DENMARK: An Introduction to Competition/European Law

Current Economic Conditions Affecting Competition  

At the beginning of 2022, the Danish market was still feeling the momentum of the general upswing following the weathering of the COVID-19 pandemic. Even after the outbreak of war in Ukraine, the economy remained stable since many consumers had built up significant savings and companies continued to receive state aid. However, during the course of 2022, the war in Ukraine has given rise to uncertainties around a possible recession and caused import shortages, resulting in fewer investments and a general reduction in expenditure in Denmark. During the second half of 2022, fuel was added to the fire as energy prices soared, and the market responded with a rapid increase in the prices of consumer goods and higher interest rates. In October 2022, the Danish inflation rate was at its highest since 1982. It is uncertain whether the economy will be tamed or if we will indeed see a recession in 2023. What we do know is that, towards the end of 2022 and as of the beginning of 2023, the market has experienced a slight decrease in inflation rates and a slight increase in investment, giving cause for optimism.

Activity, Trends and Developments 

Despite the market uncertainties and general fall in investments, the Danish Competition and Consumer Authority (DCCA) has seen a record-setting number of merger notifications. In 2022, the DCCA had 77 merger notifications under review up against 67 merger notifications in 2021, 34 notifications in 2020 and 48 notifications in 2019.

In contrast to the high levels of activity within merger control, the Danish competition authorities’ enforcement activity has been limited, resulting in fewer but more substantial cases. In 2022, the Danish competition authorities have issued only a handful of decisions on infringements of Section 6 and 11 of the Danish Competition Act – corresponding to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). The DCCA’s sudden increase in workload on mergers throughout the last two years has likely had an impact on the limited enforcement activity. Therefore, if the M&A market cools down substantially during 2023, we expect the DCCA to pick up on infringement cases.

Zooming in on enforcement activity, we see a continued tendency in the Danish competition authorities’ approach of addressing more and more cases as restriction by object infringements rather than restriction by effect, for example by seemingly expanding the scope of what actions can be considered restrictions by object. An example of this is the first major case in the EU on dual distribution involving the Danish retailer of men’s wear, Kaufmann, represented by Bruun & Hjejle, and Kaufmann’s supplier, Hugo Boss, a German manufacturer and retailer of clothing. In the case from June 2020, the Danish Competition Council deemed that the exchange of information on prices, rebates, etc, between Kauffmann and Hugo Boss constituted a restriction by object subject to the prohibition in Section 6(1) of the Danish Competition Act and TFEU Article 101(1). The Competition Council’s decision has subsequently been upheld by the Danish Competition Appeals Tribunal and the case is currently pending before the Danish Maritime and Commercial Court. A judgment is expected in 2024 at the earliest.

New Legislation  

Amendment of the Danish Competition Act 

In the wake of discussions at EU-level on how to deal with high impact mergers not meeting merger notification thresholds, the Danish parliament has been considering a modification of the merger control regime. The current rules on notification of mergers focus exclusively on turnover-based thresholds and thus faces the same challenges as the EU merger control regime: if the turnover thresholds are not met, there is no obligation to notify. Consequently, mergers with potential of significantly impacting competition, but involving companies with low turnover, escape scrutiny from the DCCA. The current Danish merger control regime is not equipped to deal with so-called “killer acquisitions” in which companies with significant market power acquire up-and-coming competitors (eg, innovative start-ups with competitive and commercial potential such as through IP rights, substantial collections of data, or a high number of digital users) with no other purpose than to squeeze out and eliminate the competitor. According to the Danish government’s legislative programme of 2022/2023, we can expect an amendment of the Danish Competition Act in 2023 inter alia regarding “requirements of notification of certain mergers falling below the notification thresholds” (our translation). How the Danish legislatures will more precisely address this rather complicated issue remains unknown, as the text of the legislative proposal has not yet been published. However, the DCCA has previously announced that it is looking to the approach of the European Commission as well as neighbouring countries for a solution on this issue. Sweden and Norway have implemented a referral mechanism similar to Article 22 of the EU Merger Regulation, allowing the European Commission, on a discretionary basis, to call in specific mergers for review, which would otherwise fall below the notification thresholds. Accordingly, it would not be surprising if the announced amendment of the competition act provides the DCCA will a similar tool.

Besides an amendment to the merger notification rules, the announced legislative proposal is stated to introduce “a possibility for the competition authorities to commence a market investigation of a market or conduct” with the “purpose of giving further tools to the competition authorities to prevent restrictions of competition” (our translations). This indicated amendment is in line with a tendency of a continuous expansion and reinforcement of the competition authorities’ investigation powers.

FDI 

Related to the competition rules is the Danish Act on the Screening of Foreign Direct Investments (FDI), which celebrated its first anniversary in September 2022. Even though the act has been implemented for more than a year, it is obvious that the administration of the rules is still evolving. The Danish Business Authority’s level of experience with the regime, in combination with the heavy confidentiality surrounding the review process and decision-making (ie, no published caselaw whatsoever), provides for a ruleset exceptionally difficult to navigate for investors. We expect the Danish Business Authority to be looking to neighbouring countries with more mature FDI regimes, such as Germany, which implemented its regulation on FDI in 2013.

On a more positive note, in our experience, investors are increasingly becoming aware of the rules’ scope and application, and M&A transactions now almost always involve a screening for an obligation to file under the FDI-regime alongside a merger screening.