Changes to the Danish Competition Act submitted for consultation

Strengthening of market surveillance and regulation

As announced in its legislative agenda for 2023/2024, the Government has now tabled a Bill proposing changes to the Danish Competition Act. The Bill introduces significant changes aimed at strengthening competition in the Danish markets, which according to the draft have deteriorated over the past 20 years resulting in increased market concentrations and margins. The Bill has now been submitted for consultation and will, if passed, enter into effect on 1 July 2024.

If the Bill is passed without amendments, it will potentially reduce the legal rights of businesses and involve an increase in the general powers of the regulatory authorities. The Bill includes the following proposals:

Merger control below the thresholds

The Bill proposes the introduction of a national "call-in rule", which the Government first gave notice of a couple of years ago. According to the draft Bill, the Danish Competition and Consumer Authority may, under penalty of the law, require notification of a merger - even if it does not meet the applicable thresholds - if the participants have a combined annual revenue in Denmark as low as DKK 50 million. Such requirement may be imposed if the Competition and Consumer Authority cannot exclude a risk that the merger may impede effective competition, in particular by creating or strengthening a dominant position. According to the legislative history behind the Bill, it seems obvious that the Bill targets the so-called "killer acquisitions" in the financial, tech and pharma sectors, but it may include all sectors, for example in case of acquisition of new businesses that sell important inputs or components to other industries. Based on the wording of the draft Bill, the threshold can be met solely by means of the buyer's revenue. It is expected, however, that the call-in option will only be utilised once or twice a year.

The draft Bill does not contain an absolute deadline for the Competition and Consumer Authority to require notification of transactions below the usual thresholds; thus, the Authority may require notification of a transaction after the parties have completed the transaction. However, according to the explanatory notes to the Bill, the Authority will aim not to request notification more than six months after completion of a transaction. The Authority's deadline for requesting notification of a transaction is 15 business days from the date when the Authority is able to assess whether the conditions for requesting notification are met. It is therefore recommended that the parties to a transaction proactively consider contacting the Authority to discuss the transaction in cases of doubt in order to minimise the risk of having to unwind the transaction later. If, on the other hand, the Authority requires notification of a transaction before the transaction is completed, the usual prohibition against completing the transaction before approval will apply.

The rule introduces considerable uncertainty and unpredictability for transaction processes, which was also the reason why the rule was abandoned in the 2008 revision of the merger control rules. However, before the effective date of the Act, the Competition and Consumer Authority will prepare a guide describing the process in more detail. The rule will only apply to transaction agreements signed after 1 July 2024.

The authority may intervene against behaviour that is not illegal

Inspired by Germany and the UK, among others, the draft Bill contains a rule that will allow the Competition and Consumer Authority, subject to approval from the Competition Council, to initiate a so-called "market investigation" upon a suspicion that the market structure or the behaviour of market players will weaken competition compared to what the competition authorities believe it could be. This is relevant in the event of a suspicion that the market structure or the behaviour of market players is weakening competition. If competition problems are identified, the Bill empowers the Authority to issue behavioural orders and make agreements binding in order to resolve the problems, even without a concrete or suspected infringement of the competition rules.

According to the draft Bill, this could, for example, be relevant in a very transparent/data-heavy market where competitors can easily adapt to each other's behaviour, which may restrict competition, even though the parties do not infringe the competition rules. These new rules will allow the Authority to regulate the market without having to prove the existence of an agreement or concerted practice. However, the use of these rules will prevent the authorities from subsequently bringing a competition action regarding the same behaviour in the future.

Also on this point, the draft Bill is quite far-reaching. In addition to politically granting the competition authorities what corresponds to broader regulatory powers, which is normally subject to political control, it will also lead to considerable uncertainty and lack of transparency in terms of possible future regulatory intervention. In other words, it could lead to a significant setback for the legal rights of businesses.

Increased levels of fines

Until now, infringements of the Competition Act have been sanctioned in accordance with fixed fine levels based on the severity of the infringement. The draft Bill will do away with this procedure and instead apply the European Commission's guidelines, according to which the fines are based on the revenue associated with the infringement, for example from the products sold under a price cartel. The severity of the infringement will determine a percentage of that revenue, up to 30%, which will constitute the basic amount of the fine. That amount must then be multiplied by the number of years the infringement has been ongoing. In the case of a hardcore infringement, the fine may be increased by a further 15-25%. In addition, the fine may be increased for preventive purposes, including, for example, if the participating companies' other revenue is particularly high or if a participating company has realised a substantial gain from the infringement. Aggravating and mitigating circumstances may still have an impact on the amount of the fine; also, in exceptional cases, any inability to pay may also be taken into account.

The level of fines will, like today, be capped at a maximum of ten per cent of the participating companies' consolidated revenue in the preceding financial year, but there is currently no practice of issuing fines that reach that cap. The intention is, therefore, to issue fines that are significantly higher than today. The Government wants Danish fines to be more comparable to those of the European Commission, which regularly issues fines of one to ten per cent of the infringer's global consolidated revenue. A similar level is seen in Sweden and Norway, for instance Telenor's fine of NOK 788 million for abuse of a dominant position.

However, the principles only apply to substantive infringements of the prohibition of anti-competitive agreements and to abuse of a dominant position. Fines for procedural infringements of the Competition Act and the merger control rules, on the other hand, will be discretionary based on the nature, severity and duration of the infringement. The same applies to fines imposed on natural persons for infringement of the substantive rules. In addition, the draft contains a change to the time limitation rules, which will allow competition authorities a better opportunity to enforce fines even if the cases drag on in the court system.

Read the draft Bill submitted for consultation (in Danish).

Read our newsletter about the legislative agenda for 2023-2024 (in Danish).