The Danish Competition and Consumer Authority has on 29 January 2025 found that a Danish medical device company has abused its dominant position by engaging in so-called “margin squeeze” with the effect of excluding competitors at the wholesale level 

A Danish medical device company has recently been found to have abused its dominant position by employing a pricing practice that amounts to margin squeeze. 

The dominant company manufactures and sells different medical devices to the Danish municipalities, where they are used in hospitals to treat patients with certain diseases. The patients are first introduced to the medical devices at the hospitals, after which a grant is issued for the product that best suits the patient. After being discharged from the hospital, it is the responsibility of the respective municipality to continue providing the medical devices that meet the individual patients’ needs. The market dynamics are influenced by a "lock-in" effect, as patients tend to continue using the products they were introduced to during hospital stays after being discharged. 

When municipalities purchase the medical devices, they do so through tenders or so-called price inquiries, where the municipalities request a broad portfolio of different manufacturers' products along with a range of services such as advice, visits to users, and an electronic grant system. Historically, the suppliers participating in municipal tenders have been wholesalers specializing in purchasing a selection of different products from various manufacturers, while also being able to deliver the services municipalities demand. Wholesalers procure the products either directly from the manufacturers or through parallel imports. As municipalities are required to offer all the products that patients may need, wholesalers must therefore be able to supply a broad range of products, including those from the dominant company, which amount to more than half the products used by patients in Denmark.

The Danish Competition and Consumer Authority (“DCCA”) initiated an investigation into the dominant company’s pricing behaviour in relation to the sale of medical devices to municipalities in Denmark following receipt of several complaints and inquiries from various market participants, including municipalities, wholesalers, and an industry association. 

The complaints particularly pointed out that the dominant company, through a consortium with a wholesaler, priced its medical devices for Danish municipalities at prices significantly lower than those set for competing Danish wholesalers supplying the same products to municipalities. According to the complaints, this resulted in a margin squeeze for the competing wholesalers, making it difficult or outright impossible for them to compete with the consortium consisting of a dominant undertaking and one wholesaler. 

Margin squeeze refers to a pricing practice whereby a vertically integrated dominant company, such as the dominant undertaking, sets its upstream and downstream prices in such a way that equally efficient competitors, such as the wholesalers, cannot achieve a reasonable profit margin in the downstream market. This can be achieved e.g. by raising the upstream wholesale prices, by lowering the downstream retail price, or a combination of both.

The DCCA found that the dominant undertaking had a dominant position in the upstream market for the sale of brand-specific medical devices to wholesalers in Denmark during the relevant period from 2020 to 2022, and that the dominant undertaking had abused its dominant position in this market by engaging in margin squeeze, as evidenced by the lack of successful bids from certain major competitors in municipal tenders since 2019, when the dominant undertaking and a wholesaler partnered and started supplying the municipalities through their consortium. 

The DCCA will continue the case with a view of imposing fines. The DCCA’s decision is available here (in Danish only). 

The decision emphasizes the importance of dominant undertakings carefully considering their pricing strategies and market conduct, including when they are vertically integrated and thereby also compete with some of their competitors on a different level. 

For more information, please contact Morten Nissen or Stefan Brkic.  

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