Competition Economics Handbook 2019

Denmark

Copenhagen Economics

Over the past year, the Danish Competition and Consumer Authority (DCCA) has worked on several Phase II mergers and court cases. Most notably, the DCCA lost a long-standing and prominent abuse of dominance case against the energy company Ørsted in the High Court. The DCCA also lost a much-debated case about a consortia agreement in the Maritime and Commercial Court.

The following trends have been identified based on interviews with the DCCA and prominent competition lawyers from the following Danish law firms: Accura, Bech-Bruun, Bruun & Hjejle, Delacour, DLA Piper, Gorrissen Federspiel, Horten, Bird & Bird, Kammeradvokaten, Kromann Reumert and Plesner.

Mergers: DCCA ramping up use of sophisticated economic analyses

The past year has seen high merger enforcement activity with four Phase II investigations since August 2017. Three of the investigations, Imerco/Inspiration, SE/Boxer and GlobalConnect/Nianet were cleared subject to remedies, while one investigation, Danica Pension/SEB Pension, was cleared without remedies.

The mergers have been investigated by the DCCA’s new merger unit, which was launched at the beginning of 2017. The merger unit is part of the DCCA’s aim to ramp up their economic competencies, which is also reflected in their hiring of several new employees with PhDs.

In our interviews, lawyers confirm that the DCCA has increased its appetite for sophisticated economic merger analyses. While some lawyers welcome this development, others voice concern that the economic models used by the authority dominate qualitative arguments leading to, in their view, a less transparent merger review process. To increase transparency, some lawyers propose that the DCCA publish thresholds that set the bar for when estimated post-merger price increases are considered problematic.

Lawyers’ experience is that the DCCA encourages parties to present their own economic models and studies. However, in most cases the lawyers prefer a reactive approach to the economic analyses and await the DCCA’s results before submitting any economic models themselves.

Competition compliance: surge in number of in-house competition lawyers

Since harsher sentences were imposed in 2013, Danish firms has increased their focus on competition compliance. Our interviews show that this has led to a surge in the number of in-house lawyers conducting competition compliance and to a lesser extent more demand for external legal or economic advice. It is also the DCCA’s impression that the larger Danish companies in general have a well-functioning competition compliance setup.

According to lawyers interviewed, most of the increase in competition compliance work is in relation to anticompetitive agreements, where economic analyses often play a minor, if any, role. In relation to abuse of dominance compliance, these lawyers see some increased demand for price-cost testing. The lawyers also note that the firms for the last year has spent a bulk of their compliance resources on preparations for the EU’s General Data Protection Regulation, as well as anti-money laundering efforts.

In relation to consortia, several lawyers said they experienced that the firms are over-compliant owing to fear of harsh sanctioning. According to these lawyers, the firms only engage in consortia that are surely unproblematic and in grey area situations they will rather refrain from engaging in the consortia from the outset than basing the decision on due diligence work such as estimating potential efficiency gains from the consortia. The new guidance paper on consortia released in the spring has not changed this situation.

On 27 August 2018, the Maritime and Commercial Court overturned a decision from the Competition Council on a consortium for road markings. The court found that the necessary test was whether the members of the consortia had capacity to handle the full contract, even though the tender was designed such that it was possible to bid for a part of the contract. The DCCA is currently considering whether to appeal this ruling.

Abuse of dominance: Ørsted wins against the DCCA at the High Court

In relation to abuse of dominance, one case stands out. In May 2018, the DCCA lost their excessive pricing case against the energy company Ørsted in the Danish High Court.

The case regards Ørsted’s pricing at the Western Danish wholesale electricity market in 2005 and the first half of 2006. The High Court rejected the DCCA’s decision that Ørsted had charged excessive prices. The DCCA has sought appeal to the Supreme Court and is still awaiting the appeal decision from the appeals permission board.

Damage cases: more need for economists

Our interviews show that recent changes to the Danish legislation will increase the demand for economic experts as witnesses in the courtroom.

First, a new law introduced in 2017 allows the use of party-appointed experts in Danish courtrooms. Previously, both the choice of economic expert and the questions for him or her had to be agreed on by each party, which was criticised for being time-consuming and for giving the expert witness too much influence over the outcome of the case. The expectation is that the new system with party-appointed experts will lead to shorter court cases and increased demand for expert witnesses.

Second, the interviews show that the new EU Damages Directive implemented into Danish law in 2015 will lead to more future damage cases and thereby an increased need for economic experts both inside and outside the courtroom.