Clifford Chance

Processing data of German end-users can amount to a local activity, so bringing a merger within the jurisdiction of the German merger control regime, even when the processing is performed for non-German customers. The Federal Court of Justice's Meta/Kustomer ruling significantly widens the scope of Germany's transaction-value threshold and has important implications for cloud- and data-driven businesses.

On 17 June 2025, the German Federal Court of Justice (Bundesgerichtshof – the "Court") issued its first decision on the scope of the transaction-value threshold in the German merger control regime, in the Meta/Kustomer case (KVR 77/22). At stake was the meaning of "substantial operations in Germany" under Section 35(1a) No. 4 of the German Act against Restraints of Competition ("ARC"). The judgment clarifies that activities directed at, or involving, German end-users can establish a sufficient nexus to Germany, even if the target has few direct German business customers or limited local turnover.

The ruling provides welcome guidance but also expands the potential reach of German merger control into transactions involving cloud services, SaaS providers and other data-driven business models.

1. Background

Traditional thresholds and the transaction-value test

German merger control is triggered when the parties exceed turnover thresholds: combined worldwide turnover over EUR 500 million, one party with more than EUR 50 million in Germany, and another with more than EUR 17.5 million in Germany. These thresholds failed to capture high-value acquisitions of innovative but low-revenue firms.

To close this gap, the legislature introduced a transaction-value threshold in 2017. A filing is also required if:

• the parties' combined worldwide turnover exceeds EUR 500 million;
• at least one party achieves EUR 50 million in Germany;
• the transaction value exceeds EUR 400 million; and
• the target has "substantial operations in Germany" (Section 35(1a) No. 4 ARC).

The final element, substantial domestic activity, is qualitative by design. It ensures that only deals with a meaningful nexus to the German market are caught, but its open wording has created uncertainty, especially in digital markets.

The Meta/Kustomer deal

Meta agreed to acquire Kustomer, a US-based SaaS provider offering customer-relationship management software. Kustomer had only a handful of German corporate clients and modest German revenues. However, through its software it processed large volumes of data concerning German consumers, the end-customers of its business clients.

The Federal Cartel Office ("FCO") considered this sufficient to establish substantial operations in Germany and required a filing under the transaction-value threshold. Meta filed under protest. The Higher Regional Court of Düsseldorf later disagreed with the FCO, finding that Kustomer's German footprint was negligible since its direct customers were mostly abroad. This restrictive view was appealed to the Court.

2. The Judgment

End-user data matters

The Court overturned the Düsseldorf court and endorsed a broad interpretation of Section 35(1a) No. 4 ARC. It held that Kustomer's processing of data from German end-users forms part of its domestic activity. The fact that contractual relationships existed primarily with foreign business clients did not preclude a sufficient nexus to Germany.

The Court stressed that the local nexus inquiry must focus on the competitive effects in Germany, not on the formal location of contractual customers. Where activities concern German end-users, they can create competitive potential for the acquirer in German markets, for instance by enhancing access to data for targeted advertising.

Threshold set low

The Court also clarified that the test for "substantial" is lenient: only marginal or de minimis activities are excluded. Traditional revenue figures are not decisive. Instead, metrics such as the number of German users or the volume of domestic data processed may indicate substantial operations.

This interpretation aligns with the policy goal of the transaction-value threshold, capturing acquisitions of innovative, data-rich firms that may shape competition in future, even if current revenues are modest. By focusing on end-user engagement, the Court confirmed that data-driven activities can be sufficient to trigger a German filing.

Unresolved scenarios

The Court left open whether processing German end-user data for exclusively foreign clients (with no German corporate customers at all) would also meet the test. While not decisive here, the reasoning suggests that the presence of German end-users themselves could be sufficient, regardless of where the contractual client sits.

3. Practical Considerations

Wider jurisdictional reach

The ruling substantially expands the reach of German merger control in digital markets. Transactions involving targets with indirect links to Germany, for example, foreign SaaS providers or cloud platforms processing German consumer data, may now require notification if the deal value exceeds EUR 400 million.

Assessment in practice

For practitioners, the key questions are:

Does the target process data of German end-users or otherwise interact with German markets?

Are these activities more than trivial in scope?

If the answer is yes, the Court's low threshold suggests that a filing obligation is likely. The FCO can rely on non-financial indicators, and companies should be ready to document German user numbers, data volumes or similar proxies.

Deal planning implications

In light of the judgment, parties should integrate a broad nexus analysis into early deal assessment. Particularly in the tech and cloud sectors, targets may have substantial German relevance without generating significant German revenues. Where there is doubt, a defensive filing may be the safer course.

The decision also underlines the importance of considering potential competitive effects, not just current business. Even if contractual restrictions initially limit data use, the possibility of leveraging data post-transaction can be relevant for jurisdictional purposes.

Cloud and data-driven businesses in focus

The ruling is especially pertinent for cloud services, SaaS providers, platforms and other data-intensive firms. These businesses often monetise engagement or data rather than direct sales in each country. If their services involve German consumers, even indirectly, they may be considered to have substantial operations in Germany.

Foreign-to-foreign deals in the tech sector should therefore carefully review their exposure under the German transaction-value test.

Conclusion

The Meta/Kustomer ruling stipulates that "substantial operations in Germany" is not limited to direct sales or customer contracts in Germany. Activities affecting German end-users, notably the processing of their data, can establish a domestic nexus, even where turnover is low and clients are abroad.

By setting a low bar for significance, the Court has widened the scope of German merger control, with particular impact on cloud- and data-driven transactions. For dealmakers, the message is clear: when evaluating whether a German filing is required, look to where the users and data subjects are, not only to where the revenues are generated.