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Meta’s Kustomer deal puts EU antitrust’s 'one-stop shop' principle under strain
09 December 2021 17:39 by Andrew Boyce, Nicholas Hirst
The timeline for Meta’s bid for Kustomer is up in the air after the deal got caught between two parallel, or even rival, European approaches designed to increase scrutiny of “killer acquisitions.”
Today Germany’s competition authority said it had jurisdiction, under national thresholds introduced to catch Big Tech deals, to review the acquisition.
That comes some seven months after the European Commission started reviewing the acquisition on the basis of a policy that allows EU countries to ask it to review potentially problematic deals.
The deal, reported to be worth $1 billion, was announced just over a year ago and the social networking giant formerly known as Facebook must have felt it was finally within touching distance of the finale.
In recent months the Australian and UK competition authorities — two stringent critics of Big Tech — approved the merger, and the EU review was progressing.
But now Meta has to start a fresh review process with the Germans. That’s unlikely to happen before Christmas.
At best, it takes one month for the Bundeskartellamt to approve a deal, following notification. So under the most positive scenario, it could approve the deal around the same time as the commission, whose deadline is Jan. 28.
But if the German authority has “any indication that the merger may cause competitive problems which cannot be dispelled during the first phase proceedings” it can open an in-depth investigation. That can take up to five months and would put the Kustomer deal on hold until at least the middle of 2022.
According to the Bundeskartellamt the “vast majority” of the more than 1,000 cases notified each year are cleared in phase I. Still, this year it has opened phase II investigations into at least nine deals, including China International Marine Containers Group’s acquisition of Maersk Container Industry and EG Group’s plan to buy German fuel stations from OMV.
At least one deal has been blocked this year: plans by Funke Mediengruppe, the publisher of German newspaper Thüringische Landeszeitung, to acquire sole control of newspaper Ostthüringer Zeitung.
Another deal was withdrawn and abandoned after the enforcer raised concerns: car-parts maker Dana’s plan to buy part of the light-vehicle thermal business of rival Modine.
In 2020 the Bundeskartellamt reviewed around 1,200 deals. Nine triggered phase II investigations. Of these two were abandoned; three were cleared with remedies; and four were cleared unconditionally.
Today’s decision is an important precedent for the Bundeskartellamt and Big Tech in general. An early mover on “killer acquisitions,” Germany revised its criteria for mergers that needed to be notified in 2017.
Any deal worth more than 400 million euros ($450 million) and involving a target company whose “operations in Germany are substantial” needed German competition approval. But the provision has not caught as many deals as expected and there is little precedent.
That is why German officials balked at the idea that they could have referred the deal to the European Commission.
EU law gives national competition authorities 15 days to join a referral request, which Austria made in this instance in May.
While all agree that 15 days is a quick turnaround, critics will wonder how it could have taken Germany seven months to decide the matter (or even a year from the deal being announced).
The question of jurisdiction is by no means easy, counter defenders of the Bundeskartellamt. Plus it can only decide once it has received all necessary information from the companies.
What was the outcome? The public statement merely notes that Kustomer’s presence in Germany was sufficiently substantial. It’s understood to have a handful of customers.
More reasoning may come out if the decision is published, whether by the Bundeskartellamt or as the result of an appeal by Meta. In the meantime, Big Tech has been warned.
The commission said today that Austria’s original referral request was made in May and supported by nine other national competition authorities.
In private, officials are disappointed that the EU’s near-sacred “one-stop shop” for merger review has broken down in this case, and they lay the blame squarely at the feet of the Bundeskartellamt.
Why couldn’t it have joined the referral request like the other nine national competition authorities, they ask.
But in the eyes of the Bundeskartellamt, that simply wasn’t possible: It does not believe it can legally refer a deal to the commission where there is no German jurisdiction.
That has been a sore point for a year, ever since the commission moved to revise its approach to referrals to better catch killer acquisitions. The disagreement was laid bare as the commission sought jurisdiction to review Illumina’s acquisition of Grail earlier this year.
Nor would the Bundeskartellamt agree with the idea that this is a unique breach of the one-stop shop principle. It happens occasionally that the commission refers part of a deal down to a national authority, for example when referring part of LKQ’s bid for Stahlgruber to Germany, and part of McKesson’s deal with UDG Healthcare to the UK.
The German authority could point to Article 22 of the EU merger law, whereby the commission takes the jurisdiction from those countries that refer the deal up. Strictly speaking, then, there is no “legal conflict” between the commission and the Bundeskartellamt conducting their own reviews.
That may be. But in practice the markets are European and it is hard to see how two regulators conducting parallel reviews won’t overlap.
Illumina will likely eventually have to unwind its acquisition of Grail as a result of the EU merger regulator’s block on it
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