Changes to the standard of review and key aspects of the merger review process make Germany's rules more consistent with those of the European Commission.

On June 30, Germany introduced a change to the basic test that its Federal Cartel Office (FCO) uses to evaluate mergers and acquisitions, as well as some important changes to the FCO's merger review process. Because of both the size of the German economy and the broad reach of the German merger review rules, these changes could affect many transactions, even when the main nexus of a transaction is not in Germany (or even in Europe). The principal changes are summarized below.

Merger Review Standard

• The standard of review for the competitive effect of a transaction has been changed from a standard that considers whether a transaction will facilitate "dominance" in a market to the test employed by the European Commission—whether a transaction will lead to a "significant impediment to effective competition." However, since the potential for market dominance remains the FCO's principal focus, the effect of this change may not be as great as intended. The concept of market dominance includes both unilateral anticompetitive effects—effects, such as higher prices or lower outputs, that firms can impose by acting alone—and some forms of "coordinated" anticompetitive effects, such as the increased likelihood of a cartel or tacit collusion. It remains to be seen whether this change may cause the FCO's analysis to become more reliant on economic analysis, which could make it less predictable.

• The market share level at which the FCO will presume that a transaction will cause market dominance has been increased from 33% to 40%. The impact of this change will be more immediate, as it will reduce the number of transactions that are subject to close scrutiny.

Procedural Changes

• The FCO will be able to "stop the clock" to relax the very rigid time limits of the current law when parties do not respond fully to a request for additional information.

• The "second phase" of the merger review period, which is normally three months long, will automatically be extended by one month when the parties make a settlement proposal.

• Multiple transactions between the same parties that occur within a two-year time period will be considered a single transaction.

Implications

Taken as a whole, these changes could make merger enforcement in Germany more closely resemble the enforcement activity of the European Commission. It also appears probable that economic analysis will become more prominent over time, which could bring German merger analysis more in line with the practices of the U.S. enforcement agencies. Companies that are considering transactions that could be reportable in Germany or with the European Commission should consult with counsel early in the process to ensure compliance with the new rules.