2 Promotion of competition
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2 Promotion of competition2002 was the year of reform. During the Danish Presidency of the European Union, the most fundamental amendment of the EU competition rules ever was adopted. The reform will influence the way in which competition rules are implemented all over Europe. 2.1 New Competition ActAlso the Danish Competition Act was changed in 2002. This provided Denmark with legislation that is up to international standards. The new Competition Act increases the level of penalties to the same level as in most other countries in the EU. In practice, the penalty level is expected to increase significantly following the new Act. At the same time, the Danish Competition Authority is to a larger extent allowed to request the Public Prosecutor for Serious Economic Crime (SØK) and the courts to be lenient with companies that have co-operated with the Authority on the unravelling of a case. The new Act will thus make it more attractive for cartel participants to co-operate with the Authority. In the public area, municipalities and counties will no longer be able to exonerate themselves when a municipality, for instance, has made political decisions restricting competition, and the municipality claims that the decision was necessary in order to comply with other legislation. Now, this kind of assessment, which in reality puts other legislation above the Competition Act, can only be made by the relevant minister who is answerable to the Danish Parliament. The responsible minister and the Minister of Economic and Business Affairs must motivate governmental restrictions on competition questioned by the Danish Competition Authority. 2.2 Punishable infringements of the Competition ActCartels Up till now, the largest cartel disclosed on the Danish market, is the bid rigging cartel in the electric wiring service, mentioned in the Annual Report, 2001. Fines have been imposed on 256 companies. The case is expected to be finally settled during 2003. Other punishable types of infringement In 2002, criminal prosecution of a number of cases of this type earlier reported to the Public Prosecutor for Serious Economic Crime by the Competition Authority was finalised. Several companies were fined for infringement of the Competition Act involving fixing of binding prices, illegal exclusive clauses and non- competition clauses. As regards fixing of binding resale prices, two penalties of DKK 500,000 and DKK 670,000, respectively, were imposed for fixing of binding resale prices of sports equipment/clothes and spectacle frames. A penalty of DKK 200,000 was also imposed by the City Court of Copenhagen for fixing of binding resale prices of clothes; however, this judgement was appealed to the High Court where the case is currently pending. As regards illegal non-competition clauses, a penalty of DKK 50,000 was imposed; a penalty of DKK 360,000 owing to illegal exclusive agreements was imposed in connection with housing advertising. Higher penalties in the future In connection with future fixing of penalties, the seriousness and duration of the infringement will be considered. Instances of infringement of the Competition Act are divided into three groups with the following basic amounts:
The penalty levels are indicative to the courts. When fixing the penalties, the courts are also to consider the companies' ability to pay. Besides, the courts must take a position on aggravating or extenuating circumstances that may influence the penalty, for example, if a charged or accused party has played a particularly active role in a cartel, or a company has made and still makes an active effort to get all relevant employees to comply with the legislation through a compliance program. 2.3 DecisionsThe Competition Council decides on major cases and test cases. The Competition Authority is in charge of the day-to-day administration of the Act and the preparation of cases to be submitted to the Council. On behalf of the Council, it decides cases in accordance with practice or in accordance with guidelines set out by the Council. The Competition Council held nine meetings and decided 29 cases in 2002. The Competition Authority made 166 decisions in important cases, though not test cases, with subsequent publication. In 2002, the Authority also concluded about 720 minor cases, mainly concerning access to documents, questions from citizens, etc. Production figures, competition cases 2000-2002
Decisions of the Council and the Authority can be appealed to the Competition Appeal Tribunal. 13 cases were decided in 2002. Of these, five were overruled or referred back. Decisions of the Appeal Tribunal can be brought before the courts. In 2002, two decisions were brought before the court system where the cases are still pending. 2.4 Anti-competitive agreementsThe building fairs of the timber merchantsThe Competition Council ordered the Federation of Timber Merchants (TUN) to stop making anti-competitive demands of the exhibitors at the building fairs of the federation. In connection with the trade fair “Byggeri 2002” and earlier fairs in 2000 and 1998, only suppliers that sold their products through the timber merchants and only to a limited extent dealt directly with contractors and builders were allowed to participate. Almost all timber merchants in Denmark are members of TUN. All builders and contractors deal with the timer merchants. This means that the trade fairs of TUN represent an important opportunity for the building material suppliers to meet their final customers. The Competition Council found that making the suppliers' possibility to participate in the trade fairs dependent on the extent to which they were dealing directly with contractors and builders constituted harmful anticompetitive behaviour. Agreement between DR/TV2 and Team Danmark/DHF Such long-lasting exclusive rights may impose competitive problems on other TV stations. However, the agreement did not include the rights to the European championship, the world championship and Champions League. Therefore, all TV stations were still able to tender for these attractive rights. Besides, the broadcasting rights to other sports competing with handball for TV viewers are currently distributed on the various TV stations in Denmark. It was therefore concluded that the agreement did not distort the competition for TV viewers among the TV stations. Finally, the Council found that - in the specific case - DR's and TV2's agreement concerning joint acquisition of the rights did not put the stations in such a powerful position that they were able to get the rights at a lower price than if they had negotiated individually. The agreement did not prevent DR and TV2 from competing for viewers for the Danish handball matches. Average duration of case handling, Competition 2000-2002 (months)
2.5 Abuse of dominanceUrban vs. MetroXpressThe Competition Council agreed with MetroXpress, a free newspaper, that Berlingske Gratisaviser abused its dominant position in the advertising market by selling advertisements in Urban, another free newspaper, at prices that did not cover the variable costs. When a dominating company pursues such a price policy (predatory pricing), it indicates that it wants to eliminate competitors and then raise the prices. Under normal circumstances, the Competition Council would therefore have ordered the dominant company to sell at prices that reflect the real costs. However, in this particular case, MetroXpress, which is owned by the Kinnevik Group, also sold advertisements at unnaturally low prices. Consequently, the Council found that Urban was to be allowed to “defend” its customer base and sell advertisements at prices that enabled the newspaper to compete with MetroXpress. Urban was, however, not allowed to undercut the advertisement prices of MetroXpress. 2.6 Mergers and acquisitionsMerger control was incorporated in the Danish Competition Act in 2000. It is thus a relatively new area. In 2002, the Competition Authority treated 13 merger cases. The largest merger case in 2002 was the merger between Danish Crown and Steff-Houlberg. The threshold value for mergers in Denmark is DKK 3.8 billion. The Competition Act includes a special provision on mergers not found in any other countries. According to this provision, the parties may obtain a preliminary approval, which is not published until at a later agreed time. This provision may in some negotiations be expedient for the parties – and is naturally only applied in cases where it is completely clear that the merger will have no impact on competition. Merger between Danish Crown and Steff-Houlberg The commitments were grouped into four. Firstly, the individual supplier was given more options in that the co-operative members' possibility of supplying part of their pig production to competitive slaughterhouses was extended. Also, an obligation to purchase from all Danish farmers, including non-members, was imposed on the slaughterhouses. At the same time, the minority protection was strengthened in the Danish Bacon & Meat Council (Danske Slagterier) and in the Pig Production Levy Fund (Svineafgiftsfonden). Secondly, the parties had accepted to sell a production unit with a weekly slaughtering capacity of 10,000 pigs. This is twice the capacity that the European Commission made Danish Crown sell after the 1999 merger with Vestjyske Slagterier. It has now turned out that the divested slaughterhouse was unable to compete in the market; accordingly, the Competition Council requested that the new buyer was to be put in an especially favourable position. Competition in slaughtering was also ensured by requiring the slaughterhouses to slaughter under contract for others. Besides, if the slaughterhouses close down a production unit, they are no longer allowed to impose a restriction on the property preventing the buyers from running a slaughterhouse. Thirdly, competition in the food-processing link was guaranteed. For a period of ten years, the food-processing industry will be guaranteed supplies at prices that cannot exceed the average export prices. Besides, the parties agreed to sell a food-processing company with a yearly capacity of 12,000 tons. Fourthly, competition in the retail trade was guaranteed in that the slaughterhouses agreed to allow competitors access to their distribution system. This made it easier for competitors to reach the consumers with fresh pork. Besides, the slaughterhouses were to guarantee that the hot-dog stands would continue to enjoy at least the same good terms as previously. When combined, these four groups of commitments ensured that the position of the consumers and competitors was just as good as before the merger, in the opinion of the Competition Council. 2.7 Other decisionsThe Competition Council may issue orders for the termination or repayment of aid granted from public funds, which has been granted to the benefit of speciic forms of business activities, and which is not legitimate according to public regulation. This provision should be seen as a supplement to the EC state aid rules. This means that the Competition Council can now intervene if the aid is not legal pursuant to statutory regulation and if it distorts competition. This also applies if public authorities sell or let land, commercial tenancies, etc. below market prices. In principle, the Danish Competition Act seeks to achieve the greatest possible equality between private and public business activities. If anti-competitive practice is a direct or necessary consequence of a public regulation, the provisions of the Act do not apply. The assessment of this - which entails putting other legislation above the Competition Act - can only be made by the relevant minister who is answerable to the Danish Parliament. The minister responsible and the Minister of Economic and Business Affairs must motivate governmental restrictions on competition questioned by the Competition Authority. Financial support from the Danish Labour Market Holiday Fund The Association of the Hotel, Restaurant and Tourism Industry in Denmark (HORESTA) had complained to the Competition Authority arguing that support from AFF to, for example, holiday centres had forced private holiday centres to close. AFF only supported funds, private foundations or similar, not least including Dansk Folkeferie, whereas private companies never received any support. A large part of the support from AFF did not affect competition to any signiicant extent. This applied to support to adventure and activity projects without overnight accommodation, which generally attracts tourists and therefore beneits the entire local tourist industry. Support to setting up holiday facilities for disabled persons and other groups at risk did not cause any competitive problems either. However, operational support to holiday centres with overnight accommodation distorts competition in relation to the private companies. Operational support is the most harmful type of support because it in a way protects the beneiciary against loss-making and thus reduces the beneiciary's incentive to improve operations in order to be competitive. On this basis, the Competition Council recommended that AFF should no longer provide operational support to holiday centres with overnight accommodation. Besides, the Competition Council recommended that so-called secondary activities (e.g. restaurants, cafeterias, accommodation, etc. for non-holiday purposes) should be separated inancially and run on market terms. AFF's support policy was legal pursuant to the Danish Holiday Act. Therefore, the Competition Council could not intervene directly in pursuance of the Competition Act. Instead, the Competition Council approached the Minister directly through a letter and presented a solution to the competition problems. The approach has resulted in new legislation that is in accordance with the recommendations of the Council. 2.8 User satisfactionThe Competition Authority has for some years measured the satisfaction of its ”customers”. User survey, Competition (2000-2002)
It is the goal of the Competition Authority to be a competent and service orientated organisation. Therefore the authority has a consultancy company to monitor user satisfaction by making regular user surveys. From 2000 to 2002 the user satisfaction has increased in all areas and the authority strives to continue this development. Face - Contents - Top/Bottom - Previous/Next Version 1.0 April 2003 • © Danish Competition Authority. Published by the Danish Competition Authority, http://www.ks.dk/ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
