Introduction to The Danish Competition Act
The following is an introduction to the Danish Competition Act (Act No. 384 of 10 June 1997 as amended by Act No. 416 of 31 May 2000 and Act No. 426 of 6 June 2002).
With the implementation of the Danish Competition Act in 1997, Danish competition law was aligned with the EU competition rules. Amendments to the 1997 Act were passed by Parliament in May 2000 and in May 2002 - see Consolidated Competition Act No. 539 of 28 June 2002.
As is the case under the EU competition rules, the Danish Competition Act is based on two prohibitions: (1) A prohibition against anti-competitive agreements etc. and (2) a prohibition against abuse of a dominant position.
The two prohibitions have taken inspiration from Articles 81 and 82 of the EC Treaty, and they are enforced in accordance with the case law of the European Commission, the European Court of First Instance and the European Court of Justice.
The Danish Competition Act came into force on 1 January 1998 and the amendments to the Act came into force on 1 October 2000 and on 1 August 2002.
A brief description of the principal rules of the Act is given below.
1. Purpose
The purpose of the Competition Act is to promote efficient resource allocation, which means that goods and services must be produced and distributed at the lowest possible costs and in quantities and compositions, which reflect the users’ - including consumers’ - preferences.
The means to achieve the purpose of the Act is workable competition, and workable competition is dependent on a sufficient number of operators in the market (taking the advantages of large-scale operations into account) as well as an unlimited access to (and from) the market. Free access to the market implies that new operators are not subject to specific costs, which do not apply to existing operators, and that access is not subject to quantitative restrictions.
2. Scope
The Danish Competition Act applies to any business activity - private as well as public. After implementation of the amendments on 1 October 2000, the Act also applies to aid granted from the public funds to business activities.
The term "business activity" is defined as any economic activity, which takes place in a market for goods or services, no matter whether the business activity is profitable or not. This means that the Act also applies to a non-profit business activity. Nor is it of any importance, how the business is organised (i.e. if the undertaking is a limited liability company, a private company, a co-operative undertaking, a partnership, a one-owner firm, a trade union, or a private foundation.).
As mentioned previously, the Act also applies to public business activities, which can be defined as a business activity performed by a central or local government administration, which consists in supply of or demand for goods or services, provided the activity is of importance for the competitive conditions.
However, the Act does not apply to such public business activity where goods are produced or services rendered by the employees of a public authority for their own use - so-called "in-house production".
The Act does not apply to activities under the executive powers of a public authority, meaning such activities, which consist in stipulating citizens’ rights and obligations in pursuance of statutory rules. However, the Competition Council may point out potentially detrimental effects on competition to the relevant minister and make recommendations for promotion of competition in the area concerned.
The Competition Act applies to anti-competitive practices, which affect the Danish market. This means that the Act also applies to undertakings located abroad if their anti-competitive agreements or practices affect the Danish market.
The Act does not apply to wages and labour relations, cf. section 3. In carrying out its duties, the Competition Council may, however, request information from organisations and undertakings concerning wages and labour relations.
If an anti-competitive agreement, practice or decision has been granted an exemption under the EC Treaty or if said agreements etc. fulfil the conditions of a block exemption regulation, the provisions in chapter 2 of the Act are not applicable, cf. section 4 and paragraph 4 below.
Similarly, chapter 2 does not apply to agreements, decisions and concerted practices within the same undertaking or group.
Section 5 a sets out the general principles for determining the "relevant market". Hence, for the purpose of the Act, the relevant market is defined on the basis of on examination of demand substitutability, supply substitutability and potential competition.
3. Prohibition against anti-competitive agreements etc.
According to section 6 (1), cf. section 6 (3), anti-competitive agreements or concerted practices between undertakings, or anti-competitive decisions made by an association of undertakings are prohibited.
A non-exhaustive list of prohibited restrictions is given in section 6 (2). The list is fairly similar to the list in Article 81 (1) of the EC Treaty. It is, however, expressly stated that the co-ordination of competitive practices by two or more undertakings through the establishment of a joint venture is also an example of a prohibited restriction.
If an anti-competitive clause in an agreement (or decision) comes within the prohibition of section 6, and if the provisions on exception or exemption (see below) do not apply, the clause concerned is void from the time it was made. This means that the clause is unenforceable as between the parties to the agreement, and as regards third parties. (As to potential payment of damages, see paragraph 14 below).
Finally, fines may be imposed on the involved undertakings for violation of the prohibition (cf. paragraph 15 below).
4. Exceptions
There are four cases, in which the prohibition against anti-competitive agreements etc. is not applicable. They concern:
- Agreements that have been granted an individual exemption under the EC Treaty, or agreements that satisfy the requirements for exemption (or exception) provided by an EU regulation on block exemption, cf. section 4.
- Agreements within the same undertaking or group of companies, cf. section 5, as further defined in Regulation No. 1029 of 17.12.1997. According to this Regulation, section 6 does not apply to vertical or horizontal agreements within the same group of companies or to internal agreements within co-operative societies.
- Agreements between undertakings with an aggregated annual turnover less than DKK 1 billion and an aggregated market share less than 10 per cent, provided that both conditions are fulfilled, cf. section 7 (1)-1).
- Agreements between undertakings with an aggregated annual turnover less than DKK 150 million, irrespective of their market share, cf. section 7 (1)-2).
According to section 7 (2), the exceptions described above under numbers 3 and 4 do not apply, however, where 1) the agreements etc. concern prices, profits etc. for the sale or resale of goods or services, or 2) the agreements concern preceding regulation of tenders or other forms of mutual commitments before submitting tenders. Nor do the exceptions apply, where competition within the same economic sector is restricted by the cumulative effect of similar agreements, cf. section 7 (3).
Regulation No. 895 of 21 September 2000 contains further rules as to the calculation of the turnover referred to in section 7 (1).
5. Exemptions
If an anti-competitive agreement does not come within one of the exceptions described in paragraph 4 above, it will, as a principal rule, be covered by the prohibition of section 6. But there may be agreements, which, although they separately viewed are anti-competitive, still have such favourable effects that they ought to be allowed. Such agreements may be exempted from the prohibition against anti-competitive agreements, either a) automatically by means of a so-called block exemption, or b) by means of an individual Competition Council decision.
5.1. Block Exemptions
The Minister for Economic and Business Affairs has issued seven block exemptions in pursuance of section 10. Six of these are based on block exemptions issued by the European Commission under Article 81 (3). This means that the Danish version of the EU regulations has - with a few modifications - been implemented to apply equally to agreements etc., which only affect the Danish market. For instance, the maximum thresholds of the aggregated market shares and turnovers of the involved undertakings are the same.
Six block exemptions concern categories of:
- Vertical agreements and concerted practices
- Agreements in the insurance sector
- Agreements on research and development
- Motor vehicle distribution and servicing agreements
- Agreements on specialisation
- Technology transfer agreements.
The seventh block exemption concerns horizontal agreements on co-operative chains in the retail trade.
An anti-competitive agreement, which fulfils the requirements under a block exemption, is automatically exempted from the prohibition of section 6, meaning that the agreement is not subject to notification under section 8 (1) to obtain exemption.
5.2. Individual Exemptions
If an anti-competitive agreement cannot be referred to - or does not fulfil the requirements of - a block exemption, it may be notified to the Competition Authority (by means of special form K1) in order to obtain an exemption under section 8 (1). The requirements to be fulfilled in order to obtain an individual exemption correspond to those laid down in Article 81(3).
6. Prohibition against abuse of dominant position
The second prohibition of the Competition Act is contained in section 11 (1), according to which, any abuse by one or more undertakings of a dominant position is prohibited. Section 11 (3) contains, like Article 82 of the EC Treaty, a non-exhaustive list of prohibited forms of abuse.
7. Non-intervention statement
In relation to the prohibition of section 6 against anti-competitive agreements, a so-called non-intervention statement may be issued, which corresponds to a negative clearance issued by the European Commission under Regulation No. 17/62.
As regards the prohibition contained in section 11 against abuse of a dominant position, it is also possible to obtain a non-intervention statement to the effect that a certain course of conduct does not come under said prohibition, cf. section 11 (5). In addition, it is also possible to apply for a non-intervention statement to the effect that one of more undertakings do not have a dominant position, cf. section 11 (2).
8. Aid which distorts competition
The Competition Council is competent to order the termination or repayment of aid granted from the public funds to the benefit of specific forms of business activities, cf. section 11 a.
The conditions for issuing the above order are twofold and of a cumulative nature: the aid granted must directly or indirectly have as its object or its effect the distortion of competition and may not be legitimate according to public regulation, cf. section 11 a (2).
Repayment orders may be issued to both private undertakings/foundations and to corporate undertakings, which are wholly or partly owned by the public.
Upon notification, the Competition Council may declare that according to its knowledge, the public aid does not distort competition, which means that there are no grounds for intervention. Further rules on notification have been laid down in Regulation No. 949 of 18 October 2000.
9. Merger control
There were no provisions on merger control in the 1997 Act. Mergers and take-overs were only subject to subsequent notification to the Competition Authority. However, as of 1 October 2000 a merger control regime came into force in Denmark, cf. part 4 of the consolidated Act.
The Danish merger control regime is to a large extent based on the same substantive rules as the EU merger control rules.
According to section 12 (1) i) and ii), the merger control rules apply to mergers, where:
- The combined aggregate turnover in Denmark of all the undertakings concerned is at least DKK 3,8 billion and the aggregate turnover in Denmark of each of at least two of the undertakings concerned is at least DKK 300 million, or
- The aggregate turnover in Denmark of at least one of the undertakings concerned is at least DKK 3,8 billion and the aggregate world-wide turnover of at least one of the other undertakings concerned is at least DKK 3,8 billion.
Regulation No. 895 of 21 September 2000 contains further rules as to the calculation of the turnover referred to in section 12 (1).
According to section 12 a (1) and (2), mergers arise where:
- Two or more previously independent undertakings merge,
- One or more persons already controlling at least one undertaking, or one or more undertakings acquire, whether by purchase of securities or assets, by contract or by any other means, direct or indirect control of the whole or parts of one or more other undertakings,
- A joint venture performing on a lasting basis all the functions of an autonomous economic entity is created.
Mergers caught by the above provisions must be notified to the Competition Authority not more than one week after the conclusion of the agreement to merge, the announcement of a public bid or the acquisition of a controlling interest, cf. section 12 b. A special form – must be used for notifications.
Annex to executive Order No. 480 of 15 June 2005 on the Notification of Mergers (form K2)
Not later than 10 days upon receipt of the notification, the Competition Council shall communicate whether the notification is complete, see section 2 (3) of Executive Order No. 480 of 15 June 2005 on the notification of mergers.
Executive Order No. 480 of 15 June 2005 on the notification of mergers
After receipt of a complete notification, the Competition Council has four weeks to decide whether to approve the merger or to extend the period for a further two months. As is the case under the EU Merger Regulation, the procedure for dealing with merger cases is split into a phase I (four weeks) and phase II (two months) procedure. It is only possible to prohibit a merger, if the merger has been subject to a phase II procedure.
When reaching its decision to approve or prohibit a merger, the Competition Council must determine whether the merger creates or strengthens a dominant position as a result of which effective competition would be significantly impeded, cf. section 12 c (2). The Council may attach conditions and obligations to its approval of the merger, cf. section 12 e.
Finally, it is possible to request the Competition Council to approve a planned (as opposed to an agreement, public bid etc.) merger, before the obligation to notify pursuant to section 12 b has come into effect. Approvals of such mergers will not be communicated to the public at the time of the approval, but may be postponed until a later date, cf. section 12 c (7).
10. Direct application of Articles 81 and 82 EC
The Act also empowers the Competition Council to enforce Articles 81 and 82 of the EC Treaty, cf. section 23 a. Presently, however, the Council is confined to applying Articles 81 (1) and 82, since the European Commission still has exclusive competence to apply Article 81 (3) according to Council Regulation 17/62.
As opposed to the prohibitions entailed in sections 6 (1) and 11 (1), infringements of the prohibitions entailed in section 23 a presupposes an effect on trade between Member States.
11. Exchange of information
The Competition Authority may exchange information covered by its professional secrecy with other (foreign) competition authorities, cf. section 18 a. The purpose of this provision is to facilitate enforcement and co-operation between competition authorities and to fulfil obligations under a bilateral or multilateral agreement entered into by Denmark.
Divulgement of information is subject to reciprocity. This means that it is only possible to divulge information to another competition authority, if the latter is also able to pass on information to the Danish Competition Authority.
A number of further conditions must be fulfilled before the authority may divulge information, including that addressee is under a similar obligation of professional secrecy and that information divulged may not be passed on to others, unless the express consent of the Danish Competition Authority has been obtained, cf. section 18 a (2).
12. Anti-competitive practices as a consequence of public regulation
As a principal rule, the prohibitions of the Act apply to any business activity - private as well as public, cf. section 2(1). But in case an anti-competitive practice is a direct or necessary consequence of public regulation, the prohibitions do not apply (cf. 1st sentence of section 2 (2)).
The decision whether an anti-competitive practice or decision is a direct or necessary consequence of public regulation rests with the relevant minister, cf. section 2 (4).
An anti-competitive practice determined by a local government is only considered a direct or necessary consequence of public regulation in so far as the anti-competitive practice is indispensable for fulfilling the statutory responsibilities assigned to the local government, cf. section 2 (2), second sentence.
If an anti-competitive practice appears to be a direct or necessary consequence of public regulation, the Competition Council may give the relevant minister a substantiated statement, that points out the detrimental effects on competition. At the same time the Competition Council may make recommendations for promotion of competition in the area concerned. Having consulted the Minister for Economic and Business Affairs, the relevant minister is under an obligation to respond to the Competition Council’s statement within four months, cf. section 2 (5). The Competition Council’s approach as well as the minister’s response may be published.
13. Access to files
As a principal rule, the Act on Access to Administrative Files does not apply to cases under the Competition Act, cf. section 13 (1). Consequently, third parties are normally not granted access to files.
The Competition Council may, however, publish information concerning its activities as well as general market reviews, provided that the rules on confidentiality as to technical matters, operational and business secrets etc. under section 13 (4) are observed.
14. Enforcement
The Competition Council may request any information, including accounts, accounting records, copies from the books, other business records and electronic data, which are considered necessary for its activities or for deciding whether the provisions of the Act are applicable, cf. section 17.
Having obtained a court order, the Competition Authority may also make a so-called investigation, meaning that the authority is empowered to enter the premises of an undertaking in order to examine and make copies of business records, accounting records etc, irrespective of the information medium, cf. section 18 (1).
If the information of an undertaking is stored with or processed by an external data processor, the Competition Authority is entitled to get access to the premises of the external data processor with the purpose of becoming acquainted with and making copies of the relevant information, cf. section 18 (2).
If the conditions of an undertaking make it impossible for the Competition Authority to get access to or make copies of the relevant information on the spot, the Competition Authority is entitled to seize the documents or the medium with the purpose of making copies. As a main rule the documents etc. must be returned to the undertaking not later than three workdays after the investigation, cf. section 18 (4).
The investigations carried out by the European Commission under the EU competition rules and with assistance from the Competition Authority are treated in sections 24-26.
According to section 22, if a party neglects to submit such information which the Competition Council may request under the Act or fails to comply with a condition or an order issued under the Act, the Competition Council may, as a coercive measure, impose on the party concerned daily or weekly penalty payments, which can be recovered by distraint.
The Danish courts of law may also enforce the prohibitions of the Act. It is up to the courts to settle any action for damages, including actions, which follow from infringements of the Competition Act.
15. Penalty provisions
Fines may be imposed on any party, who intentionally or by gross negligence infringes the prohibition on anti-competitive agreements, cf. section 23 (1) (i), unless the agreement has been notified in order to obtain an individual exemption, cf. section 23 (2).
As from 1 July 2002, fines may also be imposed for infringements of the prohibition against abuse of dominant position, cf. section 23 (1) (iii-iv).
Similarly, fines may be imposed for infringements of Articles 81 (1) and 82 (2), if said Articles have been applied directly by the Competition Council, cf. section 23 (1) (x).
As regards infringements of the rules on merger control entailed in chapter 4, fines may be imposed i.a. for failing to comply with the obligation to notify, or for implementing a merger prior to obtaining the Competition Council's approval hereof, cf. section 23 (1) (v-vi).
Finally, fines may be imposed on a party who, intentionally or by gross negligence, a) fails to comply with an order, b) disregards a request for information, or c) gives incorrect or misleading information to the Competition Authority, the Competition Council or the Competition Appeals Tribunal, cf. section 23 (1) (vii-ix).
These are not fines that may be imposed by administrative means, as it is up to the courts of law to decide whether a fine should be imposed in connection with a criminal procedure. The level of a fine shall be fixed in consideration of the general rules of the Penal Code, meaning that the gravity and the duration of the infringement are essential elements. The turnover obtained by the undertaking shall also be taken into consideration, cf. section 23 (3).
16. The competition authorities
The enforcement of the Competition Act and any subordinate rules issued under the Act come under the jurisdiction of a politically independent body, the Competition Council.
The Competition Council consists of a chairman and 18 members, cf. section 15 (1). The Competition Council shall cover a comprehensive knowledge of public as well as private business activity, including experience in legal, economic, financial and consumer-related matters.
The King appoints the chairman for a period of up to 4 years. The Minister for Economic and Business Affairs appoints the members of the Council for a period of up to 4 years. The chairman and eight of the members shall be independent of commercial and consumer-related interests. The remaining ten members are appointed on the recommendation of professional, consumer and industrial bodies.
The Competition Authority is the secretariat of the Competition Council and attends to the current enforcement of the Competition Act, cf. section 14 (2). The Competition Authority is an agency under the Ministry of Economic and Business Affairs, but is, as is the case for the Competition Council, independent when it comes to enforcing the Act. This means that the Minister of Economic and Business Affairs has no powers of instruction as regards the treatment of cases under the Act, nor can Minister overrule the decisions of the Competition Authority.
According to section 19 (1), some of the Competition Council's decisions - or the decisions, which the Competition Authority has made on behalf of the Competition Council - may be brought before the Competition Appeals Tribunal. As a principal rule, appeal does not have delaying effect.
The Competition Appeals Tribunal consists of a chairman, who shall be qualified for the post as a Supreme Court Judge, and two other members, who shall be proficient in economics and law, respectively, cf. section 21. All members shall be independent of commercial interests.