2. Promotion of competition
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2.1 Amendments to the Danish Competition ActOn 1 February 2005 a number of amendments to the Danish Competition Act entered into force. Among other things, the amendments were a result of new provisions for the application of the EU competition rules that entered into force in 2004. In addition, the Danish Competition Council was given a wider scope to take action against dominant enterprises with anti-competitive behavior. Finally, the Act was amended in a number of areas in order to define and clarify the legal situation, to the extent possible. Highlights of the new Competition Act:
2.2 Punishable infringements of the Competition ActCartels represent one of the most obstructive types of anti-competitive behaviour. Investigation and inquiry into such activities are therefore given top priority by the Competition Authority. Investigations into both cartels and other matters concerning punishable infringement of the Competition Act are generally based on information received by the Authority from companies and the public by way of complaints, inquiries, etc. However, the Authority also collects information as part of its general market monitoring and case administration work. In some cases, these efforts reveal illegal cartel activities, etc. Not only actual cartel agreements infringe the Competition Act. Too, other anti-competitive agreements and behaviour, e.g. binding prices and abuse of dominant position have a significantly harmful impact on society and the consumers. Consequently, the Competition Authority also attaches great importance to the clearing up and the investigation into such violations. Watch wholesaler fined 200,000 DKK also including a personal penalty to the manager On 1 December 2005 the Swatch Group was fined 200,000 DKK by The High Court of Eastern Denmark. The company was convicted of having entered into agreements with retailers, forbidding them to sell watches at a discount. Such agreements on fixed prices are illegal according to The Competition Act. Aside from the fine being imposed upon the Swatch Group, the company manager was personally fined 10,000 DKK by The High Court on the grounds that the manager himself took active part in the infringement of the law. This is the first time that a personal criminal liability has been applied to in relation to violation of The Competition Act. This is the last case which is expected to be settled according to the penalty guidelines in the former Competition Act. The revised Competition Act has significantly severer penalties. 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 decided 31 cases in 2005. The Competition Authority made 52 decisions in important cases with subsequent publication. Due to fewer notifications, there is a decrease in the number of agreements since 2002. However, the workload has not been reduced, since cases are getting more complex having conflicting parties. In 2005, the Authority also concluded about 567 minor cases, mainly concerning access to documents, questions from citizens, etc. Production figures, Competition 2003-2005
Decisions by the Council and the Authority can be appealed to the Competition Appeals Tribunal. 7 cases were decided by the Tribunal in 2005. Of these, two were overruled or referred back. Decisions by the Appeals Tribunal can be brought before the courts. In 2005 the court system decided 2 cases in relation to decisions by the Competition Council appealed to the Appeals Tribunal - both cases were decided in favour of the Competition Council. Average duration of case handling, Competition 2002-2005 (months)
Some of the major cases decided by the Council in 2005 are described below. 2.4 Anti-competitive agreementsDanish Inns and Hotels violates the Competition Act Danish Inns and Hotels violated the Competition Act by demanding their members to observe a fixed price floor for accommodation. According to the guidelines of Danish Inns and Hotels, the members were not allowed to rent out rooms below a price floor set by the Danish Inns and Hotels. Neither were the members allowed to advertise nor display with room tariffs below the fixed price floor. If the members failed to comply with these demands, it might lead to expulsion from Danish Inns and Hotels. The articles of association entailed that members of Danish Inns and Hotels were unable to compete on the price of accommodation. In other words, it was a cartel case. As a consequence, the Competition Council ordered Danish Inns and Hotels to revoke these demands on minimum prices. The case was also referred to the Public Prosecutor for Serious Economic Crime for criminal investigation. 2.5 Abuse of dominanceMarketing fees not to be spent on discrimination For the first time The Competition Council evaluated a dominant company's use of marketing fees and campaign support aimed at retail chains. It has been common practise that dominant companies must not discriminate between their customers when giving discounts. In this case, the Competition Council stated that dominant suppliers, as well, have an obligation not to discriminate their customers in relation to discounts, marketing fees and campaign support. This implies that customers with equal characteristics should gain fairly equal grants, irrespective of it being done through discounts, marketing fees or campaign support. Discrimination requires documentary proof of cost factors or the like, providing reasons for the differences. During the process, the company (Arla Foods) provided documentation that the retail chains, to a certain extent, impose different distribution costs upon Arla. Considering this, the Council concluded that Arla did not discriminate their customers. Mazda Motor abused its dominant position Mazda Motor Denmark abused its dominant position by making inspection visits at the spare parts stores at the authorized repair facilities. Mazda had informed their customers that they intended to make inspection visits without prior notice requiring access to all parts of the customer's store, not least to the spare parts store. If the individual repair facility refused to give access to the Mazda inspectors, it could result in Mazda ceasing to deliver spare parts to the repair facility in question. The terms entailed that the authorised dealers would be more reluctant to buy original Mazda spare parts from Mazda competitors (through parallel import) and from buying so-called 'non-original spare parts'. Other spare part wholesale dealers would subsequently experience increasing difficulties in selling their products, even though they could deliver at equal quality and lower prices. Against this background the Council found that Mazda imposed unreasonable terms of business on their customers, contrary to the Competition Act. Thus, the Council ordered Mazda to change these terms in its terms of business. 2.6 Mergers and acquisitionsMerger control was incorporated in the Danish Competition Act in 2000. In 2005, the Competition Authority handled 11 merger cases. The threshold value for mergers in Denmark is 3.8 billion DKK. The Competition Act includes a special provision on mergers not to be found in any other country. According to this provision, the parties may obtain a preliminary approval, which is not published until later, at an agreed time. This provision may in some negotiations be expedient for the parties - and is naturally only applied in cases where it is quite evident that the merger shall have no impact on competition. Svenska Lantmännen's (Swedish Farmers' Organization) acquires the shares in Spira-koncernen (Spira-organization) The Competition Council approved that Svenska Lantmännen's (SvL) acquired the shares in Spira-koncer-nen. SvL is active within the chemicals and feeds trade etc. in Sweden, Denmark and a number of other countries. Spira supplies and sells poultry meat in Sweden through the wholly-owned subsidiary Kronfågel and in Denmark through Danpo. The ownership of Danpo, combined with SvL's trading turnover, confirmed that it was a merger which must be registered in Denmark. The Competition Council found that the merger did not present a problem in the main areas affected by the merger in Denmark, that is to say the selling of chicken products for the retail trade and the selling of chicken products for catering and for the processing industry. However, the suppliers of chicken products may be affected by the merger, because SvL's subsidiary SweChick is very powerful in the area of supplying of parental animals to hatcheries. These deliveries are necessary for Danpo's competitors enabling them to breed chickens. Therefore, Svenska Lantmännen and SweChick were committed to deliver parental animals on equal and non-discriminating terms to all Danish hatcheries that might consider. On these grounds The Competition Council approved the merger. 2.7 Other decicionsThe Competition Council may issue orders for the termination or repayment of aid granted from public funds, which has been granted to the benefit of specific forms of business activities, and which is not legitimate according to public regulation. This provision should be considered a supplement to the EC state aid rules. As a result, the Competition Council can 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 strives to achieve the greatest equality possible between private and public business activities. If anti-competitive practice is a direct or necessary consequence of public regulation, the provisions of the Act do not apply. The assessment of this - which entails putting alternative legislation above the Competition Act - can only be made by the relevant minister 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. The Transport Industry's Training Council receives illegal support The Competition Council ordered the cease of an illegal, indirect support to the Transport Industry's Training Council. The support by TUR Publishing was carried out exclusively by the use of training material free of charge by The Ministry of Education. TUR's secretariat and publishing company is a joint ownership by employers' associations and trade unions within the transportation area. They develop training material for reeducation in the transportation sector. Normally, this is done in close cooperation with institutions offering labour market training courses. TUR receives legal support from The Ministry of Education in order to develop training material for driver's license training. The Ministry of Education owns the material. As the sole publisher, TUR Publishing was allowed to use the material free of charge. Other publishers had not yet gained access to the material. Thus, TUR Publishing had a competitive advantage compared to the private publishers. The Council found that TUR Publisher's right of use of the training material, developed by TUR for The Ministry of Education, represented an indirect, selective support to the publishing company inconsistent with the Competition Act. The Ministry of Education informed that it would make the material available to everybody on the internet, as soon as possible. The Council found that this would stop the illegal support. Subsequently, the Council found no reason for repaying of the support if the enforcement order was complied with within 3 months. The Competition Council recommends increased competition in the pharmacy sector The Competition Council recommended The Minister of Internal Affairs and The Minister of Health to partly deregulate the pharmacy sector. In relation to the Competition Report 2005 the Competition Authority conducted an analysis of the Danish pharmacy sector. The analysis showed that public regulation is anti-competitive within the scope of distribution of medicinal products in Denmark. On these grounds the Council proposed the following reorganization:
Through this reorganization, the Danish pharmacy sector would be still more development oriented and efficient without giving in on the safety of the consumers 2.8 User satisfactionThe Competition Authority has a wide range of tasks. Regulatory tasks include some not directly requested by the customers, e.g. cases of the Authority or the Council making decisions entailing obligations or conducting unannounced inspections of selected enterprises. However, this does not prevent the Authority from aiming at a high degree of customer satisfaction. Via interviews with most of its customers, the Competition Authority has measured customer satisfaction since 1998. Customers include enterprises, lawyers and other authorities whose cases have been handled by the Authority. The Authority is pleased to note that satisfaction in the competition area stabilised in 2005. However, the Authority strives to increase the satisfaction in e.g. the area of sector knowledge. User survey, Competition (2003-2005)
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