Denmark: Authorities build on EU competition law and focus enforcement on cutting-edge sectors

In summary

This article provides legal practitioners with an overview of competition law in Denmark, which is based on EU competition law. To a large extent, the Danish rules are similar to the EU rules. By covering recent practice, including but not limited to the Danish Competition Authority’s enforcement priorities, the focus of this article is to provide insight on relevant developments in Danish competition law.

Discussion points

• Agreements
• Unilateral conduct
• State aid
• Decision-making powers and sanctions
• Damages for breach of competition rules

Referenced in this article

• The Special Crime Unit (formerly the Danish State Prosecutor for Economic and International Crime)
• The Danish Competition Act (Consolidated Act No. 360 of 4 March 2021) and the English version (Consolidated Act No. 155 of 1 March 2018 – historical version)
• The Danish Competition and Consumer Authority
• The Danish Competition Council
• The Danish Competition Appeals Tribunal

Agreements

Introduction

The prohibition on anticompetitive agreements in the Danish Competition Act (the Competition Act) follows a structure similar to that of article 101 of the Treaty of the Functioning of the European Union (TFEU). Section 6 of the Competition Act contains the general prohibitions and is comparable to article 101(1) of the TFEU, whereas section 8 is comparable to article 101(3) of the TFEU. Case law from the European Commission and the European Court of Justice (ECJ) is applied when interpreting the prohibition on anticompetitive agreements in the Competition Act.

Agreements subject to the Competition Act can benefit from the EU block exemptions as they have been implemented in Danish law. Further, the Competition Act provides a de minimis exemption in section 7, which was aligned on 1 January 2018 with the De Minimis Notice 2014/C 291/01. According to the exemption, the rules on anticompetitive agreements do not apply to agreements or concerted practices if:

• the aggregate market share held by the parties to the agreement does not exceed 10 per cent on any of the relevant markets affected by the agreement, where the agreement is made between undertakings that are actual or potential competitors on any of those markets (agreements between competitors); or
• the market share held by each of the parties to the agreement does not exceed 15 per cent on any of the relevant markets affected by the agreement, where the agreement is made between undertakings that are not actual or potential competitors in any of those markets (agreements between non-competitors).

However, the Danish de minimis exemption does not apply to agreements that have restriction of competition as their object or that may affect trade between member states, as those types of agreements are subject to article 101 of the TFEU and, if applicable, the EU de minimis rule.

Section 9 of the Competition Act provides undertakings with the possibility to notify an agreement for assessment by the Danish Competition and Consumer Authority (DCCA). Similar to the previous EU system, the DCCA can, depending on the assessment, provide the undertaking with a declaration stating that the agreement does not violate section 6 of the Competition Act. However, it may refrain from considering a notification if the agreement appreciably affects trade between member states. In practice, the option of having an agreement assessed by the DCCA is rarely used.

During 2022, the DCCA published its annual report focusing on sectorial areas of interest, key financial figures and developments in jurisprudence stemming from both the administrative and the judicial system. According to the report, four key sectorial areas continue to be points of attention for the DCCA, being:

• the digital economy and digital platforms at large;
• the green transition;
• the financial sector; and
• health and pharmaceuticals.

The report reiterates the DCCA’s strategic stance from 2019 underlining tech giants as a continued focus point of the DCCA, further supported by the establishment of Centre for Tech. The DCCA points to the importance of large digital platforms not exploiting their dominant positions and not allowing the use of price algorithms as a shell for cartel-esque arrangements. Furthermore, in 2022, the DCCA initiated a market analysis pertaining to the market for charging solutions for electric vehicles.

Cases on digital platforms

A variety of cases involving agreements between providers of digital platforms have been settled in the past few years.

In February 2022, the Competition Council (the Council) found that the Danish Association of Peugeot Dealers (PFF) had infringed the prohibition of anticompetitive agreements by deciding on a collective boycott of the digital marketplace for the advertisement of cars www.bilbasen.dk. According to the Council, the aim of the collective boycott was to promote the competitor, biltorvet.dk, by agreeing with the independent car dealers of the brand Peugeot to refrain from advertising on bilbasen.dk. The Council concluded that the practice was detrimental to competition as it may have had harmful effects on both consumers and car sellers advertising on bilbasen.dk and has reported the case to the Special Crime Unit for criminal prosecution.

In two cases in 2020, the Council also found that digital platforms had violated competition rules. In the first case, a platform for offers on auditing services, Ageras, had, among other things, informed submitters with low bids on ‘estimated market prices’ and provided the submitters with the opportunity to raise bids accordingly. The price mechanism that advised submitters on ‘market prices’ was found to be incompatible with the Competition Act’s prohibition of restrictive agreements. Ageras agreed to pay a fixed penalty fine of 1.275 million Danish kroner.

In the other case, the Council found minimum pricing on digital platforms offering private cleaning services to be restrictive on competition. The practices in question were found to prevent free pricing between independent, competing companies and were, thus, incompatible with the competition rules. The cases were closed owing to commitments from the undertakings concerned to remove the pricing mechanisms.

The HMN case

In June 2019, the Maritime and Commercial High Court upheld the Danish Competition Appeals Tribunal’s (DCAT) decision from 2017 that HMN Naturgas (HMN) and its service partners Gastech-Energi and Kiertner, as well as the energy industry association DEBRA – Energibranchen, had coordinated prices on gas furnace maintenance subscription for end users in 2014. The Court found that the parties had agreed on a raise in HMN’s prices for end users with subscriptions with the objective of making it possible for service partners, who also offered gas furnace maintenance services independently of HMN, to raise their prices as well. For this reason, the Court found the agreements between HMN and its service partners to be agreements between competitors with the restriction of competition as their object in violation of section 6 of the Competition Act. The Court, thus, refused to recognise the relevance of the fact that the agreements ultimately reduced the total prices for HMN’s end users by more than 9 million Danish kroner. The case was subsequently appealed to the High Court of Eastern Denmark by HMN, which upheld the ruling in March 2021. The ruling has not subsequently been appealed to the Danish Supreme Court.

In March 2022, criminal prosecution of HMN, Gastech Energi and some of the associated individuals was initiated by the Special Crime Unit. The criminal proceeding was interesting as the agreement in the civil proceedings was found to be anticompetitive ‘on principles’, even though it ultimately reduced end user prices by 9 million Danish kroner and solely stemmed from a wish to accommodate customer complaints. However, although the legal review and the standard of proof differ significantly from the civil case, the City Court of Glostrup fined the companies 8 million Danish kroner and the individuals between 50,000 and 100,000 Danish kroner.

The Clear Channel/AFA JCDecaux case

In another significant judgment of November 2021, the Danish Maritime and Commercial High Court partially revoked a decision by the Council and upheld by DCAT. The case concerned two of the largest players in the market for outdoor media, Clear Channel Danmark A/S and AFA JCDecaux A/S.

Both the Council and the DCAT found that the companies had entered into an illegal written agreement, which had led to coordinated discount rates in relation to different services (eg, agency commission) from September 2008 to April 2015. However, quite importantly, the written agreement between the companies, which contained the clauses on discount rates, expired on 31 January 2010. Accordingly, one of the main discussion points in the case before the Court was whether the parties had continued a concerted practice after January 2010, and, consequently, what level of proof was needed to demonstrate that such a practice existed after the expiration of the agreement.

According to the Council and the DCAT, the concerted practice did continue after January 2010, as parallel conduct had continued after the expiration of the written agreement, and as they had not actively distanced themselves from continuing the practice after the expiration of the agreement.

Conversely, the Danish Maritime and Commercial High Court did not find that a concerted practice had continued after the expiration of the agreement. According to the Court, such a finding would require more concrete and positive elements of evidence. Thus, the Court partially annulled the previous decisions by the Council and the DCAT and ruled that there had (only) been an anticompetitive agreement up until the written agreement expired, but not after. The case was appealed by the Council to the High Court of Eastern Denmark, where it is still pending.

The Hugo Boss, Ginsborg and Kaufmann case

The retail clothing industry has been under scrutiny in two cases from June 2020, where the Council found that a manufacturer and two retailers had illegally exchanged information on prices, discounts and quantities in connection with future sales. The illegal activity had taken place between the clothing manufacturer Hugo Boss and the clothing retailers Kaufmann and Ginsborg.

The cases are interesting because Hugo Boss manufactures and supplies products to Kaufmann and Ginsborg and, at the same time, distributes products directly to consumers. Hugo Boss is, therefore, active in the same downstream market for menswear as its retailers, which is why Hugo Boss has a vertical as well as a horizontal relationship with Kaufmann and Ginsborg.

Naturally, as a supplier, Hugo Boss must maintain ongoing contact with its dealers. However, as competitors, the undertakings must act independently on the market and refrain from entering into any anticompetitive agreements (eg, by providing information in advance on sales ranges, sales prices and discounts in connection with future sales). Following the Council’s decisions, the DCCA sent six injunctions and enforcement notices to undertakings in the clothing industry, thereby emphasising the illegality of exchanging information that may impede competition.

The two cases were appealed to the DCAT, which upheld both decisions in June 2021. Subsequently, the Council referred the cases to the Special Crime Unit for criminal prosecution. Hugo Boss and Kaufmann (but not Ginsborg) have, however, appealed the DCAT’s decision to the Danish Maritime and Commercial High Court where the cases are pending.

Cases on resale price maintenance

The DCCA has generally paid attention to resale price maintenance.

In December 2019, the High Court of Eastern Denmark upheld a ruling by the City Court of Næstved and imposed a fine of 1 million Danish kroner on a Danish distributor of hair products, Icon Hairspa A/S, and a fine of 100,000 Danish kroner on a member of the Icon Hairspa management for violating the prohibition on resale price maintenance. The company had required its dealers to follow the recommended retail price as the minimum price when selling certain hair products.

In a similar case from September 2020, the design company GUBI A/S was found guilty of resale price maintenance for a period of not less than two-and-a-half years. In determining the amount of the fine, emphasis was placed on the gravity of the infringement, including that the agreements contained both vertical and horizontal elements, the duration of the infringement and GUBI’s turnover. As mitigating circumstances, it was considered that GUBI approached the DCCA voluntarily and, thus, contributed to the clarification and investigation of the case. Moreover, GUBI documented the implementation of measures to ensure these infringements would not occur again.

Cases on market sharing

In a decision from June 2022, the Council found that the cooperative Boligtextilbranchens Indkøbsservice AMBA (Botex) had violated the Danish Competition Act’s prohibition on cartels.

Botex, which is a cooperative made up of 24 autonomous shareholders each owning multiple Botex stores or mobile purveyor-to-client solutions, or both, were by the Council found, in a period spanning at least from May 2009 to August 2021, to have engaged in illegal conduct covered by the prohibition on cartels. Specifically, the autonomous shareholders had agreed to designate delimited areas on the basis of zip codes, in which only a singular shareholder within the Botex cooperative was allowed to market itself through household distributed pamphlets.

Therefore, the Council imposed an injunction in its decision, pursuant to which Botex was to inform all individual shareholders of the decision awarded by the Council, including that Botex was obliged to inform all shareholders that the exclusivity agreement entered into by the conduct of the individual shareholders was no longer in force and had been annulled ex nunc.

The decision is the first to be rendered after an amendment to the Danish Competition Act entered into force in May 2021. Consequently, it is the first case in which the Council has exercised its mandate to bring cases before the court, pertaining to the determination of the size of the fine and fixed penalty notices. The decision has, however, been appealed to the Competition Appeals Tribunal.

At the end of 2021, the DCCA uncovered a large-scale cartel cooperation between (to date) 22 Danish nightclubs, referred to as the Nightclub cartel case. In short, the nightclubs had agreed not to open branches in each other’s designated cities or within a 20 kilometre radius of each other. The violations ranged in duration between approximately two and 15 years. The DCCA issued civil fines to the implicated nightclubs ranging between €3,500 and €35,000. As such, the Nightclub cartel case was the first example of the DCCA using its new legal basis to issue fines trough the civil regime. The rather low level of fines is in part because of the rules for fixing fines (ie, the low turnover of the nightlife establishments in the preceding financial year as a result of covid-19), but also because the companies themselves contributed to the uncovering of the cartel.

Unilateral conduct

Introduction

Anticompetitive unilateral conduct is regulated in section 11 of the Competition Act. The section corresponds to article 102 of the TFEU and is interpreted in accordance with case law from the Commission and the ECJ. If a certain practice affects trade between EU member states, the national provision is applied with article 102 of the TFEU.

Advertising on digital platforms

The most high-profile abuse cases in Denmark have undoubtedly been in the postal sector (ie, the Post Danmark cases). The market for the distribution of unaddressed mail has, however, been declining in recent years, while the market for advertisement on digital platforms has been growing. The two markets are connected in the sense that a large proportion of advertisers are customers in both markets; hence, the DCCA has had an increased focus on abusive conduct on digital platforms.

In June 2020, the Council found that FK Distribution had abused its dominant position by tying the distribution of unaddressed mail to promotion on its digital platforms. When customers bought distribution of unaddressed mail from FK Distribution, it was a condition that they also bought a display on FK Distribution’s digital platforms, including minetilbud.dk. The Council found that the behaviour could create entry barriers and exclude competitors from the growing market of advertisement on digital platforms.

The Deutz AG case

In June 2013, the Council ruled that Deutz AG (a German engine manufacturer) abused its dominant position by preventing the supply of spare parts for the IC3 trains owned by the Danish state railway company, DSB. Deutz refused to supply spare parts for the IC3 trains and prevented parallel imports of spare parts in an agreement with its distributor in Denmark.

In December 2013, the DCAT upheld the Council’s decision, after which the case was appealed to the Maritime and Commercial High Court. Owing to a rather extensive exchange of statements regarding expert valuations and appointment of the expert appraisers, the case was only closed by the Maritime and Commercial High Court in January 2021. The Court ultimately found that the Deutz AG and the company’s Danish dealer, Diesel Motor Nordic A/S, had illegally prevented the sale of spare parts for use in the renovation of DSB’s IC3 trains.

On 27 February 2023, the Danish High Court of Eastern Denmark repealed and repatriated the decisions by the Danish Competition Authorities. The court found that the economic data, constituting the basis for the DCCA’s market delimitation and therefore the assessment of dominance, was flawed and remitted the part of the judgment that pertained to Deutz AG’s alleged exploitation of its dominant position.

Furthermore, as a consequence of flawed market delimitation, the Court found that it was not sufficiently substantiated that the market share threshold of the vertical block exemption regulation was exceeded. As such, the distribution agreement with Diesel Motor Nordic A/S fell within the scope of the vertical block exemption, meaning that the DCCA’s decision, pertaining to the alleged anticompetitive agreement, was also remitted.

The DCCA’s review is currently pending.

The CD Pharma case

In November 2018, the DCAT upheld a decision by the Council in which it found that CD Pharma (a pharmaceutical distributor) abused its dominant position by charging excessive prices for the drug Syntocinon. The case concerned the Danish market for oxytocin (contained in Syntocinon), which is used for pregnant women in connection with childbirth. CD Pharma had an exclusive distribution agreement on the Danish market with the European producer of the drug.

In March 2020, the Maritime and Commercial High Court rendered its judgment in the case with dissent. Three of the five judges found that CD Pharma was dominant in 2014 and 2015 on the market for oxytocin, while the two other judges found that CD Pharma was not dominant.

The question of dominance is of interest because CD Pharma only became a residual supplier as a result of another supplier’s (Orifarm) breach of contract with the buyer, Amgros, and because CD Pharma acted on a one-year tender market in which it submitted bids in competition with Orifarm, among others. Thus, a dominant position based on a one-year tender can be sufficient to consider an undertaking dominant under Danish competition law. All the judges found that CD Pharma’s high price for Syntocinon for a period of less than six months was excessive and, consequently, violated the Competition Act and article 102 of the TFEU.

The Falck case

In January 2019, the Council found that Falck (Denmark’s largest provider of ambulance services) abused its dominant position by excluding its largest competitor, BIOS, from the Danish market for ambulance services. Between August 2014 and October 2015, Falck decided on, and implemented, a strategy that comprised, among other things, conveying negative stories about BIOS to the press and to Falck’s employees with the purpose of influencing any paramedics who were considering jobs with BIOS to abstain from applying for those jobs. The behaviour shown by Falck made it difficult for BIOS to recruit paramedics, and ultimately BIOS was forced to leave the market.

In December 2019, Falck confessed to the infringement, and the City Court of Copenhagen imposed a fine of 30 million Danish kroner. The size of the fine reflects the increased level of fines that apply to competition law infringements as of 1 March 2013 and is to date the highest fine imposed by the Danish competition authorities in Denmark for a violation of competition law.

The Wolters Kluwer Danmark case

In December 2021, the Council delivered a decision concerning certain contractual stipulations pertaining to irrevocability and discounts, mandated by the software supplier Wolters Kluwer Danmark A/S (Wolters), when entering into a supplier contract with buyers.

In a number of the agreements entered into by Wolters as a supplier of software designated to be used for personalised tax calculations and assessments, Wolters had inserted stipulations concerning irrevocability, stating that the buyers could not terminate the contract for a period of up to three years and three months, and stipulations in which discounts were contingent upon the customers entering into multi-year supplier agreements with Wolters. The Council found it reasonable to assume that these stipulations could deter customers from buying similar software solutions from other suppliers within the period of irrevocability, thus effectively placing limitations on suppliers’ access to the market for software solutions within the field of tax calculations and assessments. The Council stated that these stipulations would be sufficient to qualify as an infringement of the Danish Competition Act if the supplier in question held a dominant market position. The Council did not, however, assess whether Wolters in fact held such a dominant market position.

The case was closed by Wolters accepting a commitment in which it assured the Council that customers that have multi-year agreements with Wolters would be able to terminate the agreements with three months’ written notice until the conclusion of a product year. Furthermore, Wolters would remove the stipulation pertaining to discounts being contingent on multi-year agreements.

The Council made Wolters commitments binding until August 2027.

State aid

The Danish rules on state aid

Section 11(a) of the Competition Act contains the Danish rules on state aid. 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.

Section 11(a) is similar to – and interpreted in accordance with – the corresponding provisions of the TFEU; however, it is not applicable if the aid is lawful, according to public regulation. Seeing as section 11(a) only applies in cases where trade between member states is not affected, it is rarely used, and there is no recent case law on the Danish rules on state aid.

The Danish rules on state aid do not entail block exemptions similar to those issued by the Commission with regard to the application of articles 107 and 108 of the TFEU to certain categories of state aid; thus, the application of section 11(a) 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 11(a) if the aid scheme at issue affects trade between EU member states. Typically, this will be the case if the aid scheme at issue is being, or has been, assessed by the Commission under articles 107 and 108 of the TFEU, or if the Commission intends to do so in the near future.

Decision-making powers and sanctions

Fines

The competition authorities have the power to investigate undertakings and to decide whether anticompetitive conduct (eg, agreements and concerted practices) is in violation of the Competition Law. If an undertaking is found to infringe the competition rules intentionally or negligently, the competition authorities may request the courts to impose civil fines in accordance with Danish civil procedure (sections 23 to 24 of the Competition Act). The civil fine regime is a consequence of the adoption of the ECN+ Directive (EU) 2019/1 and is a new and rather significant deviation from the Danish legal tradition of only imposing sanctions in accordance with criminal procedure.

Individuals who participate in, or contribute to, infringements of the Competition Law are subject to criminal prosecution (section 23(4) and (6)). The competition authorities do not have the power to impose sanctions on individuals; they must forward those cases to the Special Crime Unit, which investigates the suspected individuals and decides whether criminal prosecution should be initiated. Criminal prosecution is led by the Special Crime Unit and brought before the courts in accordance with Danish criminal procedure.

The competition authorities may offer undertakings a fine instead of prosecution in uncomplicated cases without evidential doubt. If the undertaking accepts the fine and pleads guilty, it can thereby avoid trial proceedings. In its 2022 annual report, the DCCA states that it had experienced immense interest from companies wishing to engage with the opportunity to have their cases resolved through the adoption of an extrajudicial penalty. The DCCA further states that this is at large both because of the more lenient and speedy procedure and the possibility of a cooperation discount on the penalty. The competition authorities cannot offer individuals a fine instead of prosecution, as these cases are still administered by the Special Crime Unit.

In December 2012, the Danish Parliament passed an 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 amendment entered into force on 1 March 2013 and, consequently, the rules only apply to competition infringement after 1 March 2013.

Imprisonment

Custodial sentences in cartel cases were also introduced in the amendment from 2013. Cartel agreements are punishable by imprisonment if the participation in the cartel was deliberate and if the offence was grievous, judging by its scale and the adverse effects it is capable of causing.

Under section 23(4) of the Competition Act, the punishment for participating in a cartel may be imprisonment for up to 18 months. Under aggravating circumstances, the punishment may increase to imprisonment for up to six years.

The custodial sentence is primarily directed towards the members of management, the members of the board and the responsible employees who are involved. The Special Crime Unit unofficially announced that it will request unconditional imprisonment in cartel cases and that the punishment of up to 18 months’ imprisonment applies if the estimated total value of the infringement (eg, a price-fixing cartel) is more than 10,000 Danish kroner. Further, according to an unofficial announcement from the Special Crime Unit, imprisonment for up to six years applies if the estimated value of the infringement is more than 500,000 Danish kroner.

It remains to be seen whether the courts will follow the view of the Special Crime Unit. In the Demolition case, mentioned above, the State Prosecutor (now the Special Crime Unit), for the first time under Danish competition law, made a claim to imprison the managing employees in the company; however, both the City Court of Holbæk and the High Court of Eastern Denmark dismissed the claim for imprisonment and instead imposed a fine of 100,000 Danish kroner. Again, in the above-mentioned HMN case, the State Prosecutor argued for imprisonment, which the City Court of Glostrup dismissed and imposed fines between 50,000 and 100,000 Danish kroner. Finally, in a high-profile case, the Vejstribe case, the State Prosecutor made a claim for imprisonment of three individuals following the Supreme Court’s judgment from November 2019 that the companies involved had committed a by-object infringement of competition law by coordinating tender bids. However, the City Court of Copenhagen dismissed the claim for imprisonment in its judgment from February 2022; the Court did not find that the State Prosecutor had lifted the burden of proof that the individuals had acted with intent nor gross negligence.

Leniency

Since 2007, it has been possible to apply for leniency in cartel cases in Denmark.

The Danish leniency regime is similar to that of the European Union; thus, the first undertaking to satisfy the criteria will obtain withdrawal of charges, and the subsequent leniency applicants may obtain a reduction of the fine, provided they submit new, relevant information. Similarly, if an individual fulfils the criteria for leniency, he or she may avoid a custodial sentence or other type of punishment, and the subsequent leniency applicants may have their sentences reduced.

In general, plea bargaining does not exist under Danish law and, consequently, any reduction in custodial sentences to those who report a cartel subsequent to the first reporter will be decided by the courts.

To benefit from the leniency scheme, the applicant must satisfy the following criteria:

• the authorities are presented with new evidence enabling them 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 application for leniency; and
• the undertaking has not forced others to participate in the cartel.

As of 1 January 2018, a preliminary application (a marker) for leniency can be submitted, which must be finalised within the time limit determined by the competent authority. In that case, the application is deemed to have been submitted as at the date of submission of the preliminary application and, consequently, the preliminary application facilitates the possibility of reserving a place in the queue for leniency, while putting together a final application.

Damages for breach of competition rules

Introduction

The right to damages for loss as a result of breach of either Danish or EU competition rules is governed by the Act on implementation of the Damages Directive 2014/104/EU and the general Danish rules on damages.

The Act ensures a right to full compensation for competition law infringements and provides an extended limitation period of five years for bringing actions for damages in competition cases, compared to the general statute of limitation for damages in Denmark, which has a limitation period of three years.

The Act entered into force on 27 December 2016 and is not applicable to infringements committed before this date. Damages for infringements before the commencement date may be obtained only if the plaintiff proves negligence (culpa) or intent by the defendant; a causal and foreseeable loss; and absence of fault by the plaintiff.

Case law

To date, only a limited number of cases on damages for breach of competition law have been heard by the Danish courts. Most of those cases concern damages as a consequence of anticompetitive agreements.

Moreover, all those cases concern damages for infringements before the new Act on implementation of the Damages Directive entered into force. Consequently, case law gives no guidance on how the new damages claim regime works, as all cases are from before 2016.