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) are responsible for the administration of Danish merger rules. The DCCA prepares all cases and decides less complicated cases on behalf of the Council. Phase II mergers are generally decided by the Council.
The decisions of the Council 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 mergers 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 on the operations of the undertaking. The acquisition of a minority shareholding may also constitute a merger insofar as the acquirer obtains decisive influence on the undertaking, for example, through agreements concerning voting rights, or if important decisions require a qualified majority or may be vetoed.
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 the aggregate turnover in Denmark of each of at least two undertakings concerned is at least 100 million kroner; or
- 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.
The concept of undertakings concerned in the Competition Act – the direct participants in a merger – is identical to the EU concept, and the Commission’s practice and the Consolidated Jurisdictional Notice provide guidance.
If the jurisdictional thresholds are met, prior notification to the DCCA is mandatory. In 2015, a total of 41 notifications were filed with the DCCA, 28 of which were notified under the simplified procedure and 13 pursuant to the full-form procedure.
The timing of the notification
Notification to the DCCA may be made when there is a merger agreement (which may be subject to conditions) between the parties, a takeover bid has been made public, or a controlling interest has been acquired. However, a mere letter of intent will usually not be sufficient for the DCCA to accept the notification. The notification must be made before the merger is carried out.
Time frame for the Authority’s assessment
There is no legal requirement for a pre-notification phase. Once the notification has been filed, the DCCA must declare the notification complete or specify any missing information within 10 working days. However, the DCCA recommends that the parties contact the DCCA as soon as possible after it has been established that the merger is notifiable. During the pre-notification phase, the drafting of the notification can be discussed with the DCCA, and draft notifications can be submitted to and reviewed by the DCCA. In practice, it will often take from two to ten weeks to have a full-form notification declared complete, and it may take three to five weeks in case of a short-form notification.
Since August 2013, fees for merger filings 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 notification is 0.015 per cent of the combined turnover in Denmark of the undertakings concerned. The fee is capped at 1.5 million kroner. The fees are not reimbursable.
Once the notification has been declared complete by the DCCA, Phase I, 25 working days, begins (however, the DCCA may, as a new thing, extend Phase I to 35 weekdays if commitments are proposed by the parties under Phase I). If the merger is not approved in Phase I, including for reasons of time, the DCCA will open Phase II.
A Phase II investigation is more thorough, and the DCCA will usually contact customers and other market participants if this has not already been done in Phase I. If commitments are to be discussed, Phase II will most often be initiated – but it may be closed quickly once an agreement on commitments has been reached. Phase II investigations must be completed within
90 working days from 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. Further, the Council 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.
In 2015, 38 out of a total of 41 mergers in Denmark were approved in Phase I.
Formats of the notification
Since 2010, a full-form procedure and a simplified notification procedure have been available: both inspired by the EU merger regime. Under a simplified notification, less market data need to be submitted, and the simplified procedure will often be faster because a decision can be expected within 25 working days of the notification being declared complete.
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 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 are merged or one or more undertakings acquire sole or joint control of another undertaking and in which:
- none of the parties have activities in the same product and geographic market or in a product market which is downstream or upstream from a product market in which another party to the merger is engaged;
- two or more of the parties to the merger are active in the same product and geographic market, but will have a combined market share below 15 per cent in Denmark; or
- one or more of the parties to the merger are active on a downstream or upstream product market where another party operates, 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 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). 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 whether a simplified notification may be submitted. In Dansk Supermarked/Wupti from April 2016, the Tribunal ruled in favour of the DCCA’s decision of 2015 stating that the parties should make a full-form notification of the merger as – based on information in the parties’ draft notification – the DCCA could not ensure that the conditions for a simplified notification were met. By ruling in favour of the DCCA, the Tribunal confirmed that the DCCA has a wide margin of appreciation in the matter.
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.
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 increased its use of economic evidence in Danish merger control proceedings.
In the Arcus/Pernod Ricard case from 2012, where the market shares were very high (above 90 per cent on some markets), the use of diversion ratios and UPP calculations were central to the DCCA’s analyses and approval of the transaction subject to divestiture.
A diversion ratio analysis was also central in the approval of the JYSK/IDdesign merger from the autumn of 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 (HHI) 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 certain critical mass were found to apply a competitive pressure on the parties.
Most recently, in two merger cases involving Danish Agro from 2015, the DCCA once again applied a diversion ratio analysis (which indicated that the parties were close competitors) and UPP and illustrative price rise (IPR) methods (which indicated that there was no risk of substantial price increases post-merger). The mergers were both cleared subject to commitments.
Public statements from the DCCA indicate that the use of diversion ratios and upward pricing pressure (UPP) calculations is becoming the new standard in cases concerning consumer-related markets, and that diversion ratios and UPP calculations may also be used for market definitions. However, the classic approach is still used in the initial assessment of a merger. Insofar as the DCCA finds that the merger could potentially give rise to concerns, it may supplement the classic approach with a more economic test including diversion ratios and UPP calculations. Moreover, as shown by the JYSK/IDdesign and EY/KPMG mergers, the DCCA may also use diversion ratios and UPP calculations to check for concerns even if a traditional market share and entry barrier approach does not indicate concerns.
Until now, the vast majority of Danish merger cases have been approved; in fact, 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 which have been repealed by the parties themselves prior to a decision by the Council. An example is the contemplated merger between the Danish abattoirs Danish Crown and Tican 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 repealed. The reason for this was a merger agreement between Danish Crown and Tican, according to which 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 repealed.
Similarly, a merger notification from Stofa and Canal Digital submitted in February 2011 was repealed by the parties in July 2011. The parties were both active within the cable TV market and repealed the notification shortly after receiving a draft decision by the Council. The process indicates that the Council would not have cleared the merger.
As regards remedies, most cases are cleared without remedies. In 2015, for instance, only two out of 40 approvals entailed remedies.
As with joint ventures under EU law, the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity 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 appraised 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.
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 owner interests;
- the grant 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. To remedy these concerns, the DCCA improved access to the market for the new member of KPMG International/Accura Tax – by accepting 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.
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 divestment 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.
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 because 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. On the other hand, 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, inter alia, because new regulation required it to hold more capital. In June 2014, the Supreme Court found that the remedy was not limited in time and did not cancel the remedy. The case shows that forcing a cancellation of a remedy through the courts may be difficult.
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, there could be a risk that the approval process will 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. For a merger filing to be complete, the parties must therefore also provide a non-confidential version of the filing.
As with EU notifications, Danish merger approvals automatically cover ancillary restrictions. The DCCA will not deal with ancillary restrictions to the merger, and it is up to the parties to assess whether there are any ancillary restrictions that need to be evaluated by the DCCA. The Commission’s guidelines and practice 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 ordinary 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 – for example, remedies imposed by the authorities. 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.