German Merger Controls: The Role of Company Assurances

• Published date: 01 December 1977
• Date: 01 December 1977
• Author: David J. Gerber,Alexander Riesenkampff
• DOI: 10.1177/0003603X7702200408
• Subject Matter: Article

GERMAN

MERGER

CONTROLS: THE

ROLE

OF 'COMPANY ASSURANCES

by

ALEXANDER

RIESENKAMPFF

AND

DAVID

J.

GERBER·

The German Federal Cartel

Office

(FCO) began in 1975

to consider assurances or promises (Zusagen) of parties sub-

ject to merger controls in deciding whether or not to prohibit

proposed mergers.' The commencement of this practice intro-

duced a new and potentially critical dimension into German

merger control decisions, and an understanding of this new

element must be considered vital for all who seek to under-

stand the German

antitrust

scene-especially

for anyone in-

volved in decisions concerning mergers, acquisitions, joint

ventures or other forms of combination in the Federal Re-

public of Germany.

The aim of this article is to make this assurances practice

comprehensible to non-German attorneys, scholars and busi-

nessmen.

It

thus discusses the development of the company

assurance practice of the

FeO

and analyzes the current

status

of the practice from both a legal and a policy standpoint.

In

addition,

it

is intended to provide aid

for

non-German attor-

neys and businessmen (especially those from the Anglo-

American legal tradition) who must evaluate the institu-

tional and legal factors attending a

particular

involvement

with the practice. Reference to

antitrust

practice by the U.S.

Department of Justice have been provided

for

purposes of

comparison."

I.

LEGAL

AND ADMINISTRATIVE

STRUCTURE

OF

GERMAN

MERGER CONTROLS

In

order to understand the assurances practice and the

problems associated with it, a brief description of the legal

•Peltzer &Riesenkampff,

Frankfurt

am Main, Germany.

889

890

THE

ANTITRUST

BULLETIN

and administrative structure of German merger controls is

necessary.

The essence of the German merger control system is the

right and

duty

of the FCO to prohibit or to dissolve mergers

by administrative decree where it is to be expected that the

merger will lead to the formation or strengthening of a

market-dominating position, unless the parties establish that

the merger will in all probability lead to an improvement in

competitive conditions which outweighs the negative effects

of the formation or strengthening of the market-dominating

position (§ 24

(I)

Law Against Restraints on

Competition-

"GWB").8

Thus, a decision to prohibit amerger involves two dis-

tinct steps. First, the FCO must decide whether such a

market-dominating position is likely to be created or strength-

ened as a result of the merger.

If

it

concludes

that

such a

result is likely, a second question must be asked, "Will the

merger lead to improvements in competitive conditions which

outweigh the negative effects of the created or increased

domination

T"

Three aspects of the application of these tests

are

of par-

ticular importance with respect to the assurances practice.

First,

both tests

are

relatively undefined. The statute pro-

vides little aid in determining what the tests involve, except

that

it establishes certain presumptions based on market

shares.' Second, the tests

are

future-oriented, requiring prog-

noses as to the results which can be expected

if

amerger is

allowed. And third, the merger control practice was insti-

tuted in 1973, and thus there is relatively little precedent to

guide the cartel officials or the companies involved. The

cumulative effect of these factors is to give the FCO signif-

icant leeway in its decisions.

The FCO, which is responsible for merger controls, is a

semi-autonomous regulatory agency.

It

is subject to the

authority of the Federal Minister of Economics,

but

it func-

tions with a minimum of outside control.

If

the FCO orders