Merger control notification requirements – a question of the right timing?

Author: Florian Krumbiegel

After a record fine of EUR 70 million against REWE in January 2025 and thus one of the biggest successes of the Federal Competition Authority (BWB) in history, the authority this time failed before the Austrian Supreme Court of Justice (OGH) in a case concerning the transaction value threshold.

The case of Edwards Lifesciences/JenaValve

With its decision of March 26th, 2025 (OGH 16 Ok 2/25t), the Supreme Court of Justice clarified for the first time under which circumstances a company must be “significantly active in Austria” within the meaning of section 9 para. 4 (4) of the Cartel Act (KartG) in order to trigger a notification obligation under Austrian merger control law. The case at hand concerned the market for aortic valve replacement products. Specifically, the acquirer, Edwards, intended to acquire all shares in and sole control of the target company, JenaValve. The target company develops and markets a transcatheter aortic valve replacement product for the treatment of aortic valve regurgitation (TAVR-AR), which is currently the only product of its kind approved in Europe. The acquirer markets a product for the treatment of aortic stenosis (TAVR-AS) and has recently acquired a company that holds the rights to develop and market a TAVR-AR valve outside of China.

Despite the low domestic turnover of the target company (EUR 57,000 in 2023; EUR 95,000 in 2024), the planned transaction was notified to the Federal Competition Authority (BWB) as a precautionary measure in the fall of 2024. The turnover consisted of the sale of only eight TAVR-AR systems to a single customer (a hospital) between 2023 and 2024. The low turnover figures of the target company show that the thresholds of section 9 para. 1 KartG were far from being met. However, since Edwards intends to pay up to EUR 870 million for all shares in the target company, at least the first three criteria of the transaction value threshold [section 9 para. 4 (1-3) KartG] were met. Therefore, the key question remained whether the distribution of eight TAVR-AR systems to a single customer constituted a “significant domestic activity” within the meaning of section 9 para. 4 (4) KartG.

The BWB and the Federal Cartel Prosecutor affirmed this and accordingly requested an in-depth merger examination (Phase II) with the Cartel Court. The request was based on the fact that the merger of the only licensed producer of a TAVR-AR valve in Europe with the currently only other alternative would significantly restrict competition. In particular, the potential future market concentration was pointed out.

The Cartel Court rejected the requests due to a lack of significant domestic activity of the target company, whereupon the BWB and the Federal Cartel Prosecutor lodged an appeal with the Supreme Cartel Court.

The transaction value threshold

In 2017, the Cartel and Competition Law Amendment Act 2017 introduced a new threshold for merger notifications into Austrian antitrust law – the transaction value threshold. An identical threshold was also introduced in Germany in section 35 para. 1a of the German Act against Restraints of Competition (GWB). Accordingly, a transaction in Austria is subject to notification even if the thresholds within the meaning of section 9 para. 1 of the (Austrian) KartG are not met if:

the companies involved achieved total worldwide turnover of more than EUR 300 million in the last financial year prior to the merger,
the companies involved generated total domestic turnover of more than EUR 15 million in the last financial year before the merger,
the transaction value of the consideration for the merger is more than EUR 200 million, and
the company to be acquired is active to a significant extent in the domestic market.

The transaction value thresholds are a peculiarity of Austrian and German merger control law. They act as a catch-all provision and make it possible to include mergers where the value of the target company is not primarily reflected in its turnover but, for example, in its innovation potential. The threshold is particularly relevant for transactions in the digital or pharmaceutical industry. If the turnover of a target company does not exceed the threshold of EUR 5 million under section 9 para. 1 KartG, a notification obligation may still exist if the company is “active to a significant extent” in the domestic market.

A guideline issued by the BWB (in cooperation with the German Federal Cartel Office, or “BKartA” for short) clarifies that the factors or criteria for assessing the materiality threshold under section 9 para. 4 (4) KartG may vary depending on the industry. However, in so-called “mature markets,” meaning markets in which turnover figures are considered a sufficient indicator of market presence, the BWB assumes that the materiality threshold is in any case not met if the domestic turnover of the target company does not exceed EUR 1 million. If, on the other hand, the turnover does not adequately reflect the market position and competitive potential, other key figures must be taken into account for the assessment. For the digital industry, the guideline refers, for example, to the number of monthly users or the daily click rate of a platform as relevant key figures.

The guideline also indicates (margin numbers 103 et seq.) that the competition authorities assume that the threshold is met when acquiring a company that is to market a newly approved medicinal product, even if no significant turnover is generated for the time being, as long as substantial future revenue growth appears realistic. Domestic research and development activities (R&D activities) can also establish a significant domestic connection. This is particularly the case if, for example, the number of employed researchers, existing patents, or the research budget indicate a substantial domestic activity. According to the guideline, the materiality threshold is deemed to be met in particular if a company, along with its patents, is acquired and its main focus lies in the development and future commercialization of a medicinal product that is already in the final phase (phase III of clinical trials).

In summary, the competition authorities assume a significant domestic activity if the target company already generates sales, has a production site in the country, carries out R&D activities or if there is a realistic potential for a significant increase in sales.

Decision of the Supreme Court of Justice (OGH)

The Supreme Cartel Court has now ruled that the assessment of the materiality threshold pursuant to section 9 para. 4 (4) KartG must be based exclusively on the date of the (planned) implementation of the merger. Future activities – even specifically planned ones – in later years must be completely disregarded.

Consequently, the fact that a target company marketed eight TAVR systems to a single customer in previous years was not sufficient for the Supreme Court of Justice, even if this would or could lead to market concentration. Future developments are irrelevant for the assessment. Only current, market-related activities are decisive, whereby these are to be determined based on the location of the customers.

If a company does not engage in a market-oriented business activity in Austria, recognized industry-specific indicators (e.g., user numbers or website traffic) must be used to assess the significant domestic activity. In the present case, however, the market share was not considered a relevant criterion for assessing significance (note: JenaValve’s market share is 100%). In this regard, the Supreme Court of Justice deviates from an earlier decision in the “Salesforce” case (OGH 27 Kt 9/21g), in which a market share of 5-10% was considered an indication of significant domestic activity. According to the current decision, a single domestic customer who has purchased eight systems in two business years is not sufficient to exceed the materiality threshold.

With this clear rejection of the argumentation by the BWB and the Federal Cartel Prosecutor, the Supreme Court of Justice provides an essential clarification regarding the application of the transaction value test and its relevance to the notification obligation under Austrian merger control law.

A look at Germany

A similar ruling was also recently made in Germany, in which the Higher Regional Court of Düsseldorf restricted the Federal Cartel Office’s expansive interpretation of the transaction value threshold. In the proceedings, Adobe had taken over two globally active software companies that developed products for the e-commerce sector and for the automation of B2B marketing and distributed them, among other places, in Germany. The Federal Cartel Office viewed this as a notifiable merger under the application of the transaction value threshold and therefore initiated demerger proceedings, even though the acquisition had already been completed. According to the court, such a market regularly exists if software has already been distributed – including in Germany – for around ten years at the time of acquisition. If there is no mature market, indicators such as a company presence in Germany, the number of employees, national revenues, and the customer base are to be used to assess domestic activity. However, the decisive factor is always the time of acquisition; a merely abstract growth potential, which could, for example, be derived from the proportion of the purchase price attributable to Germany, is not sufficient to establish significant domestic activity.

Furthermore, the Edwards Lifesciences/JenaValve merger was also notified in Germany; the German Federal Cartel Office denied the existence of a notification obligation due to the lack of significant domestic activity in Germany.

Conclusion and outlook

The two decisions make it clear that the interpretation of the transaction value thresholds by the Federal Competition Authority and the German Federal Cartel Office is somewhat too generous. In particular, abstract sales growth in the future must not be taken into account, but only current business activities. If a company generates less than EUR 1 million in turnover in Austria, it is therefore unlikely that the project will exceed the materiality threshold – unless there are additional factors such as a production site, a significant number of employees or a large customer base that indicate significant domestic activity.

In this respect, timing can be a key factor in determining when to acquire a company. If growth is expected in the near future, but merger control is to be avoided, early action could prevent the need for merger notification (and potential prohibition).

It also remains exciting to see how the protection of innovation competition will develop in the EU in the future. Teresa Ribera, the new Vice-President of the European Commission and Competition Commissioner, has repeatedly emphasized that the preservation and promotion of innovation competition will be a central goal of her competition policy. Ribera is paying particular attention to so-called “killer acquisitions” – i.e., takeovers of innovative start-ups by established market players that could potentially suppress future competition. This issue has once again come into focus after the European Court of Justice rejected the Commission’s previous practice of covering transactions below the turnover thresholds via Article 22 of the Merger Regulation referrals – as in the Illumina/GRAIL case – on September 3rd, 2024. It therefore remains to be seen what further steps Ribera will take to achieve her goal. This could also have an impact on Austrian practice with regard to the transaction value threshold.

Our experts from the Antitrust Law and Life Sciences & Health Law teams at Haslinger / Nagele Rechtsanwälte GmbH are happy to answer any questions you may have about the transaction value threshold.

Disclaimer

This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.