Guidance for transaction value thresholds concerning the filing requirement for proposed mergers
09/09/2018 - Reading time: 2 minutes
The 2017 Act Amending Antitrust and Competition Law (Kartell- und Wettbewerbsrechtsänderungsgesetz 2017) introduced new regulations concerning the threshold values applying in the field of merger control in the Austrian Cartel Act (Kartellgesetz, KartG). These serve to adjust competition law to the change induced by technological developments and international competition. The new notification threshold is laid down in section 9 (4) KartG and applies in addition to the existing thresholds. This new threshold is aimed at making it possible to subject assumingly competition-relevant mergers to review under competition law: this refers to cases where undertakings or assets generating low turnover are acquired at a high price (for instance, the acquisition of Whatsapp by Facebook). Accordingly, mergers falling below the turnover thresholds set out in section 9 (1) KartG must be notified nevertheless if the following conditions are met:
- the combined worldwide turnover of the undertakings concerned exceeded EUR 300 million in the last business year,
- the combined Austrian turnover of the undertakings concerned exceeded EUR 15 million in the last business year,
- the value of the consideration exceeds EUR 200 million; and
- the undertaking to be acquired is active in Austria to a significant extent.
In view of the close economic linkage of Austria and Germany, which introduced a transaction value threshold at the same time, the Austrian and German competition authorities (Bundeswettbewerbsbehörde and Bundeskartellamt, respectively) issued a joint guidance for transaction value thresholds concerning the filing requirement for proposed mergers. This guidance should make interpreting the provision easier.
The key criterion of section 9 (4) KartG is the value of the consideration, which must exceed EUR 200 million. According to the guidance, the value of the consideration comprises all assets and other benefits with monetary value received by the seller from the purchaser in connection with the merger in question, including, for instance, cash, securities, intangible assets, consideration received for an agreement to refrain from acting as a competitor, and liabilities taken over by the purchaser, if any. Future and variable elements of the purchase price, like earn-out clauses, for example, must also be taken into account when calculating the value of the consideration. The parties to the mergers have to assess the value of the consideration and the filing requirement themselves – including any valuation forecasts. In this context, the relevant time for determining the value is the time of closing (!) the merger. Thus, a filing requirement will arise if the value of the consideration increases as from the signing to exceed the threshold by the closing.
An additional criterion stipulated in the Act for testing whether merger control applies is the target company’s significant activity in Austria. As a rule, domestic activity in these markets is not measured by means of domestic turnover. Depending on the industry and activity, various criteria may be used for measuring the extent of activity. The quantities applied must be customary in the industry and non-manipulable. An exciting question in cases where the provision must be applied.
The introduction of the new thresholds as set out in section 9 (4) KartG results in new review requirements and the necessity of providing additional information when filing for a proposed merger. First experience of the new regulation shows that it is of quite considerable practical significance and comes with a wide variety of practical problems.