From Overreach to Boundaries – How Courts Are Refocusing the Transaction Value Threshold in German Merger Control

When Germany added a transaction value threshold in 2017 to its merger control regime, the goal was clear: to capture a small number of strategically important acquisitions that fall below traditional turnover thresholds. The rule, enshrined in Section 35 (1a) of the Act against Restraints of Competition (GWB), was intended to catch innovation-driven deals that might otherwise escape merger review – such as acquisitions of fast-scaling platforms, biotech start-ups or companies with key IP or datasets.

But in practice, the rule developed a life of its own. The Federal Cartel Office (FCO) interpreted it broadly – asserting jurisdiction sometimes even retrospectively in cases with only very limited links to the German market. Over the years, this approach led to many companies having felt forced to submit a significant number of purely precautionary filings. Despite its original purpose as a targeted instrument, the transaction value threshold became more of a catch-all mechanism. Legal certainty suffered.

A corrective may now be underway. In a series of recent rulings, German courts have started to clarify the limits of the transaction value threshold, restoring the original intent of the provision: it applies only where there is a genuine concern for competition in Germany (“wettbewerbliche Gefahrenlage”).

The FCO’s expansive practice – and its limits

The FCO’s past decisions often relied on proxies: high revenue multiples (purchase price divided by target turnover), investor expectations, or a hypothetical share of the global purchase price attributable to German activities (so-called “fictitious domestic value”). In the authority’s view, these factors could indicate strategic relevance and thus justify the need for notification – even where domestic revenues or market presence were marginal.

But the courts have pushed back. In a June 2025 decision, the German Federal Court of Justice made clear that turnover- or valuation-based indicators are not sufficient. What matters is the transaction’s actual or potential impact on competition in Germany – not assumptions derived from price, global relevance or growth expectations.

Two recent decisions by the Higher Regional Court of Düsseldorf follow the same line. The Court rejected the notion that longstanding (but small) revenue streams or stable customer relationships could establish substantial operations in Germany and thus sufficient local nexus to justify a German merger filing. Such factors do not in themselves suffice. Even if German customers are involved, a business with no additional leverage on market dynamics may fall outside the scope.

Why (Domestic) Revenue Often Misses the Point

This may seem counterintuitive. After all, Section 35 (1a) GWB explicitly asks whether the target has “substantial operations in Germany”. So why shouldn’t revenue matter?

The answer lies in the purpose of the rule. The transaction value threshold was created to address gaps in traditional turnover-based filing tests, particularly in innovation-heavy sectors. It aims to catch cases where a target’s strategic relevance – not its current revenue – may allow the acquirer to gain or expand market influence.

In that context, revenue can be misleading. A start-up with modest German turnover may control critical infrastructure, datasets, or patents. At the same time, a company with steady revenue may offer nothing new or relevant from a competition law perspective.

Accordingly, what matters is not whether the target is earning money, but whether the transaction gives the acquirer a new lever to shape competition in Germany. And that lever must be grounded in facts, not projections.

Back to the core test: domestic competitive impact

The Federal Court of Justice has now clarified the analytical steps that guide the assessment under Section 35 (1a) GWB:

• There must be a current activity in Germany – physical presence or assets are not required, but the activity must be ongoing and inward-directed.
• This current activity can also be relevant if its competitive effects are expected to materialize only in the future.
• Most importantly, the domestic activity must be significant – this is where the legal and policy focus is increasingly turning. 

The courts have re-centred the analysis on one decisive question: does the transaction enable the acquirer to gain or expand influence on German markets? Such competitive concerns may arise, for example, where a transaction threatens to:

• impair innovation potential,
• contribute to structural foreclosure, or
• increase barriers to market entry

– the very risks that the transaction value threshold was originally designed to capture.

According to recent case law and the FCO’s guidance on the transaction value threshold, this may be the case where a transaction grants access to:

• patent portfolios relevant to R&D,
• platform functionalities that aggregate data or enable user bundling,
• technology inputs for adjacent markets,
• product candidates close to market entry,
• large datasets with strategic relevance (e.g., personal or behavioral data),
• platforms with rapidly growing user bases,
• business models that rely on indirect monetization (e.g., advertising or data-driven revenue),
• or innovation-driven start-ups with disruptive potential in regulated or high-growth sectors.

But where no such lever exists, the transaction value threshold should not apply – no matter how high the price the acquirer is willing to pay.

These decisions provide helpful guidance for future assessments. For example, in more mature markets with well-established monetization models, courts have held that turnover already reflects a company’s market position and competitive potential. As a result, the FCO cannot rely on alternative valuation metrics in such cases. The emerging message is clear: what matters is competitive substance, not financial optics.

Between legal certainty and policy pressure

The message also resonates in current policy debates. Speaking in May 2025, FCO President Andreas Mundt acknowledged that recent court rulings have narrowed the scope of the transaction value threshold and increased the legal precision required in merger assessment. While still skeptical of call-in powers, he mentioned they might be necessary in his view if no other mechanism ensures effective control of critical deals.

A more predictable path forward

By reaffirming the original limits of the rule, the courts have brought some welcomed clarity. The transaction value threshold remains a valuable tool for capturing innovation-driven mergers – but it is not a general jurisdictional hook.

For companies and advisers, this means fewer unnecessary filings, better alignment with legislative intent, and an at least somewhat clearer understanding of when the threshold applies – despite uncertainties which inevitably remain. A high purchase price may continue to raise attention. But only a credible, fact-based risk to competition in Germany will trigger a legal obligation to submit a merger control filing.