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Under the merger control rules of the Austrian Cartel Act (ACA) a pre-closing filing is required if the combined turnover of all participating undertakings amounts to at least Sch3.5 billion (US$290 million), provided that the turnover of at least two undertakings involved in the merger is at least Sch5 million. Because Section 42a para 1 ACA does not qualify the term 'turnover' (Umsatz)in geographic terms, and because the preparatory documents of the Cartel Law Amendment Act confirm the irrelevance of the distinction between domestic and foreign turnover, the Austrian Cartel Court initially applied the threshold to worldwide turnover. From the outset the turnover thresholds for the pre-closing filing requirement under Section 42a para 1 of the ACA have been considered too low. Because the Austrian Cartel Court only applied fairly weak structural link and effects tests to limit the jurisdiction of the court with respect to 'foreign' mergers and business combinations, transactions with a negligible Austrian content were subject to the pre-closing filing requirement and the one-month waiting period provided for under Section 42b ACA.

Landmark decision

The Austrian Supreme Court (December 9 1996, 16 Ok 1/95) recently held that the turnover thresholds in Section 42a para 1 ACA relate to Austrian rather than to worldwide turnover. As a consequence, only transactions where the combined Austrian turnover of all participating undertakings amounts to at least Sch3.5 billion are subject to a pre-closing filing requirement. The decision significantly reduces the number of pre-closing filings of 'foreign' mergers and other business combinations with the Austrian Cartel Court.

Overall the decision has been welcomed by practitioners. However, it has been criticized by the Federal Chamber of Commerce because it puts Austrian acquirors whose Austrian sales will often exceed Sch3.5 million irrespective of the target's size and Austrian sales at a disadvantage relative to foreign acquirors. Moreover, some scholars consider the legal reasoning underlying the decision not entirely convincing. The law as it stands may therefore change before long. An amendment of the ACA implementing an intermediate threshold for Austrian sales and removing the present disadvantage of Austrian acquirors appears likely, but a departure by the Austrian Supreme Court from its decision of December 9 1996 is also a possibility.

Practical consequences

Apart from cases where the calculation of turnover as such is doubtful, the obvious advice would be not to file transactions with the Austrian Cartel Court if the parties' combined Austrian turnover amounts to less than Sch3.5 billion. However, the risk that the Austrian Supreme Court may at some time in the future depart from its December 9 1996 decision has to be taken into account. Clearly, parties will be protected from any criminal law sanctions (Section 130 ACA) by their reliance on the decision, even if it is overruled after the transaction closes. However, such reliance does not appear to protect the parties against (partial) nullity of the agreement underlying the transaction (Section 42a para 4 ACA). Furthermore, it is doubtful, under the ACA, whether such nullity would be cured by a filing made after the closing. In transactions with a significant Austrian content and where the Austrian one month waiting period does not lead to an unreasonable overall delay in closing, a filing with the Austrian Cartel Court may therefore still be advisable. The Court is at present divided on the procedural treatment of such technical filings, but filing parties will in any event obtain a decision protecting their transaction against (partial) nullity.

Peter Huber

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