionnaires to customers, competitors and suppliers, and their responses often shape the outcome. Third parties with a significant interest can be admitted to the proceedings and have the right to be heard and, in some cases, to appeal a clearance decision. The notifying parties should anticipate likely concerns and be prepared to provide internal documents, data on customers and bidding processes, and economic analyses. In phase 2, the authority can require extensive internal documents, including board papers and strategy documents, so the parties' internal communication about the transaction should be accurate and measured from the outset.

The substantive test

The Federal Cartel Office prohibits a concentration that would significantly impede effective competition, in particular by creating or strengthening a dominant position (§ 36(1) GWB). The test mirrors the EU test. Dominance is presumed where an undertaking has a market share of at least 40%, and collective dominance at certain combined market shares of the largest competitors. The authority examines horizontal overlaps, vertical relationships and conglomerate effects, as well as the role of innovation, data and access to competitively relevant inputs, particularly in digital markets.

A concentration that would otherwise be prohibited can be cleared if the parties show that it also brings improvements in competitive conditions that outweigh the disadvantages, or under the failing firm defence in narrow circumstances.

Markets are defined from the perspective of demand-side substitutability, and the Federal Cartel Office frequently defines regional markets within Germany, for example in retail, building materials, hospitals or waste management. For transactions affecting such markets, a detailed analysis of local overlaps and catchment areas is required, often with economic support.

Remedies

Where a concentration raises competition concerns, the parties can offer commitments to obtain clearance. The Federal Cartel Office prefers structural remedies, typically the divestment of a business to a suitable purchaser, sometimes required to be signed before clearance (upfront buyer). Behavioural remedies, such as access commitments, are accepted only in exceptional cases because they require ongoing monitoring. Conditions and obligations are set out in the clearance decision, and a breach of a condition can lead to the decision being revoked. Remedy negotiations take time and must be reflected in the long-stop date and the risk allocation in the purchase agreement, including any hell-or-high-water obligation of the buyer.

Gun-jumping and the interplay with EU merger control

The standstill obligation prohibits implementing a notifiable concentration before clearance or before the review periods have expired. Gun-jumping includes not only closing the transaction, but also measures that anticipate the transfer of control, such as the buyer influencing the target's commercial strategy, exchanging competitively sensitive information beyond what is necessary for due diligence and integration planning, or the target obtaining the buyer's consent for ordinary business decisions. Transactions implemented in breach are invalid until clearance, and the Federal Cartel Office can impose fines. Clean team arrangements and carefully drafted interim covenants in the purchase agreement are standard protections; see our insight on gun-jumping risks in German deals.

Where the EU Merger Regulation thresholds are met, the European Commission has exclusive jurisdiction under the one-stop-shop principle, and the parties do not file in Germany. Cases can be referred from the Commission to the Federal Cartel Office and vice versa under the referral rules of the EU Merger Regulation, for example where a concentration affects a distinct German market. Following case law of the Court of Justice of the European Union, the Commission no longer accepts referrals from member states of transactions that the referring state itself has no jurisdiction to review, which limits the scope for reviewing below-threshold deals at EU level.

Notification obligations after sector inquiries

A recent amendment to the GWB introduced a power linked to sector inquiries. After publishing a sector inquiry report, the Federal Cartel Office can, where there are objectively traceable indications that future concentrations could significantly impede competition in the sectors examined, require specific undertakings to notify every concentration in those sectors for three years (§ 32f(2) GWB).

The obligation applies only where the acquirer had domestic turnover of more than EUR 50 million and the target more than EUR 1 million in the last business year. Companies in sectors that have been the subject of an inquiry should check whether such an order affects them. Note that the earlier call-in provision in § 39a GWB has been repealed.

Digital markets

Digital markets receive particular attention. Undertakings designated by the Federal Cartel Office as having paramount significance for competition across markets under § 19a GWB are subject to special abuse control that can also affect their acquisition strategies, and gatekeepers under the EU Digital Markets Act must inform the European Commission of all intended concentrations in the digital sector. Acquisitions of start-ups by large platforms are scrutinised for their potential to eliminate future competitors, even where there is no current overlap, and access to data and ecosystems is a recurring theme in the assessment. Parties should prepare evidence on the target's development pipeline and on alternative sources of data and technology available to competitors.

Parallel reviews

Merger control is often only one of several reviews. Acquisitions by non-EU investors may require investment screening under the Foreign Trade and Payments Ordinance, with its own standstill obligation; large transactions may require notification under the EU Foreign Subsidies Regulation; and sector regulators may need to approve acquisitions of banks, insurers, energy companies or media. Each process has its own timetable, and the transaction documents should coordinate them, including who prepares which filing, how information is shared between the parties and which approvals are conditions to closing. See our pages on foreign investment control and state aid and the FSR.

Private equity funds and joint ventures deserve particular attention. For a fund, the turnover of all portfolio companies controlled by the fund's manager or general partner is attributed to the acquirer, so even small add-on acquisitions can be notifiable. For joint ventures, each parent acquiring control or a relevant stake is an undertaking concerned, and the joint venture may also raise questions under the prohibition of anticompetitive agreements if the parents remain active in the same market. Both situations require an early analysis of the group structure and of any coordination between the parents.

• Check EU and German thresholds, including the transaction-value threshold.
• Assess minority stakes for competitively significant influence.
• Plan for phase 2 in transactions with overlaps or vertical links.
• Protect against gun-jumping with clean teams and interim covenants.

How TRW & Co helps

We advise buyers, sellers and joint venture partners on merger control in Germany and on coordinating multi-jurisdictional filings. We analyse whether a transaction is notifiable, prepare and file notifications with the Federal Cartel Office, manage pre-notification contacts and phase 2 investigations, and negotiate remedies. We draft merger control conditions, clean team arrangements and interim covenants, and advise on gun-jumping risks. We coordinate merger control with investment screening and foreign subsidies reviews so that the overall timetable is realistic. To discuss a transaction, please contact us.