German retail company EDEKA Group's (EDEKA) proposed acquisition of competitor Tengelmann Group (Tengelmann) was prohibited by the Federal Cartel Office (the FCO) in April this year. However, EDEKA subsequently applied for ministerial approval from the German Federal Minister of Economics and Energy (Minister of Economics), who can overrule the FCO’s decision. In November both EDEKA and Tengelmann had the chance to present their arguments at an oral hearing.
The ministerial approval is a legal instrument in German competition law which is only used rarely. It was introduced in 1973 and prior to EDEKA’s application there have only been 21 cases in which the undertakings concerned applied for ministerial approval. In 13 of these cases the applications were not successful, 5 other cases were cleared but subject to conditions and only in 3 cases the proposed mergers were cleared unconditionally. The most recent application for ministerial approval was made in 2008 and concerned a merger in the hospital sector. In that case the Minister of Economics granted the approval.
By assessing the case, the Minister of Economics acts as a competition authority and the formal proceedings will be similar to those at the FCO. However, the Minister of Economics’ scope of assessment is broader than the FCO’s which only assesses whether there are impediments to effective competition. Nevertheless, the ministerial approval is not subject to the sole discretion of the Minister of Economics, as certain material and formal conditions which are laid down in Section 42 of the German Act against Restraints of Competition must be satisfied:
- as to the formal conditions, the parties can only apply for ministerial approval within one month after the FCO’s prohibition decision or, if the companies appealed against the FCO’s decision, within one month after a court decision prohibiting the merger has become legally binding; and
- as to the material conditions, the Minister will take into account whether the restraints of competition by the proposed merger are either outweighed by advantages to the economy as a whole following from the concentration, or whether the concentration is justified by an overriding public interest.
In the course of the proceedings, the Minister of Economics will ask the Monopolies Commission, as well as the state governments of the affected German states, for their opinion on the proposed merger. Moreover, interested third parties are invited to submit their opinions and the Minister of Economics will carry out further market investigations, e.g. request written submissions by the parties and their competitors, or conduct surveys.
Prior to a final decision, an oral hearing will be held to hear the parties’ arguments.
The Minister’s final decision shall be taken within a maximum of four months after the receipt of the parties’ application and can be subject to conditions.
The final decision can be appealed in court at the Higher Regional Court of Düsseldorf by both the undertakings concerned as well as by third parties affected by the merger.
The proceedings in the case of EDEKA and Tengelmann are still pending but the final decision is expected to be given soon.