German Merger Control: A European Approach to Anticompetitive Takeovers

Northwestern Journal of International Law & Business Volume 1 Issue 2 Fall Fall 1979 German Merger Control: A European Approach to Anticompetitive Takeovers Rolf Belke W. David Braun Follow this and additional works at: http://scholarlycommons.law.northwestern.edu/njilb Part of the Antitrust and Trade Regulation Commons, Comparative and Foreign Law Commons, Corporation and Enterprise Law Commons, and the International Law Commons Recommended Citation Rolf Belke, W. David Braun, German Merger Control: A European Approach to Anticompetitive Takeovers, 1 Nw. J. Int'l L. & Bus. 371 (1979) This Article is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons. Northwestern Journal International of Law &Business Autumn 1979 Volume1 Number 2 German Merger Control: A European Approach to Anticompetitive Takeovers Dr. Rol Belke* W. David lraun** Europeanfree-market countriesrecently have begun to enact more laws regulatingmergersandjoint-ventures, with Germanyat theforefront. In this article, Messrs. Belke and Braun intensively analyze the German merger control law, including the criteriathat necessitate a report to the German CartelOffice, itsapplicationofthe substantivemerger controlrules,andpossible exceptions to an anti-merger ruling. They also explore the impact of the German law on internationalmergers andjoint-ventures. Final, they discuss in detail the first two German Supreme Court decisions that construed the substantive rules and contrast them with similarAmerican cases. * Universithtsdozent, University of Munich; J.D., 1966, University of Ttibingen; M.C.L., 1966, Columbia University. ** Research Assistant, Max Planck Institute for Foreign and International Patent, Copyright and Competition Law, Munich; A.B., 1972, University of Illinois; J.D., 1975, University of Notre Dame. Because several foreign language periodicals are cited numerous times in the footnotes to this article, a shorthand abbreviation has replaced the usual shortened citation form coupled with a supra reference to a foregoing footnote. For ease of reference, the following shorthand abbreviations may be found in the cited footnotes: WuW, BB, and WRP are in note 2; FK is in note 8; KB is in note 9; LNS KOMMENTAR is in note 10; TB is in note 19. Further, since German case names are not easily distinguished by having the names of two parties separated by a v., the names of German cases have been italicized and separated from the citation by a comma. Northwestern Journal of International Law & Business 1:371(1979) While the prohibition of mergers and acquisitions to prevent undue market concentration is a mature legal concept in the United States based on section 7 of the Clayton Act, ' merger control in Europe is for the most part in the embryonic or adolescent stages with Germany leading the way. At the supranational level, the European Economic Community (EEC) has no general merger control statute and therefore has a very limited capability to prohibit anticompetitive mergers.2 At the national level, only Britain 3 France,4 and Germany 5 have laws spe1 15 U.S.C. § 18 (1976). 2 Mergers may be attacked under article 86 of the Treaty of Rome, which provides in part that an "abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States." Treaty establishing the European Economic Community, March 25, 1957, 295 U.N.T.S. 2. Mergers may be prohibited only to the extent "an undertaking in a dominant position stregthens that dominant position so that the degree of control achieved substantially obstructs competition, i.e. so that the only undertakings left in the market are those which are dependent on the dominant undertaking with regard to their market behaviour." EuropemballageCorp. and ContinentalCan Co., Inc. P. EEC Commission, COMM. MKT. L.R. 199, 225 (1973). While article 86 has not yet been used with success to block mergers, article 85 has been applied successfully to attack joint ventures. This article prohibits "agreements between undertakings . . . which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market .... See Re Bayer Gist-Brocades, Comm. Mkt. L.R. D98 (1976); SIXTH REPORT ON COMPETITION C. BELLAMY & G. CHILD, COMMON MARKET LAW OF COMPETITION, POLICY, §§ 53-59 (1976); 345-57 (1978); Huber, Aktuelle Probleme des Gemeinschaftsunternehmens im deutschen und europaischen Wettbewerbsrecht, 28 WIRTSCHAFT UND WETrBEWERB 677 (1978) [hereinafter cited as WuW]; Steindorff, Zur Anwendbarkeit des Art. 85,4bs. 1 EWG- Verfrag auf Gemeinschaftsunternehmen in der EG-Praxis, 32 BETRIEBS-BERATER 1613 (1977) [hereinafter cited as BB]. For discussion of the relationship between articles 85-86 and article 23, § 1, of the Free Trade Agreements between the EEC and the member states of the European Trade Association (EFTA), see Roth, Die Wettbewerbsregeln in den Freihandelsabkommen der EWG, 1978 WETTBEWERB IN RECHT UND PRAXIs 409 [hereinafter cited as WRP]. Article 66(1) of the European Coal and Steel Treaty provides for control over mergers in which one of the merging parties is a producer of coal or steel but has been rarely applied. A proposed regulation for the general control of mergers in the EEC dated July 20, 1973, provides in part: "Any transaction which has the direct or indirect effect of bringing about a concentration between undertakings or groups of undertakings, at least one of which is established in the common market, whereby they acquire or enhance the power to hinder effective competition in the common market or in a substantial part thereof, is incompatible with the common market in so far as the concentration may affect trade between Member States." 16 O.J. EUR. COMM. (no. c 92) 2 (1973); COMPETITION LAW IN WESTERN EUROPE AND THE USA, vol. A*, at CM.L.II-91 (D. Gjilstra & F. Murphy ed. 1977). Prospects of the Council adopting this proposed regulation in the near future are considered highly unlikely. 3 Merger control was enacted in Britain in the Monopolies and Mergers Act 1965, c. 50, amended by The Fair Trading Act 1973, c. 41. See COMPETITION LAW IN WESTERN EUROPE AND THE USA, vol. A*, at UK.L.l-5. An overview of merger control laws of many countries is found in OECD, COMPARATIVE SUMMARY OF LEGISLATIONS ON RESTRICTIVE BUSINESS PRACTICES 77- 82 (1978). 4 A merger control law was enacted in France in 1977. Loi No. 77-806, July 19, 1977, [1977] German Merger Control 1:371(1979) cially directed at the control of mergers. The German merger control statute is found in sections 22-24a o (...truncated)