On January 19, 2022, the German Federal Cartel Office (“FCO”) launched a new sector inquiry into the waste management sector in preparation to order Rethmann SE & Co. KG (“Rethmann Group”) to notify future acquisitions of smaller waste management companies.
The 10th Amendment to the Act against Restraints of Competition (“ARC”) introduced a new provision empowering the FCO to examine concentrations below the turnover and transaction value thresholds if successive acquisitions of smaller targets below the second domestic turnover threshold lead to further concentration in an economic sector and thus might impede competition in Germany. Pursuant to the new Section 39a ARC, the FCO can order companies to notify all concentrations in a particular economic sector for the following three years if the following (cumulative) conditions are met: (i) the FCO sees indications that future concentrations may significantly impede competition in that sector, (ii) the company concerned achieved a global turnover exceeding €500 million in its last financial year and supplies or procures at least 15% of goods or services in that sector, (iii) the target company generated more than €2 million turnover in its last financial year, two-thirds of which it achieved in Germany, and (iv) the FCO conducted a sector inquiry into that economic sector. Already during the legislative consultation procedure of the 10th Amendment to the ARC, the FCO had identified regional markets with medium-sized competitors, such as the waste management and construction sectors, as likely areas of application.
To set the scene for a potential Section 39a ARC order against Rethmann Group, the FCO launched a new sector inquiry into the waste management sector after it had concluded a sector inquiry into this sector only in December 2021. In its previous sector inquiry, the FCO found that Rethmann Group (through Remondis) was the market leader in Germany and had engaged in a series of non-notifiable acquisitions of smaller local competitors. The FCO’s new sector inquiry is intended to update and specify the prior findings with a view to the requirements of Section 39a ARC.
This is the first time, that the FCO launches a sector inquiry in preparation for an order under Section 39a ARC. It remains to be seen if it will have the desired outcome and more generally, whether the new Section 39a ARC will be an effective merger control instrument. In any event, even if the FCO were to order Rethmann Group to notify smaller acquisitions on that basis, it will still have to examine the concrete competitive impact of each single acquisition. In addition, Rethmann Group can appeal the FCO’s order and any subsequent merger control decisions issued by the FCO.
Editors: Katharina Apel and Anna Lubberger