Merger Control 2021

Last Updated July 07, 2021

Denmark

Law and Practice

Authors



Bruun & Hjejle has a merger control team that includes three partners, six attorneys and three assistant attorneys. The office is located in Copenhagen, Denmark, but often cross-border mergers are handled in co-operation with a network of law firms in other jurisdictions. Bruun & Hjejle has a leading competition practice covering all aspects of Danish and EU competition law, including merger control and cartel investigations. Examples of significant clients include Danske Bank A/S (a leading Danish bank), Nets Denmark A/S (a leading provider of payment solutions, information services and digital security solutions), HMN Naturgas I/S (a company within gas distribution, biogas facilities and gas fuelling stations), TV2/Danmark A/S (a leading broadcaster and media conglomerate), FIH Erhvervsbank (a financial institution), Ørsted A/S (the former Dong Energy A/S), CD Pharma AB (a Swedish pharma distributor), and Clear Channel International (an out-of-home media and advertising company).

The Danish merger control regulation is primarily based on the principles of the EU Merger Control Regulation (EUMR). In general, Danish merger rules are interpreted in line with EU law and case law from the European Commission and the European courts. Furthermore, the substantive test under Danish law is similar to that under EU law.

The scope of the jurisdiction is based on turnover thresholds, which are calculated largely in accordance with EU principles.

The merger control rules are laid down in part 4 of the Danish Competition Act (the "Competition Act") as well as in two executive orders, which set out the detailed rules on the calculation of turnover thresholds and the notification of concentrations. Finally, the Danish Competition and Consumer Authority (DCCA) issues and regularly updates a guidance paper on merger filings on its website.

"Foreign-to-foreign" transactions are subject to Danish merger control insofar as the merging parties meet the Danish jurisdictional thresholds. No separate legislation applies to such transactions. 

With respect to particular sectors, it should be noted that a merger between two or more commercial providers of electronic communications networks in Denmark may be referred to the DCCA by the Danish Business Authority, irrespective of whether or not the jurisdictional thresholds are met.

The Danish merger rules are enforced by the DCCA and the Danish Competition Council (the "Council"). The DCCA prepares all cases and decides on less complex mergers on behalf of the Council, while the Council decides on the more complicated mergers.

The DCCA’s and the Council’s decisions may be appealed to the Danish Competition Appeals Tribunal (the "Tribunal"), which is an independent administrative appeals body. The decisions of the Tribunal may, in turn, be appealed to the Danish courts.

Notification to the DCCA is compulsory if the jurisdictional thresholds are met, with no exceptions.

If the parties are unsure whether notification is required, they can choose to consult the DCCA about a specific transaction. If the parties wish to receive a legally binding reply from the DCCA regarding the obligation to notify, they must submit a notification. However, informal contact with the DCCA normally provides the necessary clarity on jurisdictional issues.

If an undertaking fails to notify a merger to the DCCA or carries out a merger despite a prohibition to the contrary (ie, implements a merger before approval – so-called “gun-jumping”), fines may be imposed (see Section 23 (2), subsection 4-5 of the Competition Act). Up until now, fines for failure to notify have only been imposed on the buyer(s).

In the case of SEAS-NVE Holding A/S and Syd Energi Holding A/S, the State Prosecutor fined each of the two utility companies DKK4 million for failure to notify a joint acquisition of ChoosEV and for implementing the merger before approval. The size of the fine reflected that the parties had themselves informed the DCCA of their failure to notify.

In a case from June 2019 regarding Circle K Denmark A/S’ acquisition of 72 service stations within the Shell trade mark, Circle K accepted a fine of DKK6 million for failure to notify. The acquisition of the 72 service stations should have been separately notified to the DCCA, as they had not been included in a previous merger approval of 2016 from the European Commission regarding Circle K’s acquisition of Danish Fuel (comprising some of Shell’s Danish activities).

Civil Fines

The competition authorities may request the courts to impose civil fines on undertakings in accordance with Danish civil procedure (see Sections 23–24 of the Competition Act). The size of the fine imposed depends on factors such as the gravity of the infringement and its duration. Regarding legal persons, the turnover will also be taken into consideration.

The new civil fine regime was introduced in March 2021 with the amended Danish Competition Act, which implements the ECN+ Directive of 11 December 2018 (Directive (EU) 2019/1).

In general, penalties are made public.

Mergers resulting in a lasting change of control are caught by the Danish merger rules. In line with the EUMR, control can be obtained by agreements or other means that do not involve the transfer of shares or assets, where such operations are caught by the merger rules, too. As internal restructurings or reorganisations do not usually result in a change of control, they are most often not caught.

The Competition Act exempts certain types of transactions from the merger concept, as follows: 

  • the acquisition of securities by financial undertakings for resale, which are disposed of within one year of the acquisition, and which are acquired as a customary part of the company’s operations;
  • transactions where a trustee in bankruptcy acquires control over a company; or
  • the acquisition of control by financial holding companies, as long as the holding company uses the attached voting rights only to retain the full value of its investment.

According to Section 12a of the Competition Act, and in line with the EUMR, the term "control" is defined as the possibility of exercising decisive influence on an undertaking.

Control can be obtained through rights or agreements or in other ways that will, separately or in combination, make it possible to exert a decisive influence on the operations of the undertaking. The acquisition of a minority shareholding may amount to a merger in so far as the acquirer obtains a decisive influence on the undertaking – for example, through agreements concerning voting rights or veto rights.

The Danish merger rules apply to a merger if: 

  • the combined aggregate turnover in Denmark of all the undertakings concerned is at least DKK900 million, and the aggregate turnover in Denmark of each of at least two undertakings concerned is at least DKK100 million; 
  • the aggregate turnover in Denmark of at least one of the undertakings concerned is at least DKK3.8 billion, and the aggregate worldwide turnover of at least one of the other undertakings concerned is at least DKK3.8 billion; 
  • the Danish Business Authority, in accordance with the Danish Act on Electronic Communications Networks and Services, has referred a merger between two or more commercial providers of electronic communications networks in Denmark to the DCCA; or
  • if the European Commission, in accordance with the EUMR, has referred a merger to the DCCA.

The concept of "undertakings concerned" in the Competition Act refers to the direct participants in a merger and is identical to the concept in EU merger rules. The European Commission’s practice and the Consolidated Jurisdictional Notice provide guidance for further interpretation. The DCCA often consults with the European Commission and obtains guidance on jurisdictional issues. 

Except for the exceptions provided by the Danish Act on Electronic Communications Networks and Services and the EUMR, there are no deviations from the jurisdictional thresholds. 

The aggregate turnover of the undertakings is the net turnover derived from the sale of products and the provision of services falling within the undertakings’ ordinary activities after the deduction of value-added tax and other taxes directly related to sales. 

The calculation of turnover is based on audited accounts of the preceding financial year. 

If the turnover is in a foreign currency, it must be converted into DKK based on the average ECB rate of exchange of the preceding accounting year of the undertaking concerned.

The undertakings concerned are relevant for the purpose of calculating the jurisdictional thresholds.

The turnover of an undertaking concerned shall be calculated on a group-wide basis. The turnover of a group comprises the turnover of associated undertakings, which include subsidiaries, the parent company, subsidiaries of the parent company, joint ventures and other undertakings that are subject to joint management. Where a merger is the result of the acquisition of part of one undertaking, the calculation of the turnover shall only comprise the share of the turnover of the seller that relates to the acquired part (target).

If an undertaking has been divested or has acquired control of assets after the end of the preceding financial year, the turnover related to the divestiture or assets must be deducted or added to the turnover of the undertaking concerned.

Foreign-to-foreign transactions are subject to Danish merger control if the turnover thresholds are met, even if the merger has no actual effect on the Danish market. However, it is a prerequisite that the turnover is in Denmark and comprises products sold and services provided to undertakings or consumers in Denmark (corresponding to the EU merger rules). For credit institutions and other financial institutions, the turnover in Denmark comprises revenue earned by the institution’s departments or branches in Denmark. 

Under Danish law, there is no market share jurisdictional threshold; the jurisdictional thresholds are based solely on turnover.

In case of a newly created joint venture, the "undertakings concerned" are each of the companies acquiring control of the newly set-up joint venture in question. Consequently, an assessment of whether the jurisdictional thresholds are met must be based on the turnover of the parent undertakings.

Where two or more undertakings acquire joint control of a pre-existing business, the undertakings concerned are each of the undertakings acquiring joint control and the target business. In this case, the turnover of the parent undertakings and the target business must be taken into consideration. Since the judgment of the European Court of Justice (ECJ) in Case C-248/16, Austria Asphalt, and in line with the Commission’s practice, only the creation of a full-functioning joint venture is considered a concentration under Danish law.

In practice, the DCCA takes guidance from EU case law and guidelines from the Commission when assessing aspects of a joint venture. 

A case from 2018 brought up some interesting issues in relation to joint ventures and the DCCA’s jurisdiction. In 2017, Danica Ejendomsselskab ApS (Danica) had sold 50% of its shares in 16 Danish shopping centres to Arbejdsmarkedets Tillægspension (ATP), which resulted in the creation of a full-functioning joint venture. In 2018, the joint venture acquired apartment No 2 in Randers Storcenter (part of a shopping centre in Central Denmark). The DCCA based the assessment of its jurisdiction with regard to the acquisition of apartment No 2 in Randers Storcenter on the turnover of the parents (Danica and ATP) and not on the turnover of the joint venture.

Thus, the acquisition of apartment No 2 in Randers Storcenter met the turnover threshold under the Danish competition rules and was consequently subject to notification. The DCCA nevertheless accepted a simplified notification on the basis of Danish rules equivalent to Section 5(a) of the Commission Notice on a simplified procedure (the acquisition of joint control of a joint venture, provided that the joint venture has no, or negligible, actual or foreseen activities in Denmark).

The Danish merger rules do not apply to a transaction below the jurisdictional thresholds, except where a transaction is referred to the DCCA by the Danish Business Authority in accordance with the Danish Act on Electronic Communications Networks and Services or by the European Commission in accordance with the EUMR.

The DCCA does not have any power to investigate transactions that are not covered by the merger rules in the Competition Act.

A merger covered by the Competition Act must not be implemented until the parties have notified the DCCA, and the DCCA has approved the merger. However, pursuant to Section 12c (6) of the Competition Act, the DCCA may grant derogations from the suspensive effect at its discretion.

If the parties implement a merger prior to clearance, ie, gun-jumping, the DCCA may impose fines (see Section 23 (2), subsection 5 of the Competition Act). The same applies if the parties fail to notify the DCCA, see Section 23 (2), subsection 4 of the Competition Act.

The competition authorities may request the courts to impose civil fines on undertakings in accordance with Danish civil procedure (see Sections 23–24 of the Competition Act). The size of the fine imposed depends on factors such as the gravity of the infringement and its duration. Regarding legal persons, the turnover will also be taken into consideration. As mentioned, the new civil fine regime is a consequence of the adoption of the ECN+ Directive of 11 December 2018, which entered into force with the amended Danish Competition Act in March 2021.

In general, penalties for gun-jumping are made public.

Gun-Jumping in Denmark

The Danish EY/KPMG case from May 2014 was the first example of a gun-jumping case in Denmark. In the case, the Council approved the merger subject to remedies, but also found that the parties implemented the merger before approval. The decision was brought to court and, on 7 December 2016, the Danish Maritime and Commercial Court referred preliminary questions to the ECJ, seeking guidance on how to interpret the EU merger rules on the implementation of mergers (which are indicative of the interpretation of the Danish merger rules).

On 31 May 2018, the ECJ delivered its preliminary ruling in Case C-633/16, which de facto implied that EY and KPMG Denmark did not violate the prohibition on pre-implementation of a merger. Consequently, on 13 November 2018, the Danish Maritime and Commercial Court repealed the Council’s decision.

There have been no cases of gun-jumping in 2020.

Section 12c (5) of the Competition Act holds a general exemption to the suspensive effect for public bids and a number of transactions regarding securities, ie, securities that can be traded on a market such as a stock exchange, whereby various sellers gain control. However, this applies only to the acquisition itself. The merger may not be implemented, and the buyer may not exercise voting rights attached to the securities in question or may only do so to maintain the full value of its investment and after dispensation from the DCCA.

In the Danish DLG/Danish Agro case from February 2010, the DCCA granted a derogation from the suspensive effect for DLG and Danish Agro’s acquisition of AAA’s rights and obligations according to a contract for the supply of soy. DLG and Danish Agro were planning to acquire AAA, which had suspended its payments. The DCCA granted the derogation with reference to AAA’s economic difficulties and as the transfer of the rights and obligations under the supply contract was necessary in order to maintain the operations of AAA during its suspension of payments.

The DCCA stressed that its decision had no influence on the Council’s decision of whether the merger could eventually be approved.

Pursuant to Section 12c (6) of the Competition Act, the DCCA may grant derogations from the suspensive effect at its discretion.

There are no examples of Danish cases where global closing has been implemented before clearance in Denmark following the carve-out of the Danish business, and it is not likely that such a procedure would be possible in Denmark.

Under Danish law, no deadlines for merger notifications are applicable. However, the merger cannot be notified (in complete form) before binding merger agreement has been agreed (signing) and may not be implemented before it has been approved by the authorities. If the parties implement the merger prior to approval, they may be subject to fines, which are made public.

A notification may be submitted to the DCCA if the parties have entered into a merger agreement (which may be subject to conditions), if a takeover bid has been made public, or if a controlling share has been acquired (the latter covers cases where control is not gained through an agreement or a take-over bid, but, eg, through a series of transactions in securities or through inheritance).

Generally, the DCCA will not accept a notification based on less formal agreements such as letters of intent, let alone based on good faith intentions to reach agreement. However, informal pre-notification discussions with the DCCA may be based on a letter of intent.

The filing fee for a simplified notification is DKK50,000. The fee for a full-form notification is 0.015% of the combined turnover in Denmark of the undertakings concerned, capped at DKK1.5 million. A merger notification will only be deemed complete once the merger filing fee has been paid.

An already-paid fee is not reimbursable, unless:

  • the notified transaction was not notifiable; 
  • the parties withdrew the notification before it was complete;
  • the parties withdrew the notification before the DCCA had reached a decision, due to the fact that another Danish authority had refused to permit a merger between undertakings which were involved in the notified transaction; or
  • the Danish Business Authority did not have a basis for referring the merger to the DCCA.

It follows from the DCCA’s guidelines on the notification of mergers and merger fees from 2014 that in cases involving an acquisition of joint control, the undertakings concerned are jointly responsible for filing the merger notification. In practice, fines for failure to notify have only been imposed on the buyer(s) in the transaction. In cases involving an acquisition of sole control, the acquirer of sole control is responsible for filing the merger notification.

The undertakings may choose to let one or more of the undertakings concerned submit the merger notification, or to authorise a representative to submit and receive documents on behalf of all of the undertakings concerned.

In a full-form notification, the DCCA requires detailed information about:

  • the merging parties;
  • notification to other competition authorities;
  • the merger itself;
  • economic information on the parties;
  • ownership and control;
  • the relevant markets;
  • market conditions;
  • market entry/exit conditions;
  • research and development;
  • co-operative agreements;
  • trade associations; and
  • efficiency gains.

Further information is required if the merger constitutes the formation of a joint venture. 

In addition, the DCCA requires supporting documentation in the form of:

  • annual financial statements;
  • annual reports;
  • all documents concerning the merger or related to the merger, including analyses, reports and minutes of board meetings;
  • flow charts and similar overviews for each of the parties;
  • a non-confidential version of the notification; and
  • documentation of payment of the fee.

The notification is filed by means of the standard forms available on the DCCA’s website. There is no requirement for certifications, notarisations or the like.

Notifications must be submitted in Danish, but notifications in English may be accepted upon prior agreement with the DCCA. Supporting documents may be submitted in Danish and English.

Less information is required under the simplified notification procedure.

When the parties have submitted a final notification, the DCCA will determine if the notification is complete within ten working days. There are no penalties if a notification is deemed incomplete. However, Phase I – which is 25 working days – does not commence until the DCCA deems the notification complete.

If it appears that the approval of a merger is, to a significant extent, based on inaccurate or misleading information attributable to the notifying parties, the DCCA may revoke the approval. The parties may also be subject to a fine, as exemplified in April 2017, where a district court fined Metro Cash & Carry Danmark DKK50,000 for failure to provide the DCCA with all relevant information for its review of the contemplated merger with Euro Cater. 

Notification of a merger to the DCCA may be filed when a binding merger agreement has been completed by the parties, a takeover bid has been made public, or a controlling share has been acquired. The DCCA must declare the notification complete or specify any missing information no later than ten working days from submission of the notification.

Phase I

Phase I commences once the DCCA has declared the notification complete and takes up to 25 working days (35 working days if the parties propose commitments).

The DCCA may decide to initiate a more comprehensive Phase II investigation if deemed necessary due to, eg, the complexity of the merger, or because a final decision cannot be made within the time frame of Phase I. Further, if the parties have proposed commitments, a Phase II investigation will often be initiated, but it may be closed as soon as an agreement on commitments has been reached.

Phase II

Phase II investigations must be completed within 90 working days. However, the timeframe for a Phase II investigation will automatically be extended by up to 20 working days if the parties propose commitments during the last 20 working days of Phase II. Finally, the Council may – at any time – extend the deadline by up to 20 working days, provided the undertakings concerned have made a request for or consented to such an extension.

Both types of extensions may be granted within the same Phase II investigation.

Overall Timeline

In a simplified merger without substantial horizontal overlap, a time frame of up to two months should be expected (from the first initial contact being made to the DCCA). Complex merger cases can take up to – and sometimes exceed – a year from the initial contacts with the DCCA and until approval is granted. However, in general, the DCCA is becoming more efficient, especially when handling non-complicated mergers.

Pre-notification is not required by law, and there is no statutory time frame for the pre-notification phase. The DCCA recommends that parties contact the DCCA as soon as they have established that the merger is notifiable and no later than two weeks prior to notification.

During the pre-notification phase, drafts of the notification can be submitted for review by the DCCA which will then usually revert with questions to the parties. In practice, it will often take two to four weeks to have a simplified notification declared complete, and two to ten weeks for a full-form notification to be declared complete. However, we have seen examples of longer pre-notification phases, such as the notification of JP/Politiken/Børsen, which was not declared complete until July 2016 even though the pre-notification process was initiated in January 2016.

Discussions with the DCCA in the pre-notification phase are confidential. The DCCA does not announce the merger or initiate market research, etc, before the parties have notified the merger, unless specifically agreed to by the parties, or if the merger is known to the public.

Information requests are common, even in simplified cases without overlap. In complex cases, information requests can be extremely burdensome, and often require the involvement of economic expertise. Until 2018, information requests did not stop the clock, but an amendment to the Competition Act introduced a "stop the clock" provision as of 1 January 2018, which entitles the DCCA to suspend the deadline for a merger review if the undertakings concerned do not disclose requested information.

Since 2010, it has been possible to use a full-form procedure or a short-form (simplified) procedure, both of which have their origins in the EU merger regime. Under the simplified procedure, the parties are required to submit less market data.

Formally, the same deadlines apply to both the full-form procedure and the simplified procedure (for example, 25 working days in Phase I) but, in practice, a faster approval can be expected for the simplified procedure.

The simplified notification may be submitted in the following cases:

  • mergers in which two or more undertakings acquire joint control of an undertaking and where the turnover of the joint venture or of the transferred activities is less than DKK100 million in Denmark, or where the total value of the assets or the turnover generated by the assets transferred to the joint venture is less than DKK100 million in Denmark;
  • mergers where one undertaking acquires sole control of another undertaking of which it already has joint control; or
  • mergers where two or more undertakings are merged, or one or more undertakings acquire sole or joint control of another undertaking and in which:
    1. none of the parties have activities in the same product and geographic market or in a product market that is downstream or upstream from a product market in which another party to the merger is engaged;
    2. two or more of the parties to the merger are active in the same product and geographic market, but will have a combined market share below 15% in Denmark; or
    3. one or more of the parties to the merger are active on a downstream or upstream product market where another party operates, provided that neither their individual nor combined market share on these markets in Denmark is 25% or more.

Full-Form Notification and Appeals

Even where the conditions for submitting a simplified notification are met, the DCCA may still require a full-form notification. It is, therefore, recommended to engage in pre-notification discussions with the DCCA about the type of notification procedure required. A decision that a merger does not qualify for a simplified procedure may be appealed to the Tribunal, but it is rarely overturned as the DCCA has a wide discretionary margin when deciding whether a simplified notification suffices.

In January 2020, the High Court of Western Denmark ruled in the Dansk Supermarked/Wupti.com case form 2016. The DCCA had ordered Dansk Supermarked to submit a full-form notification, as the information set out in the parties’ draft notification did not convince the DCCA that the conditions for a simplified notification had been met. Consequently, the parties had to pay a filing fee of DKK1.5 million rather than DKK50,000.

Dansk Supermarked complained to the Tribunal and submitted that the DCCA had not been entitled to require a full-form notification since the undertaken market investigation was very limited in scope and since the DCCA found that the merger would not give rise to any competition concerns. The Western High Court ruled that the DCCA was right in requiring a full-form notification in order to conduct a minor market investigation even though this resulted in a higher filing fee and even though no substantial competition issues were eventually found. The case demonstrates that the DCCA has a very wide margin of appreciation and is always entitled to require a full-form notification.

Section 12c of the Competition Act provides that the authorities shall approve a merger that will “not significantly impede effective competition, in particular due to the creation or strengthening of a dominant position”. However, the authorities must approve the merger if the merging parties offer commitments that solve the problems identified by the authorities.

When assessing a merger, the authorities will apply the same tests as the European Commission (ie, the SIEC test under EUMR Article 2(2)), where the Commission’s decisions and the relevant case law from the European courts will be applied. The Commission’s guidelines on the assessment of horizontal and non-horizontal mergers also provide an important contribution to the interpretation of the authorities’ merger assessments.

When the authorities assess whether a merger will significantly impede effective competition, they will, inter alia, consider whether the merger will create or strengthen a dominant position. As part of the authorities’ assessment of the creation or strengthening of a dominant position, they will, inter alia, look at market shares and other aspects that may affect competition, such as the presence of actual or potential competitors, as well as buyer power.

The DCCA notes in its guidance paper that a merger may significantly impede effective competition even if no dominant position is created or strengthened. For instance, this may be the case in relation to vertical mergers, or in relation to mergers in oligopolistic markets. The DCCA also examines the ancillary restraints on the undertakings concerned. Restraints will only be allowed if they are necessary and proportionate to effectuate the merger.

According to Section 5a of the Competition Act, the relevant market is determined based on studies of demand and supply substitution. 

The DCCA investigates demand substitution by identifying products that consumers consider to be substitutable for the products of the undertaking concerned – ie, products that consumers would likely choose over products from the undertaking concerned in the event of a small but significant and non-transitory increase in price (the SSNIP test). Furthermore, the DCCA tests whether other suppliers, in response to a small and non-transitory increase in the relative prices of the undertaking’s products, may in the short term reorganise their production to the relevant products and market them without significant additional costs or risks. 

The DCCA will consider the relevant market to be affected by the transaction if: 

  • in cases of horizontal overlap, the merging parties hold a combined market share of more than 15%; or
  • in cases of vertical overlap, the merging parties hold a combined market share of more than 25%. 

If the market share is below 15% in cases of horizontal overlap and 25% in cases of vertical overlap, the merger is – on the face of it – considered unproblematic and may be notified following a simplified procedure.

The authorities often rely on case law from other jurisdictions and particularly the case law of the European Commission, but they may also include case law from the National Competition Authorities of other EU member states.

The DCCA will investigate the same competition concerns as the European Commission, including unilateral effects, coordinated effects, conglomerate or portfolio effects, vertical concerns, and elimination of potential competition.

The DCCA notes in its guidance paper that a merger may reduce effective competition even if no dominant position is created or strengthened. For instance, this may be the case in relation to vertical mergers, or in relation to mergers in oligopolistic markets.

While the DCCA may take economic efficiencies into account, it does not ex officio consider economic efficiencies when it receives a merger notification. On the contrary, it is up to the parties to identify economic efficiencies; the DCCA will require the parties to substantiate such claims with, inter alia, economic expertise – and the burden of proof is in general high. In practice, economic efficiencies mainly play a role in complex mergers, and they will often be discussed in Phase II of the merger procedure.

The DCCA generally only takes competition concerns into account in the review process, and the Competition Act does not expressly permit the DCCA to take non-competition factors into account. Thus, in general, non-competition concerns have not played a significant role to date in Danish merger control, if any.

In accordance with the rules on anti-competitive agreements, the DCCA will examine whether a joint venture has the co-ordination of behaviour between parent companies as its object or effect.

In practice, if the DCCA finds that a merger may significantly impede effective competition, it is up to the parties to propose structural or behavioural remedies to mitigate the DCCA’s concerns. If the DCCA does not find that the remedies solve the competition concerns, the merger will be prohibited.

Examples of Authority Interference

Since the introduction of merger control in Denmark in 2000, only one merger has been prohibited: the 2008 Lemvigh Müller/A&O Johansen merger.

However, some merger notifications have been withdrawn by the parties themselves before the Council has made a decision, such as the JP/Politiken/Børnsen case from 2016 and the Metro Cash & Carry case from 2014.

Most recently, in June 2020, HusCompagniet and eurodan-huse A/S withdrew a notification of a merger in which HusCompagniet was to take over 100% of the shares in eurodan-huse A/S. Both HusCompagniet and eurodan-huse A/S are construction companies whose main activities consist of designing, building and selling type houses, including detached and terraced houses, to primarily private customers. The DCCA undertook thorough market investigations, including hearings of customers, suppliers and competitors. In addition, the DCCA conducted a number of economic analyses.

The DCCA’s investigations indicated that the merger could harm competition and lead to higher prices for newly built type houses. Before the Council could make a decision on whether to approve of the merger, the parties chose to withdraw the merger notification submitted in 2019. The merger will thus not be completed. 

If a merger gives rise to concerns, the parties may propose remedies in order to obtain the DCCA’s approval. Usually, such commitments will be discussed and agreed upon in Phase II. 

According to the Competition Act, remedies may include:

  • divestiture of a company, parts of a company, assets or other owner interests;
  • granting third parties access to the merged entity’s technology, production facilities, distribution facilities or similar facilities; or
  • other measures that may promote efficient competition.

However, this list is non-exhaustive.

Remedies proposed by the parties must eliminate competition concerns and be complete and effective in every respect. The parties must explain in detail how to implement the proposed remedies, and how the proposed remedies will solve the competition concerns. The proposed remedies must be binding and commit the parties to act or omit to act in a particular way.

If the parties fail to comply with the remedies, the DCCA may revoke its approval or impose fines on the parties.

There are no requirements as regard the format of remedies proposals. However, in June 2018, the DCCA issued two templates, including model texts for divestiture commitments and trustee mandates. 

In Denmark, remedies are not used to address non-competition issues.

The DCCA has historically favoured structural remedies over behavioural remedies. There are difficulties linked with controlling a merged entity’s compliance with behavioural remedies, and the competition authorities may deploy substantial resources when reassessing behavioural remedies in light of new market situations. Consistent with this approach, in the DCCA’s recent publication regarding guidelines on remedies from August 2020, the DCCA states that the parties should consider structural remedies before behavioural remedies as the DCCA usually prefers structural remedies over behavioural ones.

The SE/Eniig Case

Despite a preference for structural remedies, the DCCA will also accept behavioural remedies where appropriate. This was the case in the SE/Eniig case from 2019 where the two energy companies, SE A.m.b.a. and Eniig, merged into the joint company Nordlys. In the assessment of the merger, the DCCA considered the parties’ activities to overlap in nine markets in Denmark, and, inter alia, that the merger posed a risk of input foreclosure towards service providers using the fibre network. SE and Eniig met the concerns of the DCCA by offering four behavioural remedies:

  • to ensure the opening of Eniig's fibre optic infrastructure and offer wholesale internet access service to other service providers on reasonable and non-discriminatory terms, making it possible for customers to choose between several providers;
  • to offer access to the fibre network on commercial, fair and non-discriminating terms;
  • to set up Chinese walls between Nordlys and OpenNet (a wholesale company, owned by Eniig, through which Danish fibre-companies can hire their fibre network to service providers); and
  • further initiatives which are kept confidential.

As a consequence of the proposed commitments, the DCCA approved the merger in Phase II.

The Tryg/Alka Case

In the Tryg/Alka case, the Council found that the merger between the two insurance companies would significantly impede competition in the market for property and casualty insurance (non-life insurance) for private consumers. In order to address the concerns raised by the Council and obtain an approval of the merger, Tryg offered three behavioural remedies for a duration of five years:

  • to terminate exclusivity clauses in some of the partnership agreements entered into with Alka;
  • to refrain from charging customers a fee when terminating their private insurance policies; and
  • to annually pay DKK5 million to Forsikringsguiden (an independent insurance and price comparison website).

Orifarm/Takeda Case

In a very recent case from March 2021, the DCCA required four different remedies of both structural and behavioural character in order to approve the merger. The merger was an international merger in which the pharmaceutical company Orifarm acquired a portfolio of 50 medicines and 43 different supplements and herbal remedies from the Japanese company, Takada. Due to, inter alia, the potential impediments of competition in different national markets, the merger was taken under a Phase II review, and approved with remedies, including the divestment of:

  • seven different generic medicines;
  • five marketing authorisations for imported medicines;
  • an over-the-counter product named "Klarigen"; and
  • as a behavioural measure, it was required that Orifarm joined price cap agreements made by the Danish Pharmaceutical Industry Association (LIF).

SEAS-NVE/Ørsted

The SEAS-NVE/Ørsted case from 2020 concerned two of the largest energy companies in Denmark in which SEAS-NVE would acquire several of the B2C companies in the Ørsted group. In its assessment, the DCC applied various economic tools, and found, inter alia, that the post-merger market shares were high, that the parties were each other’s biggest competitors, and that no other market players exerted a resemblant competitive pressure on the market. In order to address the concerns of the DCC, a rather straightforward structural remedy was proposed: SEAS-NVE would divest the 107.000 natural gas customers that it received from Ørsted B2C. The DCC accepted this remedy and approved the merger in Phase I. 

The DCCA’s guidance paper on merger filings encourages parties to consider remedies as early as possible if there is a risk that the concentration may give rise to competition concerns.

Remedies may be proposed in both Phase I and Phase II. If remedies are proposed later than 20 working days before the expiry of Phase II, Phase II will automatically be prolonged by 20 working days. 

It is the responsibility of the parties to propose remedies, but it may be possible – during the merger process – to arrange meetings with the DCCA and receive input on what types of remedies may be deemed suitable. In practice, remedies will often be proposed in writing by the parties and then discussed at a meeting between the parties and the DCCA. The DCCA cannot impose remedies not agreed to by the parties.

In August 2020, the DCCA released guidelines on remedies with recommendations on how to produce a streamlined and successful remedy. The main principles are to:

  • make proactive preparations regarding the need for remedies and their potential design;
  • use early dialogue to help the process;
  • seek thorough understanding of the competition issue at hand though communication with the DCCA, before proposing any remedies;
  • make remedies as clear and precise as possible;
  • ensure sufficient communication and collaboration between legal advisors and the merging parties, as this creates the best results; and
  • consider structural remedies before behavioural remedies as the DCCA usually prefers structural remedies over behavioural ones.

Changing/Cancelling Remedies

If a merger has been approved with remedies, these remedies may be changed or cancelled at a later stage if the circumstances have changed significantly.

This was the case for the Danish electricity producer, Dong Energy A/S. As part of a merger in 2004, Dong Energy had committed to selling 600MW of virtual electricity capacity per year to address the DCCA’s concerns that Dong Energy might be able to control prices on the Danish electricity market. Since 2004, the competition had increased on the Danish electricity market due to market entries, a significant increase in the installed wind capacity, increased transmission capacity with neighbouring countries and regulatory changes. Dong Energy applied for a cancellation of the commitments, which the DCCA allowed.

By contrast, in the Nykredit case, the Danish Mortgage company, Nykredit Realkredit A/S, did not succeed in cancelling remedies. In 2003, Nykredit had agreed to a remedy that limited its fees on mortgage loans to consumers to 0.5% of the mortgage loan value. In light of declining interest and increased capital requirements, Nykredit tried to have the remedy amended or cancelled. However, in June 2014 the Supreme Court found that the remedy was not limited in time, and hence did uphold the remedy. The case shows that forcing the cancellation of a remedy through the courts may be difficult.

The DCCA may condition the approval upon the agreed remedies in order to ensure that the remedies are complied with. The Competition Act does not regulate when remedies should be complied with. In practice, the question will depend on the type of remedy (structural or behavioural) and the decision of the DCCA in the individual case.

According to the Competition Act, the DCCA may issue orders and fines to ensure that remedies are complied with.

Once a merger is approved or prohibited, a formal decision is issued to the parties. Furthermore, the decision is made public on the DCCA’s webpage. Usually, it is possible for the parties to read the public version and provide comments regarding confidentiality before it is made public.

There are no recent examples of remedies in foreign-to-foreign transactions. 

As with EU notifications, ancillary restraints are automatically covered by Danish merger approvals. The DCCA does not, of its own accord, deal with ancillary restraints to mergers. The parties must determine whether there are any ancillary restraints requiring evaluation by the DCCA.

The Commission’s guidelines and practice apply.

The DCCA decides whether it is necessary to conduct a market hearing. In transactions notified under the simplified procedure, the DCCA often grants an approval without conducting a market hearing. However, most full-form notifications involve some kind of market hearing.

If a market hearing is conducted, the DCCA will hear suppliers, competitors, customers and trade organisations. Any comments that indicate competition concerns will typically be presented to the parties (in anonymised form), who will need to address these issues.

No third party has a right to appeal merger decisions to the Tribunal. However, if sufficient legal interest is proved, a third party may bring a Council decision directly before the Danish courts.

The DCCA regularly conducts public hearings on its website, also in simplified notifications with only small overlaps between the parties. The DCCA will typically market test remedies proposed by the parties and will normally contact third parties directly with a request to provide comments.

In some instances, input from third parties has led the DCCA to request a full-form notification. This was the case in Arbejdsmarkedets Tillægspension/Danica Ejendomsselskab ApS, where the parties originally submitted a simplified notification.

The DCCA informed competitors and customers of the merger and, based on their comments, required the parties to submit a full-form notification, resulting in a filing fee of DKK1.5 million instead of DKK50,000. Eventually, the DCCA approved the merger following a simplified procedure. The same scenario appeared in the recent case Dansk Supermarked/Wupti.com referred to in 3.1 Deadlines for Notification.

The DCCA usually issues a short press release, explaining that it has received a notification and that comments may be submitted to the DCCA. The decision will be made public once the transaction is approved/prohibited.

Commercial information may be kept confidential. In order to ensure this, the DCCA will normally provide the parties with a draft for review before the document is made public.

The DCCA co-operates with competition authorities in other EU and EEA jurisdictions – in relation to both general policy matters and specific, cross-border transactions. The DCCA’s co-operation with the competition authorities in the other Nordic countries, ie, Finland, the Faroe Islands, Greenland, Iceland, Norway and Sweden, is based on signed co-operation agreements. The DCCA further co-operates with other European competition authorities and the European Commission as part of the European Competition Network (ECN).

Moreover, the DCCA is a member of the International Competition Network (ICN) and participates in the OECD’s Competition Committee and in the WTO’s working group on trade and competition.

The Competition Act regulates the sharing of information with other national competition authorities. Furthermore, national competition authorities may share information with each other, according to the EU rules on co-operation.

Due to the implementation of the ECN+ Directive, competition authorities have a duty to actively assist other competition authorities within the Union, ie, by conducting investigations on their behalf.

The notifying parties have a right to appeal the Council’s merger decisions to the Tribunal, and the Tribunal’s decisions may, in turn, be appealed to the ordinary courts.

An appeal to the Tribunal must be filed no later than four weeks after the Council has made its decision. No merger decisions have yet been appealed. However, an appeal will likely run for three to six months. 

No third party has the right to appeal merger decisions to the Tribunal. However, if sufficient legal interest is proved, a third party may bring a Council decision directly before the Danish courts.

On 1 January 2020, an amendment to the executive order on the calculation of turnover entered into force, aligning the Danish rules with those of the EU. The amendment implies minor technical changes regarding the calculation of turnover in Denmark and on how to determine the participating undertakings in a merger.

Moreover, on 1 July 2020, an amended executive order on the notification of mergers entered into force. The primary changes entail that the parties are asked to describe the contrafactual scenario of the merger. Further, the parties must disclose information on all potential affected markets, including potential, plausible wider or narrower market definitions. The parties are also asked to provide data illustrating demand-side substitution and supply-side substitution, if available. Lastly, the types of documents that the parties are asked to submit along with the merger notification have been specified.

With the implementation of the ECN+ Directive, a comprehensive amendment to the Danish Competition Act entered into force 4 March 2021. Of most significance is the new civil fine regime, which entails that the competition authorities – going forward – may request the courts to impose fines on undertakings for intentional or negligent infringements of the competition rules in civil proceedings (in regard of merger control, such fines may be imposed for failure to notify a merger or for implementing a merger prior to approval). Previously, fines have been imposed solely in criminal proceedings led by the State Prosecutor. Other changes include an alignment with EU competition law of parental company liability and extended investigatory powers for the competition authorities in terms of dawn raids and interviews.

New National Security and FDI Act

A new act on national security and foreign direct investments (FDI’s) enters into force on the 1 July 2021 (covering transactions completed/closed after 31 August 2021). The Act enacts two different screening mechanisms, which are overseen by the Danish Business Authority. One is a sector-specific mechanism with a mandatory notification obligation specifying, that when foreign investors invest in particularly sensitive sectors and activities, such as defence or critical infrastructures, the investor must beforehand apply the Danish Business Authority for permission to invest. The other is a general (cross-sector) mechanism with a voluntary notification option. Although this legislation is not overseen by, and thus does not directly implicate, the DCCA, it still affects the outlying framework surrounding the Danish merger system. 

Failure to Notify

On 7 June 2019, the gas station company Circle K Denmark A/S accepted a fine of DKK6 million for failure to notify the acquisition of 72 service stations within the Shell trademark from 12 individual lessees. Further, in 2017, the State Prosecutor fined each of the two Danish utility companies, SEAS-NVE Holding A/S and Syd Energi Holding A/S, DKK4 million for failure to notify the joint acquisition of ChoosEV (which delivers charging solutions to electric cars) and for implementing the merger before the DCCA’s approval. The parties had themselves informed the DCCA of their failure to notify the merger, which was reflected in the size of the fine. The cases show that failure to notify a merger is deemed to be a criminal offence under Danish competition law.

Duty of Disclosure

In April 2017, a district court fined Metro Cash & Carry Danmark DKK50,000 for failing to provide the DCCA with all information relevant for its review of the contemplated merger with Euro Cater. The case exemplifies the importance of complying with the duty of disclosure at any stage of the notification proceedings before the DCCA.

Remedies

The recent enforcement record of cases in which the competition authorities have ordered remedies, includes the cases from 2018 and 2019, where the Council conditioned approval of mergers between GlobalConnect/Nianet, Tryg/Alka and SE/Eniig upon remedies proposed by the parties. In 2020, the DCCA required remedies in relation to only one merger: the merger between two of the largest energy companies in Denmark, SEAS-NVE Holding A/S’ acquisition of parts of the Ørsted A/S group. In 2021, the DCCA has so far required remedies in relation to the case of two pharmaceutical companies, Orifarm and Takeda. The four cases are all described in 5.4 Typical Remedies.

The DCCA is more frequently subjecting merger cases to econometric analysis (using, for example, UPP and conversion ratios), and it is becoming increasingly difficult to get approval for more complex mergers, even if the parties offer remedies. As a consequence, several merger notifications have been withdrawn in recent years because no agreement could be reached with the authorities.

In May 2019, the DCCA established the “Centre for Digital Platforms” as a separate entity within the authority with the intent of strengthening the enforcement of competition law when applied to digital platforms. The centre analyses digital platforms to uncover how they affect competition, the conditions of growth for smaller undertakings and the situations of consumers. The centre will also serve as a junction for the DCCA’s analysis and use of big data, machine learning, AI and algorithms.

In September 2020, the Nordic competition authorities from Denmark, Sweden, Finland, Iceland and Norway released a joint memorandum on the Nordic perspective on competition in digital markets. The memorandum notes the challenge of large digital platforms leveraging their market power to increasingly expand both vertically and horizontally, for example, by the takeover and acquisition of smaller start-ups. Further, the high-speed nature and dynamic evolution of digital markets makes it more difficult to predict the counterfactual scenarios, thus forcing the competition authorities to predict counterfactual scenarios with a higher degree of uncertainty than usual.

The memorandum recommends that further guidelines be developed on how to design data-sharing remedies in relation to problematic mergers. Additionally, it recommends that more guidance be developed on theories of harm in relation to big tech mergers, so that authorities can better predict counterfactual scenarios. It is highlighted that many acquisitions of smaller start-ups often will not be notified under the standard notification thresholds based on turnover rates, which in some cases is problematic for competition.

Bruun & Hjejle

Nørregade 21
1165 Copenhagen K
Denmark

+45 33 34 50 00

+45 33 34 50 50

fab@bruunhjejle.dk www.bruunhjejle.dk
Author Business Card

Law and Practice

Authors



Bruun & Hjejle has a merger control team that includes three partners, six attorneys and three assistant attorneys. The office is located in Copenhagen, Denmark, but often cross-border mergers are handled in co-operation with a network of law firms in other jurisdictions. Bruun & Hjejle has a leading competition practice covering all aspects of Danish and EU competition law, including merger control and cartel investigations. Examples of significant clients include Danske Bank A/S (a leading Danish bank), Nets Denmark A/S (a leading provider of payment solutions, information services and digital security solutions), HMN Naturgas I/S (a company within gas distribution, biogas facilities and gas fuelling stations), TV2/Danmark A/S (a leading broadcaster and media conglomerate), FIH Erhvervsbank (a financial institution), Ørsted A/S (the former Dong Energy A/S), CD Pharma AB (a Swedish pharma distributor), and Clear Channel International (an out-of-home media and advertising company).

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.