The European Antitrust Review 2014 • Section 3: Country chapters
Danish competition law is based on EU competition law, and to a large extent the Danish rules are similar to the EU rules. The objective of this article is to give an introduction to Danish competition law, including the rules on state aid. The focus will be on areas of the law where the Danish rules differ from the EU rules, as well as recent developments in Denmark. The Danish rules on merger control are described in Global Competition Review’s Getting The Deal Through – Merger Control.
The article will provide an overview on the following areas of the law:
- unilateral conduct;
- state aid;
- new rules on sanctions; and
- damages for breach of competition rules.
The structure of the prohibition on anti-competitive agreements in the Danish Competition Act is similar to the EU structure. Section 6 contains the general prohibition and is comparable to article 101(1) TFEU, whereas section 8 is comparable to article 101(3) TFEU. Practice from the Commission and the ECJ is used when interpreting the prohibition on anti-competitive agreements in the Competition Act. The EU block exemptions have been implemented nationally in Denmark, and agreements subject to the Competition Act may thus benefit from the block exemptions.
De minimis and assessment by the competition authorities
Section 7 of the Danish Competition Act provides a de minimis exemption according to which the rules on anti-competitive agreements do not apply to agreements or concerted practices between undertakings which have:
- a combined yearly turnover of less than 1 billion kroner and a combined market share of less than 10 per cent for the relevant goods or services; or
- a combined yearly turnover of less than 150 million kroner.
The Danish de minimis exemption does not, however, apply to agreements considered cartel agreements, ie, the rule does not apply to agreements relating to price coordination, production or sales quotas, market sharing or bid rigging. Also, the Danish de minimis exemption does not apply to agreements that may affect trade between member states, because such agreements are subject to article 101 TFEU and, if applicable, the EU de minimis rule.
The Danish Competition Act provides in principle undertakings with a possibility to have an agreement assessed by the Danish Competition Council (the Council). If the Council approves of the agreement, the undertaking receives a statement from the Council that the agreement does not violate section 6 of the Danish Competition Act, similar to the previous EU system. However, in practice the possibility to have an agreement assessed is only used very rarely.
In recent years, the Danish competition authorities have paid special attention to trade organisations’ provision of information and recommendations to their members.
For instance, the Council found in the case Danske Vognmænd that it was a violation of the Danish Competition Act that a trade organisation had recommended its members to pass on oil price increases to end-customers, and the decision was later upheld by the Supreme Court in 2010. Similarly, a trade organisation in the transport sector, ITD, had provided its members with a cost calculation model where some of the cost figures had already been filled in by the trade organisation. In 2009, the Danish Competition Appeals Tribunal (the Tribunal) found that the model had the object of restricting competition.
Further, the Danish competition authorities have focused on information exchange through trade organisations. In their guidelines, the Danish competition authorities have stated that it is relevant whether the information provided to the members is aggregated, or whether data for individual competitors can be identified. Collusion will be less likely if only aggregated data is provided. Information of a less recent date is also less likely to have an impact on competition than information of a more recent date. Finally, the availability of the information is taken into account, and sharing of publicly available information is thus less likely to violate competition rules.
Anti-competitive unilateral conduct is regulated in section 11 of the Danish Competition Act. The section corresponds to article 102 TFEU and is interpreted in accordance with practice from the Commission and the ECJ. If a certain practice affects trade between member states within the EU, the national provision is applied together with article 102 TFEU.
In recent years, there has been little enforcement on unilateral conduct. However, two cases – both relating to the Danish postal carrier Post Danmark A/S (Post Danmark) – provide insight into developments in the area of rebates and selective pricing.
The Magazine Mail case
In the Magazine Mail case, the Council found in 2010 that Post Danmark had abused its dominant position on the market for magazine mail. According to the Council, the abuse consisted of: the granting of individual target rebates to four large customers; and the general application of a quantity rebate system with a retroactive element. Further, it follows from the decision that the competition authorities decided not to undertake an investigation of discrimination aspects with reference to the resources needed for such an investigation.
The decision was appealed to the Tribunal, and in December 2011 the Tribunal upheld the first part of the Council’s decision. However, the Tribunal struck down the second part regarding the quantity rebate system. The Tribunal agreed with the Council that the rebate system contained a retroactive element, but according to the Tribunal efficiencies could justify the retroactive element. Hence, the Tribunal remitted the case to the Council.
The Unaddressed Mail case
The Unaddressed Mail case was about the fully liberalised Danish market for the distribution of unaddressed mail (ie, newspapers, brochures, etc), in which Post Danmark held a dominant position in the years 2003-2004. At the same time, Post Danmark was a legal monopolist in the market for the delivery of addressed letters and small parcels not exceeding a certain weight. The legal monopoly entailed a universal obligation to provide distribution of letters and parcels nationwide. Therefore, Post Danmark had a nationwide distribution network, which could also be used on the liberalised market for unaddressed mail.
Post Danmark’s only real competitor on the market for unaddressed mail was Forbruger-Kontakt A/S (FK), which was the only other undertaking in the market with a nationwide distribution network. The challenge for FK, however, was that FK had to keep up a certain customer volume in order to maintain its nationwide distribution network.
In 2003, Post Danmark took over three major customers (Spar, SuperBest and Coop) from FK by offering them rates lower than those charged to Post Danmark’s other customers. FK complained to the competition authorities, and the Council found that Post Danmark’s behaviour amounted to selective pricing in violation of section 11 of the Danish Competition Act and article 102 TFEU.
Post Danmark appealed the decision, and the appeal made its way to the Supreme Court. The Supreme Court referred two preliminary questions to the ECJ on the interpretation of article 102, which led to the landmark judgment in case C-209/10, Post Danmark.
Paragraph 36 of the preliminary judgment clearly states that the prices offered to the customers Spar and SuperBest, which covered Post Danmark’s average total costs, did not constitute anti-competitive behaviour. Therefore, the remaining procedure before the Supreme Court concerned only the price offered to Coop. The price to Coop did not cover Post Danmark’s average total costs, but was, however, found to cover the great bulk of the costs attributable to the distribution of unaddressed mail (the incremental costs).
The Supreme Court gave judgment on 15 February 2013 and found that Post Danmark’s pricing behaviour towards Coop did not constitute abuse of dominance. The Supreme Court applied the directions laid down by the ECJ and found that the Council had not proved that the concerned form of pricing behaviour (below average total costs, but above average incremental costs) produced an actual or likely exclusionary effect to the detriment of competition. In this regard, the Supreme Court highlighted that:
- Post Danmark’s average prices to all customers covered Post Danmark’s average total costs;
- Post Danmark’s distribution agreements were terminable subject to a notice of one or three months; and
- it was possible for a competitor as efficient as Post Danmark to compete with Post Danmark’s prices.
The Danish rules on state aid
Section 11a of the Danish Competition Act contains the Danish rules on state aid. According to this provision, the Council may issue orders for the termination or repayment of aid granted from public funds to support certain forms of commercial activity in cases where: the direct or indirect object or effect of the aid is distortion of competition; and the aid is not lawful according to public regulation.
Except for the fact that the provision is only applied if the aid is not lawful according to public regulation, section 11a of the Danish Competition Act is similar to – and interpreted in accordance with – the corresponding provisions of the TFEU.
However, it is worth noting that the Danish rules on state aid do not entail any block exemptions similar to those issued by the Commission as regards the application of articles 107 and 108 TFEU to certain categories of state aid. Thus, the application of section 11a of the Danish Competition Act does not require the aid to exceed a certain de minimis ceiling, and even aid amounting to rather limited sums may be caught by the provision.
The Council may refrain from investigating a case under section 11a of the Danish Competition Act if the aid scheme at issue affects trade between member states of the EU. This procedure can be expected if the aid scheme at issue is being or has been assessed by the Commission under articles 107 and 108 TFEU, or if the Commission intends to do so in a somewhat near future.
The Hellers case
A recent section 11a case illustrates the point that the absence of a de minimis ceiling may entail that even rather limited sums are caught by the provision.
The case was about the small-sized company Hellers Yatchtværft ApS (Hellers), which owns a marine equipment shop. Hellers had rented a property in the harbour of Kastrup near Copenhagen from Tårnby Kommune (the Municipality). The rental period began in March 2004, and in June 2010 the Council found the rent charged by the Municipality to be lower than the market rent, thus constituting illegal state aid to Hellers. The Council found the amount of the aid to be approx. 800,000 kroner including interest and ordered Hellers to repay 10 per cent of the aid (80,000 kroner) to the Municipality.
Hellers appealed the decision to the Tribunal. The Tribunal found that the aid constituted illegal state aid according to section 11a, and that the ordered amount of repayment was not enough to secure effective competition. The Tribunal, therefore, remitted the case to the Council. After having reviewed the case, the Council decided on 22 June 2011 that the state aid amounted to 782,333 kroner including interest and ordered Hellers to repay the full amount of the aid. This decision was upheld by the Tribunal on 13 January 2012. However, by judgment of 18 June 2013 the Maritime and Commercial Court annulled the Tribunal’s decision on grounds that the market rent charged by the Municipality was not lower than the market rent and that the rent, therefore, did not constitute state aid to Hellers.
New rules on sanctions
In December 2012, the Danish Parliament passed a new act on sanctions for competition law violations. The object of the new act was to increase the fines for companies and individuals and to introduce custodial sentences in cartel cases.
The change entered into force on 1 March 2013; the rules will apply both to incidents after 1 March 2013 and to incidents commenced before 1 March 2013 and continuing after this date.
With regard to the increased fines, the following table shows the changes from 1 March 2012:
Previous indicative level
New indicative level
Indicative level of fines for individuals
Restrictions of passive sales
Exclusive purchase obligation lasting more than 5 years
Up to 400,000 kroner
Up to 4 million kroner
Minimum 50,000 kroner
Resale price maintenance
Non-compete clauses in joint production agreement
400,000 kroner –
15 million kroner
4 million kroner – 20 million kroner
Minimum 100,000 kroner
Coordination of prices, production, customers or bids
Certain types of abuse of dominance
More than 15 million kroner
More than 20 million kroner
Minimum 200,000 kroner
In addition to increased fines, custodial sentences in cartel cases were introduced. Cartel agreements are punishable by imprisonment if the participation in the cartel was deliberate and if the offence is grievous judging by its scale and the adverse effects it is capable of causing. The maximum sentence is one and a half years of imprisonment. However, if there are aggravating circumstances, the penalty may be up to six years of imprisonment.
The custodial sentence is expected primarily to be directed towards involved members of the management and/or the responsible employees. The Danish public prosecutor for serious economic and international crime has unofficially announced that he will, in general, claim unconditional imprisonment in cartel cases, and that, in his view, the custodial sentence of up to one and a half years applies if the estimated total value of the crime (eg, a price-fixing cartel) is more than 10,000 kroner, and the custodial sentence of up to six years applies if the estimated value of the crime is more than 500,000 kroner. However, no cartel cases have been heard by the courts since the new act came into force, and it remains to be seen whether the courts will follow the views of the public prosecutor.
Since 2007, it has been possible to apply for leniency in Denmark. The Danish leniency regime is similar to that of the EU; the first undertaking to satisfy the criteria will obtain withdrawal of charges, and the subsequent leniency applicants may obtain a reduction of the fine. Similarly, if an individual fulfils the criteria for leniency, he or she may avoid custodial sentences or other types of punishment, whereas the subsequent leniency applicants may have their sentences reduced.
The criteria to satisfy in order to obtain withdrawal of charges are the following:
- the authorities are presented with new evidence enabling the authorities to conduct an investigation or to establish a cartel offence;
- the undertaking in question cooperates with the authorities throughout the processing of the case;
- the undertaking ends its participation in the cartel no later than at the time of applying for leniency; and
- the undertaking has not forced others to participate in the cartel.
The Danish leniency regime does not have a marker system like leniency regimes in some other countries. Accordingly, it is not possible for a leniency applicant to determine whether he is the first one to report the offence to the authorities.
If an undertaking has cooperated with one of its competitors – for instance in relation to R&D or production – there may be a risk that parts of the cooperation could infringe competition rules. This scenario is not new, but the question is if a wrong assessment of a clause in a horizontal cooperation agreement could lead to a custodial sentence being imposed.
First of all, the question is only relevant if the agreement between the two undertakings in some way harmonises prices or profit margins, limits production, or relates to market sharing or the coordination of bids. This is a precondition for the rules on custodial sentences to apply. However, in this case imprisonment could be a possible sanction if the violation is intentional and severe.
The requirement of intention is satisfied if the undertaking – or, rather, the management of the undertaking – intends to enter into the agreement, but it is not required that the management intends to violate competition rules. Accordingly, the requirement of intention will in most cases be satisfied.
The second requirement is that the violation must be severe. It is uncertain how this requirement shall be interpreted. It follows from the preparatory works that the severity requirement can be used by the courts as a sort of ‘safety valve’ enabling the courts to impose a fine – and not imprisonment – if a violation is less culpable. However, there is no guarantee that the courts will apply this interpretation, and the uncertainty is further aggravated by the fact that the danish public prosecutor for serious economic and international crime has the opinion that the severity requirement shall be interpreted quantitatively, and that an infringement above the value of 10,000 kroner shall be considered severe.
The conclusion is that it cannot be excluded that certain clauses in horizontal cooperation agreements which violate Danish competition rules could trigger a custodial sentence for involved members of the management. In addition, the fines for severe violations have been increased significantly. These factors entail that caution is recommended until case law in this field provides a clearer guidance.
Damages for breach of competition rules
The access to damages for loss as a result of breach of either Danish of EU competition rules is governed by the general rules on liability under Danish law. The Danish law on liability is primarily based on case law, and damages can only be attained if the plaintiff proves: negligence (culpa) or intent with the defendant; a causal and foreseeable loss; and absence of fault by the plaintiff.
To date, only a limited number of cases on damages for breach of competition law have been heard by the Danish courts, and most of these cases concern damages as a consequence of anti-competitive agreements.
The difficulties of determining the loss were at issue in a 2006 case about an electricity cartel. The municipality of Copenhagen claimed to have suffered loss as a consequence of a bid-rigging cartel for electricity works. The City Court of Gentofte agreed with the municipality that the standard of proof should be mitigated with regard to the loss. However, although the competition authorities had stated in press releases that the excess amounted to 20 per cent (320,000 kroner), the City Court found that the counterfactual situation without a cartel would most likely have resulted in a price which was only 50,000 kroner lower (3 per cent).
However, although the standard of proof may be mitigated, the plaintiff will need to prove an actual loss. In a case from 2008, Skandinavisk Motor Co (SMC), which produced spare parts for cars, had been found to have abused its dominant position by giving loyalty rebates on the market for Skoda spare parts. One of its competitors, TW Autodele (TWA), claimed damages, and TWA had based its claim on a discretionary assessment of its own market share and the defendant’s market share in absence of the abuse. The City Court of Glostrup found that the TWA’s loss was not substantiated with any actual data or calculations; there was no solid evidence suggesting that TWA’s market share, in the absence of the abuse, would have increased proportionately, and the case against SMC was dismissed.
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