A 1.1 billion euro (US$1.4 billion) lawsuit filed by GN Store Nord A/S against Germany’s Federal Cartel Office (FCO), the office that in 2007 was responsible for blocking the proposed sale of ReSound to Sonova Holding AG, has been lost, according to various news reports.
GN had sued to recoup damages incurred due to the FCO’s veto of the merger/acquisition. This week, a German judge ruled that the FCO did not act negligently. “As long as the decision is within the limits of what’s reasonable, it cannot be said the regulator acted negligently,” said Cologne Regional Court Presiding Judge Reinhold Becker. “And without that, you cannot claim damages, [and] that’s a principle as old as our civil code.”
According to Bloomberg news service, the case was the first in Germany to try to hold the agency responsible for wrongfully blocking a transaction. GN is reportedly reviewing the latest judgment before deciding whether to appeal the decision.
In October 2006, GN signed an agreement to sell ReSound to Sonova for DKK 15.5 billion ($2.65 billion) in what would have been the largest hearing aid industry merger/acquisition in history. However, in April 2007, the German FCO (Bundeskartellamt) decided to prohibit the transaction, claiming it would result in “collective market dominance” in the German hearing instrument market. Both GN and Sonova appealed the decision, but the German appeals court (Oberlandesgericht) in Dusseldorf ruled that the court did not have the power to grant injunctive relief in merger prohibition cases.
Nevertheless, the FCO’s decision was eventually overturned by the German Supreme Court in early 2010—but long after the deal was dead.
Germany is the second largest market in terms of hearing aid unit volume, accounting for about 10% of global hearing aid sales. At the time of the FCO’s veto of the deal, German hearing aid maker Siemens AG and Denmark’s William Demant Holding controlled about 80% of the German hearing aid market, and the merger/acquisition would have pushed the market share owned by three companies to about 90%, according to the German courts.
Siemens briefly put its hearing aid division up for sale in January 2010, but withdrew the proposal a few months later. For a more in-depth discussion about industry mergers/acquisitions and their likelihood, see Trend #3 in the May 2010 HR article, “A Market Update and the Top-20 Trends in Hearing Care.”