Bundeskartellamt examines whether Facebook/Kustomer merger is subject to notification

The Bundeskartellamt has initiated a proceeding against Facebook to examine whether its planned acquisition of the start-up Kustomer falls under the scope of German merger control. Kustomer is based in New York, USA, and provides a cloud-based customer management platform for business customers.

Andreas Mundt, President of the Bundeskartellamt: “We are examining ex officio whether German merger control applies to Facebook’s proposed acquisition of Kustomer. Should it turn out that the merger is subject to notification with us, we would request Facebook to submit the respective documents for examination immediately. Effective merger control is the most powerful instrument we have to prevent too much market power from falling into the hands of only a few companies We already see particularly strong market concentration in the digital economy. Stringent merger control is therefore indispensable.”

The Bundeskartellamt is examining whether the Facebook / Kustomer merger is subject to notification under merger control in a separate proceeding. Official requests for information have been sent to Facebook and Kustomer to determine whether the proposed merger reaches the so-called transaction value threshold in German merger control. The legislator introduced the threshold in 2017 in the 9th amendment to the German Competition Act (GWB) in order to close a gap in the merger control system. Mergers where companies or assets which (at the time of the merger) generate little or no turnover are acquired at a purchase price of more than 400 million euros can now be examined under competition law. The high purchase price in such takeovers is often an indication of innovative business ideas with great competitive market potential. Such acquisitions may require a preventive merger investigation, especially with regard to protecting innovation potential and innovation competition in technology markets. The aims of the proceeding which has now been initiated are to ascertain if the merger project will have a domestic effect and if the target company is active to a significant extent in Germany. Both are criteria for the application of German merger control. Should it turn out that the proposed merger is subject to notification in Germany, it can only be implemented if the Bundeskartellamt has previously examined and cleared the project.

The proposed merger between Facebook and Kustomer is currently being examined by the EU Commission in a parallel proceeding after the case had been referred to it by the Austrian competition authority. Germany did not join the application for referral to the EU Commission because in the Bundeskartellamt's general practice a referral requires a merger to be subject to notification based on national competition law, which still has to be clarified in the present case.