On February 26, 2025 the Düsseldorf Court of Appeal (“DCA”) dismissed a broad application of Germany’s transaction value threshold.[1]  The threshold introduced in 2017 is a “safety net” for exceptional cases, not an additional standard aimed to lower the threshold for merger review.  Companies in mature markets with established revenue streams face reduced risk of mandatory filings, even for high-value acquisitions.

Background

The DCA limited the scope of Germany’s transaction value threshold in merger control proceedings.  The two decisions, which are not yet publicly available, are expected to provide important guidance on when high-value acquisitions of companies with limited German turnover trigger mandatory filing requirements.  The rulings represent the second instance, following Meta/Kustomer, where the DCA constrained the German Federal Cartel Office’s (Bundeskartellamt or “FCO”) efforts to expand its jurisdictional reach.[2]

The Adobe Cases

The rulings stem from Adobe’s 2018 acquisitions of Magento (e-commerce software) and Marketo (B2B marketing automation software).  Adobe completed these transactions without notifying the FCO, despite high deal values ($1.68 billion and $4.75 billion, respectively) and both target companies having marketed their software globally, including in Germany, for approximately ten years.

Upon learning of these acquisitions, the FCO initiated divestment proceedings (Entflechtungsverfahren), asserting that the transactions were notifiable under the transaction value threshold.  While the FCO ultimately identified no substantive competition concerns and closed its investigations, it nonetheless ordered Adobe to bear the costs of the merger control proceedings.  Adobe appealed the costs orders.

Legal Framework

The transaction value threshold,[3] introduced in 2017, was designed to capture high-value acquisitions of companies with limited turnover but significant competitive potential.  For a transaction to be notifiable under this provision, it must satisfy five cumulative criteria:

1.         Combined worldwide turnover exceeding €500 million

2.         One party’s German turnover exceeding €50 million

3.         No other party’s German turnover exceeding €17.5 million

4.         Transaction value exceeding €400 million

5.         The target having significant domestic activities in Germany

The Court’s Analysis

The DCA overturned the FCO’s cost orders, ruling that the authority lacked jurisdiction to review the acquisitions.  The Court’s reasoning centered on two critical points:

1. Purpose and Application of the Threshold

    The DCA emphasized that the transaction value threshold should function as a “subsidiary” measure, applicable only when a target’s actual turnover fails to accurately reflect its market position and competitive potential.[4]  Since both target companies had been commercially marketing their software for approximately ten years in “mature markets,” including in Germany, the Court determined that their turnover figures adequately reflected their market positions.

    2. Significant Domestic Activities

    The Court conducted a comprehensive assessment of the companies’ domestic activities, including their local presence, employee numbers, customer base, and German turnover, concluding that these elements, even together, did not establish a “significant” domestic activity.  The DCA clarified that a mere disparity between the transaction value and current German revenues is insufficient to trigger notification requirements.

    Practical Implications

    This ruling provides valuable guidance for companies contemplating acquisitions in Germany:

    • The transaction value threshold operates as a “safety net” for exceptional cases, not as an additional standard aimed to lower the threshold for merger control.
    • For companies operating in mature markets with established revenue streams, turnover remains the primary indicator of market position, even when the acquisition price might suggest greater future competitive potential.
    • When evaluating whether a target has “significant domestic activities”, a critical question is whether its current German turnover is a good proxy for the scope of its current German operations or whether the current German operations already have a scope to serve as a foundation for significant future growth, for example, through an already established large local sales network or R&D activities.

    Next Steps

    The DCA has to date only published a press release summarizing its decisions.  Once the Court issues its full reasoning, additional guidance for companies may become available.  While the FCO may still appeal the decisions, the rulings represent a significant limitation to the application of Germany’s transaction value threshold.  They reduce regulatory uncertainty for high-value acquisitions of established businesses with limited German revenues.

    [1] Cases VI Kart 2/24 (V) and VI Kart 3/24 (V), see press release of February 26, 2025.

    [2] The FCO cleared the acquisition but the OLG Düsseldorf (Decision of November 23, 2022 ­ Kart 11/21 (V)) held that that the FCO had in fact no jurisdiction to review in the first place.

    [3] Section 35(1a) of the German Act against Restraints of Competition.

    [4] Leitfaden Transaktionswert-Schwellen für die Anmeldepflicht von Zusammenschlussvorhaben (§ 35 Abs. 1a GWB und § 9 Abs. 4 KartG) (FCO Guidelines), paras. 65 and 82; OLG Düsseldorf, Decision of November 23, 2022 ¬ Kart 11/21 (V), para. 73.