No, it's not a standard AE expression either. I figured it was probably one of those obviously wrong listings that the LEO team puts in to catch plagiarists. I support deleting 'knockout criterion.'
There are dozens of past discussions in the archive, though only if you search under Kriterium, as the search function fails with K.O. (It also helps to raise the results per page to 250.) Unfortunately, none of the ones I found are very conclusive or satisfactory.
Revisiting the issue now, I would say that
is certainly idiomatic English, but it seems to be the right translation only if/when K.O.-Kriterium has a certain meaning, which we might tentatively call sense 1: an aspect so bad that it knocks the thing out of discussion, puts it out of the question, causes it to be excluded, kills any potential negotiation.
Evidently, however, K.O.-Kriterium can also (usually? often? sometimes?) have another sense (sense 2?): namely, something so good that it's enough to cause the thing in question to be included; something that's so impressive it knocks you out, completely convinces you; perhaps even something that makes a deal, a deal-maker. For this sense, past suggestions have included
sine qua non
Finally, if I understand correctly, yet a third line of reasoning seems to suggest that it may also be used (sense 3?) just to mean something so important that it can't be overlooked in making a deal, but without saying whether it's a factor that causes exclusion or inclusion.
To really wrap this up, it might help if a few more German speakers could help confirm or rule out any or all of those three senses.
I realize that even in English there's some overlap; show-stopper, for instance, usually means something astonishingly good, but in negotiations it could mean a deal-killer.
But maybe we can at least get a little closer, and end up with a wider range of idiomatic options, if only to make it apparent at a glance that there are a lot of choices.
We should also confirm, for the record, any other words besides Kriterium that are used with K.O.- in German, and whether you really spell it K.O.-, or KO-, or both.