The German Federal Cartel Office (“FCO”) has prohibited the acquisition of a share of 13.75 per cent in Norddeutsche Affinerie AG, Hamburg (“NA”) by A-TEC Industries AG, Vienna (“A-TEC”). The FCO found the acquisition fulfilled the preconditions of a concentration as it granted A-TEC a competitively significant influence on NA under sec. 37 para. 1 no. 4 of the Act Against Restraints of Competition (“ARC”). This extensive application of the “catch-all clause” creates a significant degree of legal uncertainty, as it further extends the scope of application of merger control onto transactions the parties would usually not expect to raise any competition issues.
A-TEC and NA are both active in the manufacturing of oxygen-free copper billets. This product is used, among other things, in the manufacture of profiles and strips for vacuum technical applications in the electronics and electrotechnical industry. The market volume is estimated at between 60 and 80 million euros. A-TEC and NA are by far the largest competitors on the market with a combined market share of approx. 85 per cent.
In the beginning of the year 2008, A-TEC already held a share of 13.75 per cent in NA when it decided to increase its stake to 20 per cent and notified the planned purchase to the FCO. Unexpectedly, the FCO decided that the acquisition of the share of 13.75 per cent already constituted a concentration in the sense of the ARC. As a merger between A-Tec and NA creates a dominant market position, the FCO ordered the dissolution of the merger. This means, A-TEC is not only prevented from purchasing additional shares, but also has to sell all currently held shares within a period determined by the FCO. In case A-Tec fails to comply with this order, the FCO will appoint a trustee, which will sell the shares on behalf of A-TEC.
The decision of the FCO is based on the “catch-all clause” in sec. 37 para. 1 no. 4 ARC, according to which the preconditions for a concentration are fulfilled if a company gains a competitively significant influence over another. This clause was designed to cover stakes of less than 25 per cent, which are in general necessary for a concentration in the sense of the ARC. However, in case of the purchase of shares of less than 20 per cent, the FCO in the past usually required substantial additional elements in order to establish the significant influence – usually in form of structural corporate integration. In the case at hand, the FCO found such elements in the constantly low voting presence at NA’s annual general meetings in recent years. In view of this low voting presence, the shares held by A-TEC virtually represent a blocking minority comparable to a 25 per cent share acquisition. In addition, NA’s other shareholders have no expertise or long-term strategic interests in the copper sector and therefore do not have any personal interest to influence the competitive behaviour of NA. According to the FCO, these circumstances suggest that a stake of 13.75 per cent enabled A-TEC to execute a competitively significant influence on NA.
The decision of the FCO is remarkable, as, on the one hand, the stake of 13.75 per cent is relatively low for an application of the “catch-all clause”, on the other hand the competitively significant influence is established by merely informal expectations and is not legally ensured in any way. Both elements solely are accepted to represent no hindrance to an application of the catch-all clause. However, in combination they speak for an extensive application, which is not totally convincing in the light of legal certainty. In fact, the FCO once more underlined its determination to decide all cases that raise its attention, even for the price of an extensive interpretation of the ARC. In any case, the prediction, whether the preconditions for a concentration are fulfilled, will not become easier by means of this decision, as even the purchase of relatively low stakes might require extensive research regarding the actual voting behaviour and personal interests of the other shareholders, in the future.