Denmark: Merger Control
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This article provides legal practitioners with an overview of merger control in Denmark, including information on the relevant legislation on merger control, the enforcing authorities, the applicable definitions and the jurisdictional thresholds for mergers. The article further gives a thorough account of the procedure of merger control under Danish law from notification to approval, including explanations of the time frames and the different phases of review as well as the substantive test. Throughout the article, reference is made to relevant and recent case law to give readers a deeper and more nuanced understanding of the administration of merger control in Denmark.
- The merger review process
- Economic evidence
Referenced in this article
- The Danish Competition Act (Consolidated Act No. 155 of 1 March 2018)
- The Danish Competition and Consumer Authority
- The Danish Competition Council
- The Danish Competition Appeals Tribunal
Legislation and competent authority
The Danish merger control regime was implemented in 2000 and is largely based on the principles of the EU Merger Regulation (Council Regulation (EC) No. 139/2004). Danish merger rules are generally interpreted in accordance with EU law and practice from the European Commission and the European courts, and the substantive test under Danish law is equivalent to the test under EU law. Similarly, jurisdiction is based on turnover thresholds largely calculated in accordance with EU law principles.
The Danish merger control rules are set out in part 4 of the Danish Competition Act. Detailed rules on the calculation of turnover and the notification of concentrations are set out in two executive orders.
The Danish Competition and Consumer Authority (DCCA) and the Danish Competition Council (the Council) enforce the Danish merger rules. The DCCA prepares all cases and decides less complicated cases on behalf of the Council, while Phase II mergers are usually decided by the Council.
The Council’s decisions may be appealed to the Danish Competition Appeals Tribunal (the Tribunal), which is an independent administrative appeals body chaired by a Danish Supreme Court justice. The decisions of the Tribunal may in turn be appealed to the Danish courts.
Pursuant to section 12a of the Competition Act, the following constitute a merger:
- two or more previously independent undertakings amalgamating into one undertaking; or
- one or more persons who already control one or more undertakings – by an agreement to purchase shares or assets or by any other means – acquiring direct or indirect control of the entirety of or parts of one or more other undertakings; or
- the establishment of a joint venture that will perform all the functions of an independent business entity on a lasting basis.
Control can be obtained through rights or agreements or in other ways that will, either separately or in combination, make it possible to exert decisive influence over the operations of the undertaking. As such, control may be acquired on a legal basis (eg, through the acquisition of shares, assets and voting rights) or by way of shareholder agreements or the right to appoint members to the undertaking’s board of directors. Control may also be obtained through an agreement even when no shares, assets or voting rights are transferred, but when the undertakings concerned otherwise agree that one undertaking will have the ability to exercise control over the other. Finally, control may follow from a state of economic dependency.
The acquisition of a minority shareholding may constitute a merger insofar as the acquirer obtains decisive influence over the undertaking (eg, through voting rights or veto rights).
A concentration must be notified to the DCCA if:
- the combined aggregate turnover in Denmark of all the undertakings concerned is at least 900 million kroner, and at least two of the undertakings concerned each have an aggregate turnover in Denmark of at least 100 million kroner;
- the aggregate turnover in Denmark of at least one of the undertakings concerned is at least 3.8 billion kroner, and the aggregate global turnover of at least one of the other undertakings concerned is at least 3.8 billion kroner; or
- the Danish Business Authority in accordance with the 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.
The concept of undertakings concerned in the Competition Act – the direct participants to a merger – is identical to the EU concept, and the European Commission’s practice and the Consolidated Jurisdictional Notice may provide guidance.
If the jurisdictional thresholds are met, prior notification to the DCCA is mandatory. In 2019, a total of 48 notifications were processed by the DCCA, 35 of which were notified under the simplified procedure and 13 were pursuant to the full-form procedure. In 2020, to date, 14 notifications have been or are currently being processed by the DCCA, six of which have been notified under the simplified procedure and eight are pursuant to the full-form notification procedure.
Timing of the notification
Notification to the DCCA may be filed when a binding merger agreement (which may be subject to conditions) has been concluded between the parties, a takeover bid has been made public, or a controlling share has been acquired (in cases where control is acquired through a series of transactions in securities). A mere letter of intent will usually not be sufficient for the DCCA to accept the notification, but it may form the basis for informal pre-notification discussions with the DCCA. The DCCA recommends that the parties initiate contact with the DCCA as soon as possible after it has been established that a merger is notifiable and no later than two weeks prior to notification.
A merger may not be implemented prior to the DCCA’s approval. However, the DCCA may, at its discretion, grant derogations from the stand-still obligation. The DCCA has granted derogations several times in Danish merger cases and has, for example, granted permission to start negotiations with distributors and to conclude agreements with suppliers prior to the DCCA’s approval of the merger.
If the parties fail to notify a merger or implement the transaction before approval has been obtained, the DCCA may impose fines. When deciding the size of the fine, the DCCA will take into consideration factors such as the gravity of the infringement and its duration. In a case from June 2019, the gas station company Circle K Denmark A/S accepted a fixed-penalty notice of 6 million kroner for failure to notify the acquisition of 72 service stations. In October 2018, Circle K had notified to the DCCA the transfer of inventory, employees and goodwill relating to 72 service stations from 12 different lessees under the Shell brand to Circle K. Circle K had signed the transfer agreements in May 2016 subsequent to approval from the European Commission of Circle K’s acquisition of Danish Fuel, which covered some of Shell’s activities in Denmark. However, the acquisition of the 72 service stations – which should have been notified separately by Circle K to the DCCA – was not covered by the Commission’s merger approval. The DCCA approved the acquisition of the 72 service stations in November 2018 but because Circle K had already implemented the merger, the State Prosecutor for Serious Economic and International Crime imposed the fine for failure to notify. The case demonstrates that failure to notify a merger constitutes a criminal offence under Danish competition law.
Time frame for the Authority’s assessment
There is no statutory time frame for the pre-notification phase under the Danish merger regime. Without any legislative time limits, therefore, the DCCA has a large time frame in which to assess a merger. In practice, it will typically take two to five weeks to have a simplified notification declared complete, and two to 10 weeks for a full-form notification. However, in some cases, pre-notification may take considerably longer; for example, in the JP/Politiken/Børsen case, in which the parties initiated the pre-notification process in January 2016, the notification was declared complete in July 2016.
During pre-notification, the parties have an opportunity to informally discuss any questions regarding the drafting of the notification, and drafts may be submitted to and reviewed by the DCCA. Further, the DCCA usually conducts large parts of the market investigation and case analysis during pre-notification. Moreover, in more recent cases, the DCCA has conducted the public hearing as a part of the pre-notification phase.
Completeness of notification
Once a notification has been filed, the DCCA is bound to declare the notification complete or specify any missing information within 10 working days.
Since August 2013, filing fees must be paid before a merger notification is deemed complete. The fee for a simplified notification is 50,000 kroner, whereas the fee for a full-form notification is 0.015 per cent of the combined turnover in Denmark of the undertakings concerned, subject to a cap of 1.5 million kroner. The fees are not reimbursable, unless:
- the notified transaction is not notifiable;
- the parties withdraw the notification before it is complete;
- the parties withdraw the notification before the DCCA has reached a decision because another Danish authority has refused to permit a merger between undertakings that are involved in the notified transaction; or
- the Danish Business Authority did not have any basis for referring the merger to the DCCA.
Phase I review
Once the notification has been declared complete by the DCCA, Phase I commences. This phase lasts up to 25 working days, which may be extended to 35 working days by the DCCA if commitments are proposed by the parties. If the DCCA is not able to determine that a merger will not lead to a significant impediment of effective competition during Phase I, it will commence a Phase II investigation (and, as such, the case will usually be decided by the Council on the basis of the DCCA’s case analysis, as outlined above).
Phase II review
Phase II investigations must be completed within 90 working days of the expiry of Phase I but the time frame for a Phase II investigation will automatically be extended by up to 20 working days if commitments are proposed by the parties during the last 20 working days of Phase II. As of 1 January 2018, the time limits are interrupted if the parties to the merger fail to supply information required by the DCCA in time. Further, the DCCA may, at any time, extend the deadline by up to 20 working days provided that the undertakings concerned have requested or consented to the extension. If the Council does not reach a decision within the relevant deadline, the Council is considered to have approved the merger.
Our experience from recent cases shows that a time frame of two to three months from the first draft of the notification being submitted to the DCCA until the DCCA has approved the merger should be expected in mergers without substantial overlaps, while clearance of more complex mergers may take from six to 12 months.
In 2019, 46 of a total of 48 mergers in Denmark were approved in Phase I and only two mergers underwent Phase II investigations. In 2020, none of the nine mergers approved so far has been subject to a Phase II investigation. However, one notification has been referred to the Commission under article 21 of the EU Merger Regulation.
Formats of the notification
A merger may be filed as a simplified notification or as a full-form notification. Under a simplified notification, less market data needs to be submitted and the procedure will often be faster.
A 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 in Denmark of the joint venture or of the transferred activities is less than 100 million kroner, or where the total value of the assets or the turnover generated in Denmark by the assets transferred to the joint venture is less than 100 million kroner;
- mergers in which one undertaking acquires sole control of another undertaking of which it already has joint control; or
- mergers in which two or more undertakings merge or one or more undertakings acquire sole or joint control of another undertaking and in which:
- none of the parties is active in the same product and geographical market or in a product market that is downstream or upstream from a product market in which another party to the merger is active;
- two or more of the parties to the merger are active in the same product and geographical market but hold a combined market share in Denmark of less than 15 per cent; or
- one or more of the parties to the merger is active in a downstream or upstream product market in which another party is active, provided that neither their individual nor their combined market share in these markets in Denmark is 25 per cent or more.
Even if these conditions are met, the DCCA may, at its discretion, require a full-form notification. Accordingly, it is recommended to discuss with the DCCA during the pre-notification phase what type of notification procedure is required, as a request for a full-form notification may result in significant additional costs in filing fees relative to the size of the transaction.
In a 2017 case, Arbejdsmarkedets Tillægspension/Danica Ejendomsselskab ApS, the merging undertakings had submitted a simplified notification. However, a small market investigation led the DCCA to request a full-form notification resulting in a filing fee of 1.5 million kroner instead of 50,000 kroner. The merger was eventually approved following a simplified procedure, but fees are not reimbursed in these instances.
A decision requiring the parties to file a full-form notification may be appealed to the Tribunal but is rarely overturned owing to the DCCA’s wide margin of discretion in deciding on the notification form. In the Dansk Supermarked/Wupti case (2015), the DCCA conducted a small market investigation, submitting a short list of questions to a handful of market participants, which led the DCCA to require a full-form notification. The parties challenged the decision before the Tribunal, claiming that the DCCA did not have sufficient grounds for requiring a full-form notification. The Tribunal upheld the DCCA’s decision in 2016, which the District Court confirmed in 2018. In January 2020, the Western High Court ruled that the DCCA was permitted to require a full-form notification to conduct a minor market investigation (even though this resulted in a higher filing fee and no substantial competition issues were eventually found).
Notification forms are available on the DCCA’s website (www.kfst.dk). There is no requirement for certifications, notarisations or the like. Usually, notifications are filed in Danish, but the DCCA may accept notifications in English. This should be agreed with the DCCA before submission. Supporting documents may be submitted in Danish and English.
The substantive test under Danish law corresponds to the significant impediment of effective competition test under EU law and is interpreted in accordance with the case law of the European courts, and the case law and guidance of the Commission. Only concentrations that significantly impede effective competition, primarily as a result of the creation or strengthening of a dominant position, will be blocked by the Council or the DCCA.
Previously, the Council and the DCCA have arguably had a more static, market-share based approach to findings of dominance and unilateral effects than the Commission. However, this tendency is changing and in recent years, the DCCA has significantly increased its use of economic evidence in Danish merger control proceedings.
In the Arcus/Pernod Ricard case (2012), the market shares were very high (above 90 per cent in some markets), and the use of diversion ratios and upward pricing pressure (UPP) calculations were central to the DCCA’s analyses and the Council’s approval of the transaction subject to divestiture.
A diversion ratio analysis was also central in the approval of the JYSK/IDdesign merger (2013). Both companies sold furniture at the retail level, and consumers were asked via surveys where they would buy their furniture if their preferred shop was no longer available. The analysis was significantly affected by the general view that IDdesign was found to disappear from the market because of bankruptcy ‘but for’ the merger. Owing to this unusual counterfactual, the diversion ratio analysis showed that there would be more competitive pressure from or on the remaining competitors – primarily IKEA – with the merger than without.
Similarly, the EY/KPMG merger (2014) follows the trend towards a more economic substantive assessment. On the markets for tax and accountancy services to large companies, the DCCA stated that it was not enough merely to look at the Herfindahl–Hirschman Index figures. Instead, the DCCA applied a more in-depth assessment and found that the markets were ‘characterised by Bertrand competition and product differentiation’, that suppliers had available capacity in both the short run and the long run, and that large tenders had a significant role in the market. Owing to these factors, only suppliers with a critical mass were found to apply a competitive pressure on the parties.
In Imerco/Inspiration and Boxer/SE AMBA (2017), the DCCA conducted analyses of diversion ratios, UPP and other in-depth economic calculations. The mergers were both cleared subject to commitments.
In Royal Unibrew/CULT, a 2019 case that underwent Phase II review, the DCCA’s investigations included both a diversion ratio analysis and an illustrative price rise analysis. Despite the parties’ relatively high post-merger market shares (between 30 and 40 per cent), the Council found that the merger, overall, would not significantly impede competition and gave unconditional approval.
The vast majority of Danish mergers are approved. So far, only one, the Lemvigh Müller/AO case from 2008, has been prohibited since the introduction of merger control in Denmark in 2000. However, there are examples of merger notifications being withdrawn by the parties themselves prior to a decision by the Council. One example is the contemplated merger between the Danish abattoirs Danish Crown and Tican, which was notified to the European Commission in July 2015. The Commission partially referred – upon request from the DCCA – the part of the merger affecting the Danish markets to the DCCA. In December 2015, nearly five months after the referral, the DCCA decided that the merger notification was considered withdrawn based on a clause in the merger agreement between Danish Crown and Tican stating that the transaction would automatically terminate if it had not been cleared by all relevant competition authorities on 31 October 2015 at the latest. Immediately following the DCCA’s decision, Tican announced the sale of its activities to a German company. The process of the Danish Crown/Tican notification indicates that the Council would have prohibited the transaction if the notification had not been withdrawn.
Similarly, in the JP/Politiken/Børsen Phase II case, a merger notification that was submitted in July 2016 was withdrawn by the parties in January 2017 before the authorities issued a final decision. The DCCA issued a draft decision in November 2016 and, according to the DCCA, the merger would have impeded effective competition in eight different markets. The parties proposed various remedies, but ultimately the parties withdrew the notification.
Furthermore, a merger notification from Metro Cash & Carry Danmark and Euro Cater submitted in October 2014 was withdrawn by the parties in November 2014 as a consequence of the DCCA’s initial assessment of the proposed merger, which showed that it would significantly impede competition. The merger concerned Euro Cater’s acquisition of two of Metro Cash & Carry Danmark’s stores in Denmark. The case is interesting, since a District Court in April 2017 fined Metro Cash & Carry Danmark 50,000 kroner for failing to supply all relevant information to the DCCA during its review of the proposed merger.
As with joint ventures under EU law, the creation of a joint venture performing all the functions of an autonomous economic entity on a lasting basis is considered a concentration under Danish law. Similarly, if the joint venture may also have as its object or effect the coordination of the behaviour between parent companies, this is assessed according to the rules on anticompetitive agreements (the Danish equivalent of article 101 of the Treating on the Function of the European Union). In practice, the DCCA looks to case law and guidelines from the Commission when assessing aspects of a joint venture such as control and full functionality.
Prior to the European Court of Justice’s judgment in Austria Asphalt (case C-248/16,), the European Commission and the DCCA held that a change from sole control to joint control over an existing undertaking was subject to merger control regardless of whether the full-function joint venture would perform, on a lasting basis, all the functions of an autonomous economic entity.
In 2018, Arbejdsmarkedets Tillægspension (ATP) and Danica Ejendomsselskab ApS (Danica) acquired apartment no. 2 in Randers Storcenter (part of a shopping centre in central Denmark). The case brought up some interesting issues with regard to the DCCA’s jurisdiction. In 2017, Danica sold 50 per cent of its shares in 16 Danish shopping centres to ATP, which entailed the creation of a full-functioning joint venture. However, in 2018, the DCCA based the assessment of its own jurisdiction with regard to the acquisition of apartment no. 2 in Randers Storcenter on the turnover of the parents (ATP and Danica) and not on the turnover of the joint venture. Consequently, the acquisition of the apartment met the turnover threshold under the Danish competition rules and was subject to notification. However, the DCCA 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).
If the DCCA finds that a merger gives rise to competition concerns, the parties may propose remedies so as to obtain an approval. Usually, these commitments will be discussed and agreed in Phase II.
According to the Competition Act, remedies may include:
- the divestiture of a company, parts of a company, assets or other interests;
- the granting of access to third parties to the merged entity’s technology, production facilities, distribution facilities or similar facilities; or
- other measures that may promote efficient competition.
The list of remedies is non-exhaustive. When proposing remedies, 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 must commit the parties either to act or not to act in a certain way. The DCCA may revoke its approval of remedies or impose fines on the parties if the parties fail to comply with the remedies.
In general, the DCCA seems to favour structural remedies over behavioural remedies. This preference is probably because of the substantial resources that the competition authorities must deploy when reassessing behavioural remedies in the light of a new market situation, and the difficulties linked with controlling a merged entity’s compliance with behavioural remedies. However, behavioural remedies have been accepted by the competition authorities in recent cases.
Of the most recent mergers that have included remedies, Global Connect/Nianet (2018), Tryg/Alka (2018) and SE/Eniig (2019), the competition authorities accepted behavioural remedies in two of the cases.
In Global Connect/Nianet, Global Connect offered structural remedies consisting of a commitment to divest both of Nianet’s data centres in the Aarhus area. The Council found that the commitments offered by Global Connect were sufficient to address the concerns raised by the Council as the commitments would enable new or exciting competitors to acquire the data centres. Accordingly, the merger was approved.
In Tryg/Alka, the Council found that the merger would significantly impede competition in the market for property and casualty insurance (non-life insurance) for private consumers. To address these concerns, Tryg offered three behavioural commitments for 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 pay annually 5 million kroner to Forsikringsguiden (an independent insurance and price comparison website).
With these remedies, the Council approved the merger.
The SE/Eniig case concerned the merger of two energy companies into the joint company Nordlys. The cooperative society SE amba had its primary activities in the energy sector but also offered retail and wholesale supply of fixed broadband connections and retail provision of television services. The cooperative society Eniig was an energy and natural gas supplier that also offered retail and wholesale supply of fixed broadband connections and retail provision of television services. In its assessment of the merger, the DCCA found that the parties’ activities overlapped in nine markets in Denmark, and the DCCA had concerns regarding the market for the wholesale of fixed broadband connections through high-speed infrastructure.
The DCCA considered that Nordlys would have the possibility of input foreclosure towards service providers that wanted to service the parties’ fibre network. Foreclosure was possible because the merger would cause (1) a vertical connection on the market concerning the wholesale of internet access, and (2) an increase in the parties’ activities on the upstream and downstream markets owing to the fact that both parties had activities within retail sale of broadband connection and television packages. The competitors on the market had only constructed high-speed infrastructure in the same areas as the merging parties to a limited extent. In addition, the DCCA considered that Nordlys would have an incentive to foreclose the market for retail sales of broadband and television packages as a result of the merger.
SE and Eniig offered four behavioural remedies to meet the concerns of the DCCA:
- to ensure the opening of Eniig’s fibre optic infrastructure and offer a 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-discriminatory 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 have been kept confidential.
With these remedies, the DCCA approved the merger in Phase II.
Another noteworthy merger case including remedies is EY/KPMG (May 2014). The DCCA found that the merger would significantly reduce competition in the markets for accountancy and tax services to large companies in Denmark and one of the concerns was that the Big Four (KPMG, EY, PWC and Deloitte) in Denmark would be reduced from four to three. The Council accepted remedies, according to which a number of partners and employees could change from the merging parties to KPMG International/Accura Tax without being bound by competition clauses and with reduced terms of notice.
The Council approved the merger subject to these remedies but found afterwards that the parties had pre-implemented the merger by terminating the cooperation agreement with the international KMPG network prior to the DCCA’s approval (gun-jumping). On 7 December 2016, the Danish Maritime and Commercial Court referred the case to the European Court of Justice (ECJ) seeking guidance on how to interpret the EU merger control rules on implementation of mergers. On 31 May 2018, the ECJ ruled in the case and found that the parties had not pre-implemented the merger by terminating the corporation agreement. Accordingly, the Council’s decision was set aside. This was the first example of a gun-jumping case in Denmark, and with its ruling in the case, the ECJ has provided guidance on the stand-still obligation in mergers and clarification in relation to gun-jumping.
If a merger is approved with remedies, those remedies may be changed or cancelled at a later stage if the circumstances have changed significantly. As an example, Dong Energy A/S, a Danish electricity producer, had committed to selling 600MW of virtual electricity capacity per year as part of a merger in 2004. The background was that in 2004, the DCCA was concerned that Dong Energy A/S might be able to control the prices on the Danish electricity market. However, since 2004, competition had increased on the Danish electricity market as a result of market entries, a significant increase in the installed wind capacity, increased transmission capacity with neighbouring countries, and regulatory changes. As a result of an application from Dong Energy A/S, the DCCA found in May 2014 that these changes allowed for a cancellation of the commitments.
Conversely, Nykredit Realkredit A/S, a Danish financial services company, did not succeed in having its remedy from 2003 (a cap of 0.5 per cent on fees in relation to mortgage loans to consumers) cancelled. Nykredit Realkredit A/S argued that the circumstances had changed because, inter alia, new regulation required it to hold more capital. In June 2014, the Danish Supreme Court found that the remedy was not limited in time and did not cancel the remedy.
According to the DCCA’s guidance paper on merger filings, the parties are encouraged to consider remedies as early in the process as possible if the concentration may give rise to concerns. Otherwise, the approval process may be prolonged. Further, the parties can expect the DCCA to market test the remedies. Either the DCCA will contact third parties directly or the proposed remedies will be published on the DCCA’s website with a request to third parties to comment.
As with EU notifications, approvals by the DCCA automatically cover ancillary restrictions. It is up to the parties to assess whether there are any ancillary restrictions that need to be evaluated by the DCCA with regard to a merger. The Commission’s guidelines and case law apply.
The Council’s decisions in merger cases may be appealed to the Tribunal by the notifying parties, and the Tribunal’s decisions may in turn be appealed to the Danish courts. An appeal must be lodged within four weeks of the Council’s decision, and the Tribunal has the competence to examine all aspects of the decision. It is also possible to appeal only parts of the decision. After a merger has been approved, the Council may impose injunctions necessary to secure timely compliance with the accepted remedies.
Third parties have no right to appeal merger decisions to the Tribunal. However, a third party may, if sufficient legal interest is demonstrated, bring the decision of the Council directly before the Danish courts.