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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 article will provide an overview on the following areas of the law:
- unilateral conduct;
- state aid;
- 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). The Danish de minimis exemption also does not apply to agreements that may affect trade between member states as such agreements are subject to article 101 TFEU and, if applicable, the EU de minimis rule.
In principle, the Danish Competition Act provides undertakings with a possibility to have an agreement assessed by the Danish Competition Council (the Council). If the Council approves 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.
The Danish Competition Authority recently announced that the Authority’s strategy from 2014 to 2016 will be to concentrate its efforts on certain markets and industries (during 2014, the Authority will conduct market analysis in the retail market, the broadband market, centralised procurement and payments service markets) and with a particular focus on possible cartels within the pharmaceutical and construction industries. The Authority has stated that a new IT solution will aid in the handling of large amounts of data serving as evidence.
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 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-consumers, and the decision was later upheld by the Supreme Court in 2010. Similarly, ITD, a trade organisation in the transport sector, 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 the sharing of publicly available information is thus less likely to violate competition rules.
In May 2013, the Council found parts of the ethical rules of the Danish Veterinary Association to be anti-competitive and ordered them revoked. More than 90 per cent of all veterinarians in Denmark are members of the association. The rules in question prevented veterinarians from trying to market their services to customers who had been referred to their clinic for special treatment of their animals thereby restricting the customers’ free choice of veterinarian. Another rule prevented the veterinarians for a period of six months from establishing a clinic within a range of 15 kilometres from a deceased colleague’s clinic before that clinic had been sold. Based on, inter alia, their content and the objectives pursued by them, the Council found that these rules had as their object or effect to restrict competition on the Danish veterinarian market.
In December 2013, the Danish Construction Association’s scaffold section undertook to cease informing its members of competitive bids when bidding on a project. Further, the Association more generally undertook not to directly or indirectly participate in or encourage the creation of a similar reporting scheme. The commitments were made binding by the Council. The scaffold section of the Association had practiced a so-called reporting scheme under which scaffolding companies were obliged to report to the Association prior to bidding on a project if the bid exceeded 50,000 kroner. This information was then circulated among the bidding members of the section by the Association.
In 2014, the Authority plans to publish Guidelines on information activities in trade organisations in order to provide an overview of the most important criteria for the Authority’s assessment of such cases.
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 in 2010, the Council found 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 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.
In a case from December 2013, the Tribunal found that Deutz AG had abused its dominant position through a refusal to supply and by entering into an anti-competitive agreement with its exclusive distributor in Denmark, Diesel Motor Nordic A/S, resulting in a restriction of parallel import and passive sales. The Tribunal found that Deutz had infringed Danish and EU competition law by refusing to supply spare parts to other suppliers and by an agreement with Diesel Motor Nordic preventing parallel imports and passive sale of spare parts for IC3-trains owned by the Danish State Railways (DSB). Diesel Motor Nordic was likewise found to have infringed Danish and EU competition law by entering into the agreement. In 2012, following a failed attempt to reach an agreement of supply of spare parts with Deutz and Diesel Motor Nordic, DSB entered into an agreement with a consortium of four smaller companies. However, the consortium could not meet the demand as Deutz refused to supply spare parts that could only be sourced through Deutz. Consequently, DSB was forced to buy the spare parts at a higher price from Diesel Motor Nordic. Following the ruling of the Tribunal, the Authority reported Deutz and Diesel Motor Nordic to the police.
A recent case from May 2014 involves Nets, a Nordic provider of payments, card and information services. The Authority, which conducted a dawn raid of Nets in 2012, had concerns that Nets, acting on a upstream market for processing services, and a Nets subsidiary (Teller) active on a downstream market for acquiring international payment cards, were involved in illegal margin squeeze on the market for processing of payment card transactions through Nets’ infrastructure (upstream) and Teller’s pricing in the acquiring market (downstream). In addition, the Authority suspected that Nets had used excessive prices. The case was settled with commitments by Nets made binding by the Council. The commitments include:
- the introduction of fair, reasonable and non-discriminatory terms for companies acquiring access to Nets’ infrastructure;
- a significant decrease in the average price charged for use of the infrastructure;
- the separation of accounts for Nets’ infrastructural services and processing services respectively; and
- an extraordinary cost-free termination right to all of Teller’s customers during the first three months of the commitments.
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 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 concerned 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 approximately 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, which 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. Having reviewed the case, the Council decided on 22 June 2011 that the state aid amounted to 782,000 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.
Rules on sanctions
In December 2012, the Danish parliament passed a new act on sanctions for competition law violations. The object of the 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 to incidents after 1 March 2013 and to incidents commenced before 1 March 2013 and continuing after this date.
As regards the increased fines, the following table shows the changes from 1 March 2012:
|Gravity||Examples||Previous indicative level||New indicative level||Indicative level of fines for individuals|
|Less grave||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|
|Grave||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|
|Very grave||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|
Most cases have concerned violations committed prior to the change in legislation and the increased levels of fines have not yet been put to use. In a single case in 2013 regarding violations committed after
1 March 2013, a manufacturer, Coss ApS, was fined 100,000 kroner by the Authority for resale price maintenance. The fine was lower than the indicative levels and was set taking into account the manufacturers annual turnover, the short time span of the violation, the fact that it was an isolated incident and the fact that the manufacturer cooperated with the Authority.
In addition to increased fines, in 2013, 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 or 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 jurisdictions. Accordingly, it is not possible for a leniency applicant to determine whether the applicant is the first to report the matter 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 that 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.
Recent case law
In a major cartel case in the construction industry, the Danish public prosecutor for serious economic and international crime has filed charges against 33 building contractor companies for their involvement in one of the largest ever cartels in Denmark. The cases concern the alleged breach of competition law by coordination of bid prices on both private and public construction projects, including the construction of schools, nursing homes and day care centers for public funds. The companies and the responsible employees are suspected of entering pricing agreements for construction works with a total value of 400–500 million kroner. A test case has been chosen to go ahead and the first indictment has been issued.
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. 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, 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, claimed damages based 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 TW Autodele’s loss was not substantiated with any actual data or calculations; there was no solid evidence suggesting that TW Autodele’s market share, in the absence of the abuse, would have increased proportionately, and the case against Skandinavisk Motor Co was dismissed.
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