Foundation of Eurohypo AG under further examination after clearance
20.06.2002
The Bundeskartellamt has concluded its examination under merger control of the foundation of Eurohypo AG, Frankfurt, by a merger of the three mortgage banking subsidiaries of the commercial banks Deutsche Bank AG, Frankfurt, Dresdner Bank AG, Frankfurt, and Commerzbank AG, Frankfurt. The planned merger was to be cleared in this respect since it does not lead to the creation or strengthening of dominant positions.
The President of the Bundeskartellamt, Dr Böge, stated: “The implementation of the planned merger, however, is only possible under the condition that there are no concerns regarding a potential violation of cartel law. Since on the one hand the three major banks hold shares in Eurohypo but on the other hand remain active in the markets for real estate financing, they are competitors in these markets. Therefore, the Bundeskartellamt has to examine further whether the commercial banks are coordinating their conduct with regard to their common interest in Eurohypo being successful and whether competition between them is restricted as a result. The examination of the project under cartel law has thus not been concluded yet.”
In its examination under merger control the Bundeskartellamt did not establish the creation or strengthening of dominant positions in any of the markets concerned, i.e. real estate financing, government credits and mortgage bonds.
In the market for financing commercial real estate and commercial and private housing construction Eurohypo’s market shares do not exceed 15 per cent. In the markets concerned Eurohypo is well behind either Depfa group or Hypo Vereinsbank. In the market for government credits Eurohypo AG holds market shares below 20 per cent. They are thus still below the threshold of 33 per cent which would give rise to concerns under merger control. In the market for mortgage bonds market shares are also considerably below the threshold for assuming dominance, even taking the narrowest marked definition.
The creation or strengthening of dominant positions is not to be assumed under the aspect of financial strength either. With regard to market access, large mortgage banks such as Eurohypo will not have a decisive advantage over smaller banks. Consulting services, in particular in commercial real estate financing, are increasingly gaining significance. Many banks are able to provide these services, irrespective of their size and equity capital base.
Background:
Regarding the foundation of a joint venture, both the merger control regulations (Sections 35 ff. of the ARC) and the regulations under the prohibition of cartels (Section 1 of the ARC) are to be examined. Under merger control it has to be established whether the foundation of the joint venture leads to the creation or strengthening of a dominant position. The Bundeskartellamt has now concluded this part of the examination by giving a clearance decision.
In addition, it has to be examined under cartel law whether competition between the parent companies of the joint venture is restricted and whether the prohibition of cartels is thus affected. According to the jurisdiction of the Federal Supreme Court this may be the case in particular if the parent companies continue to operate in the markets of the joint venture. The precondition for the existence of a restraint of competition is that it is commercially reasonable for the parent companies to avoid competition between them in view of their common purpose, i.e. the success of the joint venture, rather than their ability to instruct the joint venture to act in a particular manner in competition. Whether this is the case in the relationship between the commercial banks Deutsche Bank, Dresdner Bank and Commerzbank with the Eurohypo joint venture can not be finally assessed at this point. The companies involved have been informed that this part of the examination under cartel law has not been concluded yet and that therefore an important precondition for the merger project not raising any concerns under cartel law has as yet not been established.