Amendments to the Competition Act adopted
Background information
On 10 November 2023, the DCCA organized a consultation of a proposal to amend the Danish Competition Act. Following the consultation process, the bill was presented on 28 February 2024.
In particular, the bill includes the following amendments:
Call-in option - transactions may require notification even if the turnover thresholds are not met
The current merger control rules regulate transactions that exceed one of two turnover thresholds.
The first threshold is met when the undertakings involved have a combined annual turnover in Denmark of at least DKK 900 million (approx. EUR 120 million) and at least two of the undertakings involved each have an individual annual turnover in Denmark of at least DKK 100 million (approx. EUR 13 million).
The second threshold is met when at least one of the participating undertakings has a total annual turnover in Denmark of at least DKK 3.8 billion (approx. EUR 510 million) and at least one of the other participating undertakings has a global annual turnover of at least DKK 3.8 billion (approx. EUR 510 million).
The bill proposes a so-called call-in option, whereby the DCCA is authorised to require a merger to be notified even if the participating undertakings' turnover do not meet the thresholds
The conditions are,
- The participating undertakings have a combined annual turnover in Denmark of at least DKK 50 million, and
- The DCCA assesses that there is a risk that the merger will significantly impede effective competition.
If these conditions are met, the DCCA may require the merger to be notified and potentially prohibit it. This can happen even after the completion of the merger (i.e., post-closing).
However, a number of deadlines apply to the DCCA's call-in option:
The DCCA has 15 working days to decide whether a transaction must be notified after the DCCA has been informed of the merger. However, the 15-day period does not begin until the DCCA has received sufficient information to assess whether the conditions for requiring the transaction to be notified are met.
The DCCA cannot require a transaction to be notified later than three months after an agreement has been entered into unless special circumstances exist. Such special circumstances may, for example, be that the parties have kept the transaction confidential and have not informed the DCCA before the expiry of the deadline or that the information/publication takes place shortly before the expiry of the deadline. However, the transaction cannot be required to be notified later than six months after the completion of the merger (closing).
The DCCA expects that there will be a maximum of 1-2 transactions that will be required to be notified under this call-in option. The DCCA has organized a consultation of its draft guidelines, which are expected to be released at the end of 2024.
The new call-in option is applicable to transactions signed after the legislation came into force, i.e., on or after 1 July 2024.
Market investigation - companies can be ordered to change behaviour even if they have not violated the Danish Competition Act
The DCCA already has a range of enforcement tools at its disposal, including the ability to issue behavioural and structural orders pursuant to Section 16 of the Danish Competition Act, conduct sector inquiries, require information from undertakings, and conduct unannounced inspections.
The amendment to the Danish Competition Act is a supplement to the existing prohibition provisions and enforcement tools, according to which the DCCA will be able to initiate an investigation of one or more business sectors if there are indications of conditions that impede effective competition in the sector(s) concerned. Before the DCCA initiates a market investigation, it must conduct a public consultation on its draft decision to initiate a market investigation, and the decision must be approved by the Danish Competition Council and published.
If, on the basis of the market investigation, the DCCA finds that there are behaviour or structures that clearly impair competition, the DCCA may, after consulting the relevant market participants and competent authorities, issue behavioural orders to one or more undertakings (e.g., orders to give competitors access to data) without an infringement of the competition rules having been established. Alternatively, the DCCA can decide to make a commitment given by an undertaking binding. However, the DCCA cannot issue structural orders (e.g., orders to separate an undertaking into two or divest part of the undertaking) on the basis of a market investigation, although this is a possibility in actual enforcement cases.
The market investigation must be carried out within a time limit of two years from the DCCA's announcement of the Danish Competition Council's approval with a possible extension of up to six months.
In its market investigation, the DCCA will be able to use existing enforcement tools, including (i) requiring information from undertakings that the DCCA deems necessary, including issuing penalty fines for failure to respond; and (ii) conducting unannounced inspections - so-called dawn raids - without the normal requirement that the DCCA must have a presumption of an infringement of the Danish Competition Act.
Fines - amendment of the principles of civil penalties
The amendment means that a distinction will be made between different types of infringements when setting fines in the future.
(1) Infringement of the substantive competition rules by undertakings
Under the current rules, the calculation of civil fines to undertakings for infringement of substantive rules (prohibition of anti-competitive agreements and abuse of dominant position) is based on a fixed range depending on the gravity of the infringement: (i) up to DKK 4 million for a less serious infringement, (ii) between DKK 4 - 20 million for a serious infringement, and (iii) from DKK 20 million and upwards for a very serious infringement.
With the legislative amendment, the calculation of civil fines will be based on principles that reflect the European Commission's current guidelines for the calculation of fines from 2006. Specifically, this means that:
- The size of the fine is based on the relevant annual turnover directly or indirectly related to the infringement.
- The relevant annual turnover is multiplied by a percentage of 0-30% depending on the gravity of the infringement (however, for certain agreements between competitors 15-30%).
- This amount is then multiplied by the number of years the undertaking has participated in the infringement (e.g., a participation of 2½ years would imply that the amount is multiplied by 2.5).
- Hereinafter, an additional 15-25% of the relevant turnover can be added, especially in the case of agreements between competitors on fixed prices, market sharing or production limitation.
- The fine can then be adjusted based on potential aggravating or mitigating circumstances.
- The fine may also be increased if the undertaking has a particularly high turnover in addition to the relevant turnover related to the infringement and/or in order to ensure that the fine exceeds the illegal financial gain from the infringement.
- If, based on the above principles, the fine exceeds 10% of the undertaking's annual global group turnover, it will be limited to that amount.
- The undertaking's inability to pay can then exceptionally be taken into account.
- Finally, the above principles can be deviated from in case of special circumstances.
(2) Infringements of formal rules by undertakings and non-compliance with certain commitments and orders
The calculation of civil fines to undertakings for infringement of formal rules and failure to comply with certain commitments and orders will depend on the court's assessment, taking into account the gravity, duration, aggravating and mitigating circumstances and the size of the undertakings involved.
For certain formal infringements, a cap of 1% of the undertaking's annual global group turnover is introduced.
(3) Infringements of merger control rules
The calculation of civil fines on undertakings for infringement of the merger control rules will depend on the court's assessment, considering the gravity, duration, aggravating and mitigating circumstances, the size of the undertakings involved and the nature of the infringement.
A cap of 10% of the undertaking's annual global group turnover will continue to apply.
(4) Participation of natural persons
Regarding fines for natural persons who have contributed to an undertaking's infringement of the competition rules, the current basic amounts at different increments will be abolished. Instead, the fine will be calculated according to the gravity and duration of the infringement. The fine can still be adjusted based on aggravating or mitigating circumstances.
(5) Reduction of fines and penalties
In all cases, it will still be possible to obtain reduction fines and penalties by cooperating with the competition authorities. The amendment will not affect the relevant rules in this respect.
(6) Entry into force
The new principles on calculating fines will apply to infringements occurring after the legislation came into force on 1 July 2024.
This also applies to infringements that took place before 1 July 2024 and that continue to take place after this date, provided that the fine must not be higher than under the previously applicable principles.
Plesner notes
The call-in option will in some M&A transactions lead to uncertainty and additional costs for undertakings involved, notwithstanding that the Danish Competition Act thresholds are not exceeded. Although the DCCA expects that only 1-2 transactions will be required to be notified under these regulations per year, this does not take into account (i) that in principle in all transactions where the thresholds are not exceeded, it will be relevant to assess the risk that the transaction will be required to be notified under the call-in option, and (ii) that in relevant transactions it may potentially require significant resources to gather the necessary information for the DCCA to assess whether "there is a risk that the concentration significantly impedes effective competition", as this jurisdictional test is closely related to the substantive test for when concentrations should be prohibited.
Depending on the undertakings' need to address this risk, the amendment could potentially lead to many voluntary "notifications", which will be resource-intensive for both the undertakings and the DCCA, responsible for assessing the notifications.
The new fine calculation principles will generally increase the predictability of fines for infringement of the substantive rules, although some uncertainties remain regarding the interpretation of the principles and how they will be applied in practice.
On the other hand, predictability in relation to other types of infringements will be significantly reduced, as the existing rules in these areas will be replaced by highly discretionary calculation principles. Thus, it will take several court decisions before it will be possible to predict the relevant level of fines in different types of cases.
The amendment of the fine calculation principles will probably also mean that the possibility for undertakings to enter into out-of-court civil penalty settlements (Section 23j of the Danish Competition Act) will be reduced for a period until there is an established practice for the fine level under the new calculation principles.