Antitrust law: New risks to transaction security


published on 21 December 2022 | reading time approx. 4 minutes


Company acquisitions and mergers often require the prior approval of competition authorities in merger control proceedings. In recent years, competition authorities increasingly examined transactions that had substantial effects on competition but were below the statutory thresholds, thus generally not being subject to merger control. This trend may have a negative impact on the security of transactions in M&A projects and should therefore be taken into consideration in the M&A process at an early stage. This article gives an overview of the practices applied by competition authorities.

Notification obligation and obligation to suspend the implementation

Nearly every legal system provides for an obligation to notify the competent competition authority of company concentrations before they are implemented. In most cases, this notification obligation goes along with an obligation to suspend the implementation of such concentration the violation of which is penalized with a fine. Whether an acquisition or merger is subject to notification or not in the first place depends on whether it fulfils the criteria of the definition of a concentration and whether it reaches the statutory thresholds. 

A concentration is deemed to exist in case of the acquisition of assets or control or – like in Germany – the acquisition of shares (25 per cent, 50 per cent) or any other combination of undertakings enabling one or several undertakings to directly or indirectly exercise a material competitive influence on another undertaking. The thresholds established by law usually relate to global and/or local revenues of the parties to a concentration, partly also to assets and/or market shares. In 2017, a transaction value threshold was introduced in Germany, which, apart from revenues, also takes into account the value of a transaction.

The risk of merger control is usually well manageable.  But due to the risk of fines being imposed notification obligations should always be checked on a global scale. With good planning, notifications under applicable merger control rules can be integrated into an M&A process in such a way that they will cause no or hardly any delay. Prohibitions of concentrations are still an exception. 

Trigger: Killer Acquisitions

In recent years, in particular the tech industry has seen companies with a strong market position buying up emerging competitors so as to avoid competition in the future (so-called “killer acquisitions”). These targets were already present on the market but did not (yet) meet any thresholds. Thus, the transactions were not subject to merger control. Legislative bodies and competition authorities seek to avoid such scenarios by taking various measures, such as referrals, antitrust proceedings due to abuse of a dominant market position, as well as new regulations.

Establishing competency by way of referral

One of the possibilities for competition authorities to examine concentrations that, basically, are not subject to merger control is to fall back on the referral provision of Article 22 of EU Merger Regulation. According to this provision, the EU Commission may examine a concentration that affects trade between EU member states and threatens to significantly affect competition within the territory of a member state. The only condition is that the member state concerned must make a request for referral within the established time limit. The EU Commission is of the opinion that fulfilment of notification thresholds under European or national law is not necessary. In other words: Undertakings that actually are not subject to merger control may become subject to merger control simply if a member state makes a request for referral. This legal view has been confirmed by the ECJ (judgement dated 13/07/2022, T-227/21 – Illumina; appeal pending).

Previously, the EU Commission’s approach to this kind of referrals had been very restrictive. In 2021, however, in a “Guidance Paper” on Article 22 of EU Merger Regulation, it announced its intention to make broader use of the referral mechanism in the future. In doing so, the EU Commission’s focus is in particular on large digital economy companies but also other companies that have access to or influence on assets that are relevant in terms of competition, such as natural resources, intellectual property rights, data or infrastructure. But ultimately, the mechanism can be applied independently of industry.

This official practice can create significant risks to transaction security. In particular given the fact that the EU Commission intends to allow making such referrals up to six months after the transaction took place and – if knowledge is gained later – even at a later point of time. Thus, companies would have to expect retrospective EU merger control proceedings many months after the transaction took place.

Qualification of company acquisition as abuse of a dominant market position

In other pending proceedings, the EU Commission, the ECJ and the advocate general at the ECJ have assumed that acquisition of another company by a company with a dominant market position may constitute abuse of a dominant market position under Article 102 TFEU (opinion of advocate general Kokett dated 13/10/2022, C 449/21 – Towercast). A competition authority may take repressive measures to pursue such abuse if the merger control thresholds have not been reached and therefore no merger control proceedings have been conducted. This means that buyers with a dominant market position may face examination by the competition authority many months and years after the acquisition.

According to the advocate general, the buyer “usually” does not have to fear that the transaction will be subsequently reversed, but “only” that a fine will be imposed. Possible are also behavioural remedies, such as access to infrastructure, supply obligations and licensing. Companies with a strong market position should take such risks into account when planning acquisitions.

Obligation to notify by order

Legislative bodies have also reacted to the trends.  Since 2021, the Bundeskartellamt (German Federal Cartel Office) has been given the power under Article 39a of the Competition Act (GWB) to order a company to notify every concentration in a specific sector of the economy, with that obligation binding upon the company for several years. The prerequisites for this are, in particular, that a sector investigation has previously been conducted into the sector concerned, that the worldwide turnover of the undertaking concerned has been more than EUR 500 million, and that it has a market share of at least 15%. The target company must have achieved a turnover of more than EUR 2 million, more than two-thirds of which must be in Germany. Currently, the practical relevance of Article 39a of the Competition Act is still low. However, the 11th amendment to the Competition Act is already being prepared, intended to significantly lower the requirements for the extended merger control obligations following a sector investigation. Companies from sectors that were subject to a sector investigation could find it more difficult to acquire smaller competitors in the future.

Conclusion: Risks for transaction security

The powers of competition authorities to intervene also outside of “classic” merger control can lead to considerable risks for the security of transactions. In M&A transactions the outlined developments should be considered in addition to the “classic” merger control. Especially in the case of transactions that are potentially critical from a competitive point of view, an additional analysis should be carried out at an early stage to determine whether a transaction involves a risk of referral to the EU Commission under Article 22 of EU Merger Regulation or whether it involves a risk of the concentration leading to abuse of a dominant position. In future, the risks arising should be accordingly considered when drafting the contracts, unless the ECJ restrains the competition authorities’ practices in the two cases outlined.


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Johannes Scherzinger, LL.M. (King’s College London)

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