The Federal Supreme Court of Germany clarified the disputed scope of the de minimis provision

07 February 2008

Shiraz Kutar

In the Sulzer/Kelmix decision of 25 September 2007, the Federal Supreme Court of Germany (BGH) has resolved the discussion on the scope of the de minimis provision in Sec. 35 para 2 ARC. According to Sec. 35 para 2 ARC, transactions in markets that have been in existence for five years and which have a market volume of below €15 m are not subject to German merger control. The Federal Cartel Office (FCO) and the Regional Court in Düsseldorf had interpreted this provision differently in the past. The FCO had argued that the geographically relevant market for this provision was the economically relevant market, which could therefore also be larger than Germany. The Regional Court in Düsseldorf on the other hand had argued that the geographically relevant market in the meaning of Sec. 35 para 2 ARC may not be larger than Germany.

The BGH has now resolved this dispute. It clarified that the de minimis provision of Sec. 35 para 2 ARC geographically refers to the German market. In the case on hand the parties had announced and completed the merger in the market for two-components mixers and systems primarily for the dental and industrial markets without waiting for a decision by the FCO. The parties were of the opinion that with regard to the German market the market volume threshold of Sec. 35 para 2 ARC was not met and that a notification therefore was not necessary. The FCO, however, did not regard the merger to fall within the scope of the de minimis provision as it considered the relevant market to be larger than Germany with a market volume of more than €15 m On this basis the FCO examined the merger, prohibited it and ordered the divestiture. After the appelate decision of the Regional Court in Düsseldorf the FCO appealed further and enabled the decision on hand by the BGH.

This decision by the BGH should end the discussions on the scope of the de minimis provision, which started with the 7th amendment of the ARC. The court stated that, even though the 7th amendment of the ARC clarified that the relevant geographic market in the meaning of the German Antitrust law could generally be wider than Germany, the general intention of Sec. 35 para 2 ARC had not been altered. It was still the object of this provision to exclude economically insignificant markets from merger control. Referring to a market wider than the German market in the context of the de minimis provision would contradict the spirit and purpose of this exemption. The BGH did not see a contradiction between this interpretation of Sec. 35 para 2 ARC and other provisions in the ARC. Moreover, it reasoned that also the provision applying to foreign-to-foreign mergers (Sec. 130 para 2 ARC) is supposed to prohibit the unlimited extension of German merger control to foreign transactions. Limiting the de minimis provision to the German market was thus coherent with this aim.

The BGH further clarified that the de minimis provision shall not be applied where the parties to a merger try to benefit from this exemption by artificially splitting up the markets. In the Sulzer/Kelmix decision the BGH however accepted the submitted market definition and stated that the requirements of the de minimis provision had been met.

This BGH decision has now resolved a dispute which has been persistent after the entering into force of the 7th amendment of the ARC in July 2005. This long-awaited decision now brings legal certainty and makes the de minimis provision more operational in practice. On basis of this court decision undertakings active in small markets now have more realistic chances to avoid merger control notifications in Germany.

Source: http://www.bundesgerichtshof.de