New bill with significant changes on the Danish Competition Act in consultation

The bill was presented on 10 November 2023. According to the legal notes, the overall purpose of the bill is to ensure a more effective competition by strengthening the enforcement in cases where competition may be affected, but where the Danish Competition and Consumer Authority (hereinafter the “Competition Authority”) is currently unable to intervene effectively.

For this purpose, the following three elements have been proposed:

Introducing “call-ins” under the Danish merger control regime

The current rules on Danish merger control apply to concentrations where the undertakings concerned have a combined aggregate annual turnover in Denmark of at least DKK 900 million and at least two of the participating companies each have a total annual turnover in Denmark of at least DKK 100 million. The regime also includes concentrations where at least one of the participating companies has a total annual turnover in Denmark of at least DKK 3.8 billion and at least one of the other undertakings concerned companies have a total annual worldwide turnover of at least DKK 3.8 billion.

According to the legal notes, experiences have shown that a company's turnover is not always fully indicative of a company's current or future company's current or future market power and competitive potential.

To accommodate this concern, a national "call-in" is suggested. This will allow for the Danish Competition Authority to request for mergers to be notified - even if they do not meet the applicable thresholds. The Authority will be entitled to call-in if the combined annual turnover of the participants in Denmark is as low as DKK 50 million.

According to the bill the use of the call-in may be relevant if the Competition Authority sees a risk that the concentration may impede effective competition, in particular by creating or strengthening a dominant position.

The bill specifically notes, that this call-in may be of particular relevance in case of so-called "killer acquisitions". A “killer acquisition” is when a company acquires early control of an young or innovative company to eliminate them from future competition at a time.

Call-in options allowing national authorities to call in mergers below the turnover thresholds are already known from several other European countries, including also Norway and Sweden.

Also, the EU Commission have since March 2021 changed its practice in this regard by allowing for mergers below the national turnover thresholds to be referred to the EU Commission for clearance.

According to the legal notes – and based on experiences from other jurisdictions – this call-in is expected to be used only a few times every year. However, although call-in options as such are known, the actual application of such from the Danish Competition Authority will in any case - from our perspective – now introduce an additional deal uncertainty to the Danish M&A market, which needs to be taken into consideration.

It is worth noting, that as the draft bill is worded, the threshold for the call-in can be met solely through the buyer's turnover as there are no individual thresholds. Consequently, for a Danish company having a turnover of more than DKK 50M all acquisitions are at risk of being subject to a call-in. As also argued by The Association of Danish Law Firms (in Danish: Danske Advokater) in their consultation response, this structure appears to favour foreign acquisitions of Danish companies, as a foreign acquiror without turnover in Denmark will be able to acquire – including in the form of a killer acquisition - without obtaining approval while a Danish acquirer would need to obtain the prior approval.

Introducing launching of market investigations

The second element allows for the possibility of launching market investigations if the Competition Authority sees indications of circumstances in the market that weaken effective competition to the detriment of consumers or businesses. The Danish Competition Authority do not currently have any such authorization.

According to the legal notes, the intention is to ensure more effective competition by strengthening the authorities' ability to investigate and intervene. It is found that the current competition rules are not sufficiently effective in this regard. The background for this initiative is, that according to analysis made by among others the Danish Competition Council in 2022, there are signs that competition in Denmark has generally deteriorated since 2000, e.g. as market concentration and company margins have increased.

With the amendment, the Danish Competition Authority will - after approval from the Danish Competition Council – have the authorization to initiate a "market investigation". Such investigations may be initiated if the Competition Authority suspects that the market structure or the behaviour of market players weakens competition. If competition issues are identified, the draft bill will give the Competition Authority the power to issue behavioural injunctions and make agreements binding to resolve these problems, even without a concrete breach of the competition rules or suspicion thereof have been established. 

It is worth noting that the amendment implies that the Competition Authority may intervene without any prior decision or judgement that the Danish Competition Act has actually been infringed.

The draft bill is far-reaching in this regard and will lead to considerable uncertainty and lack of transparency in relation to possible future regulatory intervention from the Danish Competition Authority.

Introducing other principles to be used for the calculation of fines

The third main amendment relates to the calculation of civil fines to companies etc. in case of infringements of the Danish Competition Act.

Fines under the Danish Competition Act are currently based on fixed fine ranges based on the gravity of the offence. The basic amount of the fine to be imposed for a less serious offence should be set at an amount of up to DKK 4 million, for a serious offence the basic amount should be set from DKK 4 to 20 million, and for a very serious offence the basic amount should be set from DKK 20 million and upwards.

The suggested amendment to the Danish Competition Act instead refers to the EU Commission's guidelines, that sets out a number of elements and have historically led to higher fines than seen under the Danish Competition Act. Accordingly, if the bill is passed the size of the fines will in the future be based on the turnover associated with the infringement. Additional elements to take into consideration are the gravity and duration of the infringement. As well aggravating as mitigating circumstances may still have an impact on the size of the fine.

The overall purpose of the amendments in this regard is, that the fines issued under the Danish Competition Act to a greater extent reflects the turnover generated by the infringing company and also that the fines issued by the Danish Authorities generally becomes more in line with the fines seen from the EU Commission.

If the bill is passed the amendments are to take effect from July 1, 2024.