The German magazine Finance recently interviewed Frankfurt-based Antitrust Associate Dr. Jens Steger on the most prominent merger case in Germany, the union of food retailers EDEKA and Kaisers Tengelmann. Steger is recognized as an authority on German and European merger control law.
Within Germany’s highly concentrated retail food market, the largest supermarket corporation, EDEKA, is trying to purchase Kaiser’s, which is the grocery outlet of German grocer Tengelmann. Germany’s national competition regulator, the Federal Cartel Office (Bundeskartellamt) opened an in-depth investigation into the proposed takeover and issued an injunction in December 2014 to prevent the parties from completing parts of the merger before the authority finished its merger review. The authority will decide about the complex merger in March 2015.
According to some arguments the merging parties presented during the Bundeskartellamt’s merger control review, the “failing firm” defense under German and European merger control law has been raised. In the context of competition and merger control scrutiny, the failing firm defense argues that although a transaction might seem to reduce competition, the fact that the target company is on the verge of insolvency and about to exit the market anyway means that, in fact, there is no actual reduction in competition.
According to Jens, the failing firm defense wouldn’t be an option for the merging parties due to the strict interpretation of such a scenario under German merger control law.
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