On 10 November 2023 the Danish Ministry of Industry, Business and Financial Affairs proposed an amendment to the Danish Competition Act. The proposal is currently out for consultation, meaning interest groups, government authorities etc. are invited to express their opinions on the proposal. The proposal was heralded in the Danish government’s legislative programme for 2023/24 and aims to strengthen competition in Danish markets.
If accepted, the proposed amendment will have a considerable impact on the Danish competition law regulation in Denmark.
The primary proposed changes include an expansion of the types of mergers that the Danish Competition and Consumer Authority (“DCCA”) can require a notification of, provisions that make way for larger fines being handed out by the DCCA, and finally giving the DCCA the power to regulate markets without concrete evidence of infringements. However, critics fear that the proposal will create legal uncertainty for businesses and too much power to interfere for the DCCA.
Increased possibilities to require mergers to be notified
The Danish government has for some time made it clear that it has intentions of creating a so-called “call-in” provision similar to the European Commission’s Article 22 referral mechanism. This would make it possible for the DCCA to require a notification of a merger if the participating parties have a total annual revenue in Denmark of just DKK 50 million (approximately € 6.7 million).
This call-in provision is proposed to be used in situations where the DCCA cannot rule out that the merger poses a risk of distorting competition on the relevant market – primarily by creating or strengthening a dominant position. The proposed amendment specifically mentions the finance, tech and pharma sectors as sectors most likely to be areas of special interest to the DCCA. The proposed amendment is, however, not limited to these sectors.
The proposal specifically states that the DCCA must decide whether or not the merging parties are required to file a notification no later than 15 days after the DCCA has been made aware of the potential merger. This option may also be exercised after the merger has been implemented by the parties. The participating parties can, however, begin the clock on this time limit themselves by providing the DCCA with information on potential mergers.
The proposal will, if accepted in its current form, create additional uncertainty as to exactly how the DCCA will perform this assessment of whether potential mergers will be called in. It is, however, noted in the comments to the proposed amendment that the call-in option is expected to be exercised no more than 1-2 times a year.
The call-in provision would be applicable to transactions signed after 1 July 2024, if the proposal is accepted.
Power of investigation and interference
Currently, the DCCA does not have the legal ability to initiate investigations or probes ex officio. Inspired by Germany and the UK, the proposal seeks to give the DCCA the power to do exactly that. According to the proposal, should the DCCA suspect that competition in a market is being weakened by market structures or by practices of companies, it will be able to initiate a market investigation, following approval by the Danish Competition Council.
Should the DCCA after such a market investigation conclude that competition is being distorted, it will have the power to issue enforcement notices, regardless of whether an infringement of any laws has in fact taken place or not. According to the proposal, the provision will be especially useful in the tech sector, where providers of digital services may be in a position where they may not occupy a dominant position in a market, but where other companies nonetheless depend on their services to do business.
The proposal makes way for the DCCA to regulate markets without needing to prove the existence of an agreement on concerted practices etc., which constitutes a significant expansion of the DCCA’s regulatory powers. This provision will again lead to the regulatory landscape becoming more opaque, as businesses may find it harder to predict which practices will lead to regulatory enforcement.
The DCCA has historically imposed fines according to specific intervals proportionate to the violation in question. The proposal seeks to change this methodology and replace it with the approach laid out in guidelines on fines from the European Commission.
The size of fines will therefore, if the proposal is accepted, be decided by assessing the seriousness of the infringement which will then be calculated into a percentage of the revenue of the participating companies. Moreover, the existence of aggravating factors and the duration of an infringement will impact on the level of fine imposed.
The maximum size of fines will not change as fines will continue to be capped at 10% of each party’s global turnover. While the DCCA has historically not issued fines of that size, this is expected to change as a result of the proposed amendment.