As of 29 May 2020, an amendment to the German merger control regime enters into force. The amendment, thought as a response to the Covid-19 crisis, temporarily extends the review periods from one to two months (Phase 1), and from four to six months (Phase 2). It applies to transactions notified from 1 March to 31 May 2020. Since the Bundeskartellamt has already cleared most of the transactions notified since March, the amendment is unlikely to have much, if any, practical impact.
Following adoption by the German Bundestag on 16 May 2020, the “COVID-19-amendment to the German competition law” (“Amendment”) enters into force on 29 May 2020. The Amendment temporarily changes the review periods of German merger control. In addition, the Amendment introduces a moratorium on the requirement to pay interest on cartel fines.
Extension of Review Periods for Transactions Notified Between 1 March and 31 May 2020
German merger control operates a two-phased review system. The Bundeskartellamt (Federal Cartel Office, “FCO”) reviews all notified transactions in a first phase (“Phase 1”). If the FCO does not consider a transaction to raise any concerns, it then clears the transaction in Phase 1. If the FCO does have concerns, it initiates an in-depth review (“Phase 2”). The FCO clears the large majority of notified transactions in Phase 1, and reviews only a small percentage in Phase 2.
The maximum review period for Phase 1 is normally one month, and four months for Phase 2. The Amendment extends these review periods for transactions notified between 1 March and 31 May 2020 from one to two months (Phase 1) and from four to six months (Phase 2).
The statement of reasons accompanying the Amendment explains that the COVID-19 crisis makes it more difficult to carry out market investigations. The existing review periods may not be sufficient to carry out the required investigations, in particular with respect to the food retail sector. The extension of the review period aims to provide the FCO with sufficient time to review all notified transactions.
Practical Impact Limited
As of today, more than 190 transactions have been notified to the FCO since the beginning of March. The FCO cleared all transactions notified in March, the vast majority of those notified in April and many of the transactions notified in May. The extended Phase 1 review period will apply, if at all, to only a very limited number of transactions.
In terms of Phase 2 proceedings, the extended Phase 2 review period currently applies to a single case, a transaction in the insurance sector notified to the FCO on 24 April 2020. It remains to be seen whether the FCO will initiate additional Phase 2-proceedings with respect to transactions notified in April or May.
Large Number of Notifications on 2 June 2020?
The Amendment’s most obvious practical impact could be transaction parties holding back their notifications until the beginning of June to avoid the extension of review periods. For example, a notification submitted to the FCO on Friday, 29 May 2020 falls within the scope of the Amendment, and the Phase 1 review period ends on 29 July 2020. The Amendment no longer applies to a notification submitted on the next working day, Tuesday, 2 June 2020, and the Phase 1 review period will end almost a month earlier (on 2 July 2020).
Moratorium on the Requirement to Pay Interest on Cartel Fines
Companies that have been fined for a violation of competition law rules can be eligible for staggered or deferred payment. They are required, however, to pay interest on the outstanding amount. The Amendment suspends the obligation to pay interest until 30 June 2021.