On December 9, 2021, following ex officio proceedings,[1] the German Cartel Office (“FCO”) concluded that the acquisition of customer relationship management software provider Kustomer, Inc., (“Kustomer”) by Facebook Inc., re-named Meta Platforms Inc. (“Meta”) since October 2021, is notifiable under the German merger control regime as it falls under the € 400 million transaction value threshold of the ARC[2] and asked Meta to submit documents to review the transaction.[3] On January 11, 2022, the parties notified the transaction to the FCO.
At the time the FCO initiated proceedings to assess the notifiability of the intended transaction, the European Commission (“EC”) was already reviewing the transaction upon referral by the Austrian national competition authority pursuant to Art. 22 of the European Merger Control Regulation (“EUMR”). While nine European competition authorities joined the Austrian competition authority’s referral, [4] the FCO declined to do so. The FCO argued that it would not correspond to its “general practice” to refer a case to the EC only if it is subject to German merger control. Since it was not clear whether this was the case, the FCO decided to examine its jurisdiction to review the case instead of referring it to the EC.
The FCO’s “general practice” is in blatant conflict with the EC’s new Guidance on the application of Art. 22 EUMR, which expressly states that Art. 22 EUMR is applicable also to concentrations which do not meet the respective jurisdictional criteria of the referring Member States.[5] By encouraging national competition authorities to refer also “below threshold” transactions (that neither meet national nor EU merger control thresholds), the EC hopes to capture and review so-called “killer acquisitions” which are typical for dynamic, innovation driven sectors like the digital or pharma industries.
However, the FCO may be in good company, should the General Court of the European Union, which is currently reviewing the EC’s interpretation of Art. 22 EUMR in the Illumina/Grail case,[6] conclude that the EC is not competent to review a merger that was referred under Article 22 EUMR, if the national notification thresholds of the referring country were not met.
Anyhow, even when the FCO concluded that the transaction is in fact subject to German merger control, it decided to review the case in parallel to the EC and—once again—went its own way. In the meantime, after an in-depth investigation, the EC has conditionally cleared the transaction subject to Meta’s commitment to give Kustomer’s rivals non-discriminatory access to its messaging channels (e.g., Instagram, WhatsApp) for ten years.[7] On February 11, 2022, the FCO unconditionally cleared the transaction taking into account also the EC’s decision.[8]
The FCO’s parallel review once more shows that the FCO is prepared to use every single weapon it has in its arsenal to review the digital companies. In this vein, the FCO’s president, Andreas Mundt, emphasized that “[e]ffective merger control is the most powerful instrument we have to prevent too much market power from falling into the hands of only a few companies”.[9]
Editor: Anna Lubberger
[1] For the initiating of the ex officio proceedings, see the FCO’s Press Release of July 23, 2021, available in English here.
[2] The transaction value threshold aims to capture acquisitions of start-up companies or other companies with no or little turnover achieved in Germany but substantial local operations and a certain competitive potential reflected in the deal value; often referred to as “killer-acquisitions”.
[3] Case B6-37/21; see the FCO’s Press Release of December 9, 2021, available in English here. The FCO’s decision is available in German here.
[4] Namely those of Belgium, Bulgaria, France, Iceland, Italy, Ireland, the Netherlands, Portugal, and Romania.
[5] See the EC’s communication of March 26, 2021, para. 6, available in English here. For further information, please see Cleary’s Alert Memorandum published April 23, 2021 in English here.
[6] Illumina Inc.’s acquisition of Grail Inc. (Case COMP/M.10188) was the first case referred to the EC under its new Guidelines by the French competition authority. See also our article on our Cleary Antitrust Watch blog here.
[7] Case M.10262, EC decision of January 27, 2022. A press release is available here.
[8] See the FCO’s Press Release of February 11, 2022, only available in German here.
[9] See the FCO’s Press Release of July 23, 2021, available in English here.