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Competition law
1. Introduction
All commercial undertakings are regulated by the Danish Competition Act (“the Act”) which has been aligned with EC competition law. Whether the undertaking is profit-making is immaterial, provided that it carries out economic or commercial activities in Denmark.
The Act includes provisions and principles which, in all material respects, are similar to the provisions in the EC Treaty and other EC legislation. EC competition law applies to matters which may have impact on cross-border trade, whether Danish competition law applies to purely Danish matters. The following description is of Danish competition law only, and no remarks will be made on the distinctions between Danish and EC competition law (which are, for most practicable purposes, immaterial).
The Act is supervised by the Competition Council (“Konkurrencerådet”) accompanied by its executing body, the Competition Authority (“Konkurrencestyrelsen”). Decisions made by the Competition Council can be appealed to the Competition Appeals Tribunal (“Konkurrenceankenævnet”). A decision made by the Competition Council must be reviewed by the Competition Appeals Tribunal before the case can be brought before a Danish court.
As for EC competition law, the Danish system contains four core subject matters:
- Prohibition on anti-competitive agreements,
- Prohibition on the abuse of a dominant position,
- Merger control regime, and
- State Aid
2. Prohibition on anti-competitive agreements
According to Section 6 of the Act, it is prohibited to enter into agreements which have as their object or effect to restrict or distort competition, whether directly or indirectly. In order to be prohibited, the restriction or distortion of competition must be appreciable. To be able to evaluate whether this is the case, the relevant market has to be determined by differentiating the relevant market of products and geography.
The term “agreement” is to be interpreted very broadly and covers written as well as oral agreements. Also legally non-binding agreements and concerted practises between undertakings are covered.
The Act mentions the following as examples of prohibited behaviour:
- price fixing,
- limiting or control of production, sales, technical development or investments,
- dividing markets or supply chains,
- applying unequal conditions or service to equivalent transactions,
- attaching sale of one product or service to the sale of an unrelated product or service,
- coordination of competitive behaviour between undertakings through a joint venture, or
- control of resale prices.
The prohibition applies to both horizontal agreements (agreements between undertakings at the same level of the trade chain) and vertical agreements (agreements between undertakings at different levels of the trade chain).
Agreements and other behaviour covered by Section 6 are not prohibited if the participating undertakings (including the groups to which they belong) meet one of the following two de minimis requirements in Section 7:
- annual turnover on a world-wide basis less than DKK 1 billion and a combined market share below 10 pct of the particular product or service, or
- annual turnover less than DKK 150 million.
These de minimis exemptions do not apply to coordination of prices, profits etc. for the sale or resale of products or services (that is, horizontal “cartels” and resale price maintenance) or predeterminations or other coordination of tenders in relation to procurement proceedings. Furthermore, the de minimis exemptions do not apply to agreements or other behaviour, if other undertakings have entered into similar agreements etc. that affect competition at the same relevant market in a restrictive way.
Pursuant to Section 8 of the Act, Section 6 is not applicable to agreements or other behaviour that:
- contribute to improving the efficiency of the production or distribution of products or services or promote the technical or economic development, including environmental improvements, and
- ensure consumers a fair share of the advantages thereby achieved, and
- do not inflict restrictions on the undertakings which are unnecessary to achieve these objectives, and
- do not give the undertakings the possibility of barring competition for a substantial part of the relevant products or services.
It is possible (but not mandatory) to notify agreements to the Competition Council in order to receive confirmation that these criteria are met.
3. Prohibition on the abuse of a dominant position
Pursuant to Section 11 of the Act, abuse of a dominant position is prohibited. In order to asses whether an undertaking has a dominant position, a prominent criterion is the undertaking’s market share of the relevant market. As mentioned above, the relevant market is distinguished by differentiation of products and geography.
As guidelines, a market share of 25% or less is rarely considered dominant and a market share between 25 % and 40% cannot by itself establish a dominant position – additional criteria must be included in the assessment, such as the actual or potential competition or structural or behavioural circumstances in the market. A market share above 40% creates a rebuttable presumption of dominance, and a market share above 50% will as a rule constitute evidence of a dominant position. Dominance presupposes that the market share is not temporary.
In the Act the following examples are considered to be abuse:
- direct or indirect enforcement of unfair prices or other unfair business terms,
- restriction of production, distribution or technical development harming consumers,
- use of unequal terms for products or services of equal value against business partners, which thereby are weakened in their ability to compete,
- conditioning agreements on the other contracting party’s approval of supplementary obligations which are unrelated to the subject of such agreements.
It is fair to say, that during recent years focus on cases concerning abuse of a dominant position has increased. As examples hereof, the Competition Council has ruled on a wide range of cases involving dominant undertakings’ pricing and rebates, exclusive behaviour etc.
4. Merger control regime
Pursuant to Section 12a of the Act, planned mergers, acquisitions or joint ventures with a permanent function of an independent undertaking must be notified to the Competition Council if they meet the following thresholds:
- the combined aggregate turnover of the participating undertakings in Denmark is minimum DKK 3.8 billion, and at least two of the participating undertakings separately generate an annual turnover in Denmark of minimum DKK 300 million, or
- at least one of the participating undertakings generate an annual turnover in Denmark of minimum DKK 3.8 billion, and at least one of the other participating undertakings generate an annual turnover on a world-wide basis of minimum DKK 3.8 billion.
The parties must notify the Competition Council and await its decision before executing the planned corporate actions. The Competition Council has four weeks to issue its decision from receiving final notification. However, the Competition Council may decide to launch more detailed investigations, in which case the Competition Council must decide the matter no later than 4 months after the notification.
A merger/concentration that does not significantly impede competition, especially as a result of the creation or strengthening of a dominant position, shall be approved. On the other hand, a concentration that significantly impedes competition will be prohibited. An approval can be subject to certain conditions.
5. State aid
As laid down in Section 11a of the Act, the Competition Council can issue orders to the effect that state aid given for the advantage of an undertaking shall desist or be paid back, if the state aid:
- has the direct or indirect objective or effect to distort competition, and
- is not lawful according to public regulation.
State aid is given “for the advantage” of an undertaking if the aid would not have been given by a private investor acting in principle with common market economics.
Special rules apply if public authorities are subject to the “free-choice-legislation”, i.e. legislation according to which a citizen has a free choice between a public and a private service provider, and where a public authority must pay a fair price to the private service provider. In these instances, the Competition Council ensures that the public authorities do not pay less to the private manufacturers or service providers than they are obliged to pursuant to the free-choice legislation in question.
6. Compliance and enforcement
As mentioned, the Act is supervised by the Competition Council and decisions made by the Competition Council can (with certain exemptions) be appealed to the Competition Appeals Tribunal. The decisions made by the Competition Appeals Tribunal may be brought before the courts.
Besides that, notification to the Competition Council is mandatory pursuant to the Merger control rules. Undertakings have the option to submit requests to the Competition Council for a binding order (“negative clearance”) giving certainty that a particular agreement or commercial behaviour is in compliance with the Act. Such negative clearances can be subject to conditions which the participants must comply with to rely on the clearance.
The Competition Council may at their own initiative issue orders directing undertakings to end prohibited behaviour, to dissolve agreements and so forth. Prohibited agreements etc are void and cannot be enforced.
Under the Act, economical sanctions can be differentiated into penalties and fines. Penalties are imposed if undertakings as an example fail to surrender required information to the competition authorities. Any gross negligence or intentional infringement of material provisions of the Act may on the other hand be punished with potentially very significant fines imposed by the Courts. When fixing the amount of fines, the courts take into consideration the gravity and duration of the infringement and the annual turnover generated by the undertaking in question in the last year preceding the fine. The size of fines imposed by the courts for infringements of the Act is not equivalent to the size of fines imposed by the European Commission under EC competition law. The largest fine imposed on an undertaking under the Act to date has been DKK 5 million. Contrary to EC competition law, it is a possibility under the Act to impose fines on the management of the undertaking, which has infringed the Act.
The Act provides for leniency regarding undertakings acting as “whistle-blowers” under a cartel agreement prohibited by Section 6. If the said undertaking as the first undertaking contacts the competition authorities or the police and discloses information about a cartel, which the authorities did not know of at the time of the application, and if the character of the information fulfils certain additional specific conditions, the undertaking may be exempt from fines or their fines may be reduced significantly. To obtain leniency, the “whistle-blower” furthermore has to cooperate with the competition authorities throughout the entire case, has to stop being a member of the cartel no later than the time of the application for leniency and must not have coerced other parties into becoming members of the cartel in question.
Competition law infringements can furthermore be sanctioned under Danish civil law if the requirements pursuant to the general principles governing the liability for damages are met.
