On 21 May 2024, the Danish Parliament adopted significant amendments to the Competition Act aimed at strengthening competition and thus ensuring better prices and conditions. The main amendments include 1) a call-in option for mergers below the thresholds, 2) a new market investigation tool that allows for intervention without a finding of infringement, and 3) new principles for calculating fines.
Call-in of mergers below the turnover thresholds
From 1 July 2024, the Danish Competition and Consumer Authority (the "Authority") may demand notification of a merger even if it does not meet the general Danish thresholds. This option is available where (i) the merging entities have a combined annual turnover in Denmark of only DKK 50 million, and (ii) the Authority suspects that there is a risk that the merger will significantly impede effective competition, in particular because it is likely to create a dominant position. A merger notification order issued under the new rule will trigger the standstill obligation, putting the transaction on hold until it has been cleared. Any non-compliance with the notification requirement may be sanctioned by a civil fine if the company has acted with intent or gross negligence. If the merger has already been completed, the Authority can order its dissolution.
The fact that the parties must have a combined annual turnover in Denmark of at least DKK 50 million means that the rule applies even where the target company does not (yet) generate any turnover.
The Authority's call-in option is subject to certain time limits. First, the Authority must make the decision to call in the merger within 15 working days after the transaction has become "known" to the Authority The merger will be deemed "known" to the Authority only when the Authority has received sufficient information to assess whether the merger is notifiable or not. It is not clear if a press release from the parties will suffice for this purpose. However, as a precaution, the Authority cannot demand notification of a merger more than three months after conclusion of the merger agreement save in exceptional circumstances, for instance if the merging entities do not meet the Authority's deadlines for submitting the requested information. In that case, the Authority may demand notification up to six months after completion of the merger. In case of doubt, the merging entities may consider reaching out to the Authority themselves and submit the necessary information in order to start the time limit.
Finally, it should be noted that the call-in option does not apply to mergers where (i) a merger agreement has been concluded, (ii) a takeover bid has been announced, or (iii) a controlling interest has been acquired before 1 July 2024. In other words, a transaction need not be completed before 1 July in order not to fall within the new rules.
Market investigations
The new rules introduce a new tool that allows the Authority to initiate a so-called market investigation of practices or structures in one or more business sectors if the Authority suspects that effective competition is being impeded.
If effective competition is deemed impeded, the Authority may ultimately impose behavioural orders - but not structural orders for e.g. divestment - or commitments on a company, a business combination, or any other legal person to remedy the weakening of competition. This enables the Authority to regulate behaviour, even if no infringement of the competition rules has been found.
Before the recent amendments, the Authority also published regular market or sector reports if the Authority suspected a weakening of competition. But under the existing rules, the Authority has not been able to intervene in these markets - only to make recommendations to the relevant authorities, which have then had to balance competition concerns against other considerations. This option still exists, but in future the Authority will, if necessary, be able to intervene with market regulation measures against perfectly lawful practices. This is a significant innovation and a quite far-reaching step, which is highly problematic from a due process perspective.
While it is possible to appeal against the Authority's orders, it is difficult to predict the actual implications of a judicial review. It seems, based on the Act, that it is only possible to challenge the proportionality of the Authority's orders - a burden of proof which is expected to be difficult to lift. Also, judicial review is not available to test the lawfulness of commitments.
The Authority will not be able to impose sanctions as a result of its market investigation, as there will be no finding of infringement of the competition rules. However, violation of orders or commitments will be sanctioned.
Fines
The amendments to the Competition Act introduce new principles on calculation of fines. The legislator wants to raise the level of fines in Denmark to reflect the Commission's fine levels, which historically are significantly higher than in Denmark.
Today, fines are calculated on the basis of fixed amounts that can be increased or decreased. Going forward, fines will be calculated as a percentage of up to 30% of the merging entities' turnover of goods or services that are directly or indirectly related to the infringement in the relevant geographical area. The exact percentage will depend on a number of factors, including (i) the nature of the infringement, (ii) the entity's total market share, (iii) the geographical scope of the infringement, and (iv) whether the infringement has been manifest. To allow for the duration of the infringement, the fine is multiplied by the number of years the infringement has lasted. In the case of hardcore infringements, the fine may be increased by 15-25%. Moreover, the fine may be increased so that it exceeds the unlawful gain made from the infringement, subject to any aggravating or mitigating circumstances. In exceptional cases, inability to pay may be taken into account.
For companies, the maximum amount of a civil fine will still be 10% of total worldwide (group) turnover in the financial year preceding the decision.
Also, fines imposed on natural persons will in the future not be based on fixed intervals depending on the gravity of the infringement. Instead, the court will have to assess the specific circumstances of the case.
The limitation periods for civil fines will also be changed. Going forward, both the general 5-year limitation period and the absolute 10-year limitation period will be interrupted from date of (i) imposition of a civil fine or (ii) filing of appeal to the court or the Competition Appeals Tribunal against a finding of a competition law infringement. Filing of a lawsuit or complaint will trigger an interruption of the limitation period.
See the adopted Bill here [in Danish].
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