An exception or the first of many?

This week, the German Federal Cartel Office (FCO) unconditionally cleared the acquisition of Olink by Thermo Fisher after an in-depth review of the case. While the parties and lawyers involved might be (well-deservedly) popping champagne corks, I would like to use this case to highlight some trends in German merger control (and beyond).

What is the case about?

In October 2023, Thermo Fisher announced its EUR 2.8 billlion acquisition of Olink. US-headquartered Thermo Fisher is a global supplier of analytical instruments, life sciences solutions, specialty diagnostics, laboratory, pharmaceutical and biotechnology services. Olink offers analysis systems and services in the field of proteomics, in particular the human proteome (which is the set of proteins in a particular type of cell or organism).

The transaction was originally notified to the FCO in November last year, but the parties decided to pull the filing, apparently after CMA had decided to review the case as well. The parties refiled the transaction on in January 2024, the FCO then referred the case to phase two one month later and cleared the transaction on 17 June (see press release here). The review in the UK is still ongoing (so maybe leave the champagne in the fridge for now).  

A prime example for the applicability of the transaction value threshold

The parties did not reach the merger control turnover thresholds in Germany. However, due to the high purchase price, the transaction was caught by Germany’s EUR 400 million transaction value threshold. A quick recap: In 2017, Germany (and also Austria) introduced a transaction value threshold to allow the FCO to review transactions in which the current turnover and the purchase price for the target differ to a disproportionate extent. The Guidance Paper of the FCO (published jointly with the Austrian regulator) shows that the FCO sees the area of application for the threshold particularly in the tech, pharmaceutical and biotechnology sectors. Thermo Fisher’s acquisition of Olink therefore falls right into that remit.  

The transaction value threshold is especially applicable in cases where the turnover of the target is below the turnover thresholds, but the target still has substantial operations in Germany and this turnover does not adequately reflect its market position and competitive potential.

Not only the FCO is monitoring such cases

Reportedly, a number of companies raised concerns about the transaction towards the FCO. This reflects a current trend in merger control, which is not limited to Germany: Market participants and other stakeholders who believe that their individual interests are affected by a particular transaction are more than ever prepared to raise their concerns and share them with the authority. While third parties have always contributed to merger control proceedings, many are now prepared to intervene more actively to pursue their own strategic interests. This can sometimes make cases more difficult for merger control regulators, as they have to justify clearance decisions particularly carefully in order not to risk third parties appealing.

It’s not all about horizontal effects

The FCO has established that the parties’ analysis technologies do generally belong to two distinct product markets, and that there are therefore (almost) no horizontal overlaps between the parties. However, the technologies of both companies can be used in a complementary manner and allow for even more precise analyses when used in parallel. Although both parties have a relatively strong market position in their respective markets, the FCO found that there are limited overlaps between the customers for both technologies, which are generally procured independently of each other. The decisive factor in the FCO’s analysis seemed to be the competitive situation in the respective markets and the fact that no competition between the two methods was expected within the next five years.

The FCO also concluded that there are no conglomerate effects, such as bundling or foreclosure, for a variety of reasons:

• The fact that the technologies are so different makes technical bundling difficult, and the different procurement cycles and prices largely rule out commercial bundling.
• Customers are able to switch to competitors and have even initiated counterstrategies in the form of cooperations and acquisitions.
• The markets are highly innovative growth markets, and market positions are therefore not cemented and could change quickly.
• Competitors are also diversifying their business through acquisitions.

Will there be similar cases in the future?

Pretty sure, yes! As far as we are aware, this was the first case in which a notification triggered by the transaction value threshold ended up in a phase two proceeding. Given that the head of the FCO, Mr. Mundt, frequently stresses that the tech, pharmaceutical, healthcare, and biotechnology sectors are in the focus of the FCO (see also above), and that transaction values in these sectors often take into account future business opportunities (and not current earnings), they are typical cases for the transaction value threshold.

The technical complexity and often still-developing market environment in these industries require a detailed understanding of the products. From the outset, it looks as if these factors played a decisive role in the decision to open a phase 2 investigation. Going forward, stakeholders should therefore consider that even in cases ultimately not raising substantive issues, regulators might need more time to properly assess the relevant markets than they usually have in phase 1.

Lastly, interventions by various stakeholders (who appear to be better and better prepared) and the difficulties in predicting future market developments make these cases an even bigger challenge for everyone involved.  

Photo by Ian Parker on Unsplash