Denmark: Merger Control
Legislation and competent authority
The Danish merger control regime was implemented in 2000 and is largely based on the principles of the EU merger control regulation. 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. So far, only one Danish decision concerning a merger (more specifically remedies) has been subject to court appeal: a merger case between two credit institutions, Nykredit Realkredit and Totalkredit, described in more detail below.
Pursuant to section 12a of the Competition Act, the following constitutes a merger:
- two or more previously independent undertakings amalgamating into one undertaking;
- 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 permanent 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 etc. Control may also be obtained through an agreement even where no shares, assets or voting rights are transferred, but where the undertakings concerned otherwise agree that one undertaking has 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 worldwide 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 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 2018, a total of 52 notifications were processed by the DCCA, 39 of which were notified under the simplified procedure and 13 were pursuant to the full-form procedure. In 2019, so far, a total of 25 notifications have been or are currently being processed by the DCCA, 17 of which have been notified under the simplified procedure and 8 are pursuant to the full-form notification procedure.
The 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 2 weeks prior to notification at the latest.
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, eg, granted permission to start negotiations with distributors and to conclude agreements with suppliers prior to the DCCA’s approval of the merger.
Time frame for the Authority’s assessment
There is no statutory time frame for the pre-notification phase under the Danish merger regime. As a result, the DCCA has a large time frame with no legislative time limits to assess the merger. In practice, it will often take two to five weeks to have a simplified notification declared complete, while it may take two to 10 weeks in case of a full-form notification. However, in some cases pre-notification may last considerably longer, eg, in the JP/Politiken/Børsen case, where the parties initiated the pre-notification process in January 2016, and the notification was declared complete on 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. In recent cases, the DCCA has moreover conducted the public hearing as a part of the pre-notification phase.
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, filings 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, albeit the fee is capped at 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 which are involved in the notified transaction; or
- the Danish Business Authority did not have basis for referring the merger to the DCCA.
Once the notification has been declared complete by the DCCA, Phase I commences. Phase I lasts up to 25 working days but 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, the DCCA 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, cf. above).
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 show that a time frame of two to three months from the first draft of the notification is submitted to the DCCA and until the DCCA has approved the merger should be expected in mergers without substantial overlaps, while clearance of more complex mergers may take around six to 12 months.
In 2018, 48 out of a total of 52 mergers in Denmark were approved in Phase I, and only four mergers underwent Phase II investigations. In 2019, 20 out of the 21 mergers approved so far have been approved in Phase I, and only one merger has been subject to a Phase II investigation.
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 simplified procedure will often be faster.
The 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 of the joint venture or of the transferred activities is less than 100 million kroner in Denmark, or where the total value of the assets or the turnover generated by the assets transferred to the joint venture is less than 100 million kroner in Denmark;
- mergers where one undertaking acquires sole control of another undertaking of which it already has joint control; or
- mergers where 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 are active on the same product and geographic market or on 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 on the same product and geographic market but hold a combined market share below 15 per cent in Denmark; or
- one or more of the parties to the merger is active on a downstream or upstream product market to a market where another party is active, provided that neither their individual nor their combined market share on these markets is 25 per cent or more in Denmark.
However, 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 added costs relative to the size of the transaction (if the target is small).
In a recent case, Arbejdsmarkedets Tillægspension/Danica Ejendomsselskab ApS (2017), 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.
A decision that the parties cannot file a simplified notification may be appealed to the Tribunal but is rarely overturned due to the wide discretion margin of the DCCA in deciding on the notification form. In the Dansk Supermarked/Wupti case from 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, and the District Court confirmed the DCCA’s and the Tribunals decisions in December 2018.
Notification forms are available on the DCCA’s website, www.kfst.dk. 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 SIEC 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 from 2012, the market shares were very high (above 90 per cent on some markets), and the use of diversion ratios and 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 from 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 from 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’; suppliers had available capacity in the short run and the long run; and large tenders played a great 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 from 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, the DCCA’s investigations included both a diversion ratio analysis and an illustrative price rise (IPR) analysis. Despite the parties’ relatively high post-merger market shares (30–40 per cent), the Council found that the merger, overall, would not significantly impede competition and approved the merger unconditionally.
The vast majority of Danish mergers are approved. So far, only one merger, 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 at the latest. Immediately following the DCCA’s decision, Tican announced the sale of its activities to a German company, and 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 on 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 the merger 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 TFEU). 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.
Previous to the European Court of Justice’s judgment in Case C-248/16, Austria Asphalt, the European Commission as well as 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 apartment no. 2 in Randers Storcenter 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 in order to obtain an approval. Usually, such commitments will be discussed and agreed upon in Phase II.
According to the Danish 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.
After the introduction of the Danish merger control regime in 2000, behavioural remedies were often accepted by the Council – even in cases where the merged entity had a market share close to 90 per cent in major markets, the Council was willing to rely heavily on behavioural remedies. However, controlling the merged entity’s compliance with behavioural remedies was difficult and required substantial resources from the DCCA. Also, the decisional practice showed that behavioural remedies often gave rise to additional case-handling – either because the remedies were violated by the merged entity, or because the merged entity tried to have the remedies changed or removed with reference to reduced market shares or a new market situation. Owing to this, the more recent decisional practice shows greater reliance on structural remedies, alone or in combination with behavioural remedies.
In EY/KPMG from 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 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. The Council’s decision was, accordingly, set aside.
The case is the first example of a gun-jumping case in Denmark, and with the ECJ’s ruling in the case, the ECJ has provided guidance on the stand-still obligation in mergers and clarification in relation to gun-jumping.
In the Danish Agro/Dan Agro Holding merger from 2015 concerning 12 different Danish agricultural markets, the DCCA examined whether the merger would facilitate coordination between the post-merger entity and its main competitor as the two main post-merger competitors would obtain a combined market share of 90–100 per cent in a largely transparent market. The merger was approved subject to a combination of structural and behavioural remedies, including the divestiture of a number of Danish Agro’s feed factories, commitment to sell certain feed products on wholesale basis allowing other players to be active on the retail market, commitment to sell certain products to third parties at cost price, and establishing Chinese walls between Danish Agro’s upstream and downstream activities. The Danish Agro/DLA Agro merger was also cleared by the DCCA at the same time. The merger concerned the wholesale and retail levels in the value chains of four different markets and raised vertical restraint concerns. Commitments making it possible for other suppliers of agricultural inputs to purchase the products on the same conditions as Danish Agro and a commitment to set up Chinese walls within the organisation were submitted to the DCCA following which the merger was approved.
In the Boxer/SE AMBA merger from 2017 concerning the markets for retail provision of TV services to end users and for retail supply of fixed internet access services to end users, the Council found that the merger would significantly impede effective competition. According to the Council, the merger would give rise to unilateral effects on the market for retail provision of TV services to end users in the form of reduction of supply or higher prices of a la carte products. On the market for retail supply of fixed internet access services to end users, the merger could give rise to unilateral effects in the form of tying the supply of fixed internet access with the supply of TV services provided through the Digital Terrestrial Television (DTT) network. In order to address these concerns, the merging parties offered remedies, including a commitment for SE to continue to supply the a la carte products that Boxer supplied at the time of the notification and a commitment not to increase prices. The Council assessed that the commitments were sufficient to address the possible effects identified by the DCCA. The case is notable for a variety of reasons. For instance, the commitments are set to expire in April 2020 when Boxer’s DTT licence expires, which is less than three years after the authorities’ approval of the merger.
If a merger is approved with remedies, such 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. However, since 2004, competition has increased on the Danish electricity market due to 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 – which was 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.
In 2018, two mergers were cleared with remedies (Global Connect/Nianet and Tryg/Alka). In the Global Connect/Nianet case, 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 the Tryg/Alka case, Tryg also offered commitments in order to address the concerns raised by the Council. The Council found that the merger would significantly impede competition in the market for property and casualty insurance (non-life insurance) for private consumers. Tryg, thus, offered three behavioural commitments for a duration of 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 annually pay 5 million kroner to Forsikringsguiden (an independent insurance and price comparison website). The Council, accordingly, approved the merger.
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 the aspects of the decision. Also, it is 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.