Austrian merger control continues to capture non-full-function joint ventures. Joint ventures covered by merger control are sheltered against parallel assessment under the Austrian rules against anticompetitive agreements (no dual control).
1. Case Background
The case featured the merger of the logistics units of two
Austrian press wholesalers into a newly-created 50:50 joint venture
(JV). Following the merger, the parents of the JV were to remain
competitors on the market for press wholesaling, while the JV would
handle the logistical processes for the parents going forward. The
JV was undisputedly non-full-functional, as it was set up to serve
primarily the parents' businesses.
The transaction was notified to the Austrian Federal Competition
Authority and cleared following a phase II investigation subject to
commitments. Upon clearance, the country's Supreme Court
(Court) was called upon to decide on a number of questions
concerning the assessment of joint ventures under Austrian merger
control. The debate also touched upon issues such as the
delineation of merger control from the rules on anticompetitive
agreements and the treatment of spill-over effects.
2. The Court's judgment
The Court upheld the prevailing practice that Austrian merger
control captures the formation of non-full-function joint ventures.
It then reflected upon the assessment of joint ventures under
Austrian merger control.
The Court held that the full-function concentration test, which
largely mirrors the test under EU merger control, covers only
genuinely new formations of joint ventures. Conversely, the
acquisition of control (control test) and the acquisition of a
shareholding of 25% or more (25%+ test) in an existing undertaking
does not require the target to be full-functional. The Court
recognized that these concentration tests (control test / 25%+
test) also cover the formation of a joint venture in which one or
more of the parents contributes an existing business to the joint
venture, irrespective of whether the joint venture will be
full-function.
Since the parties contributed their respective logistics units
(i.e. equipment, facilities and employees) to the JV, the Court
found that the transaction qualifies as a concentration under the
control test / 25%+ test.
The Court then considered whether on top of the assessment under
merger control (dominance test), the JV could also be tested under
the rules against anti-competitive agreements (restriction of
competition test). The Court found that the merger control rules
take primacy over the rules on anti-competitive agreements of the
Austrian Competition Act. It thereby recognized that there is no
dual-control (Doppelkontrolle) of non full-function joint
ventures under Austrian competition law. Hence, an examination
under merger control excludes a parallel assessment of the merger
under the rules on anticompetitive agreements. Rather, all market
effects arising inherently from the merger are covered by the
approval and cannot be tackled (in parallel) under the rules
against anticompetitive agreements.
This also extends to spill-over effects, i.e. negative competitive
effects arising from the merger on markets in which the parents
continue to remain active. By this token, the Austrian Supreme
Court pointed out that spill-over effects are to be assessed in the
merger proceedings and therefore are also covered by the merger
approval. In the absence of a distinct spill-over test under
Austrian law (unlike on EU-level), spill-overs need to be assessed
under the dominance test.
3. Conclusion
The Court confirms the wide reach of Austrian merger control in
joint venture settings. In practice, a variety of constellations
are captured which typically would lack full-function, such as
joint purchasing, production or selling entities. It remains to be
seen whether the legislative initiative under way on EU-level to
capture non-controlling minority shareholdings will reduce the
scope of the Austrian joint venture test through the back door by
broadening the reach of EU merger control.
*Austrian Supreme Court, 16 Ok 11/13 – Pressegrosso,
decision of 27 January 2014.
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