Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The main legislation on Danish merger control is contained in the Danish Competition Act (Consolidated Competition Act No. 155 of 1 March 2018), which is modelled on EU competition law. The Competition Act can be accessed online at www.kfst.dk, which is the website of the Danish Competition and Consumer Authority (DCCA).
In the field of merger control, the provisions of the Competition Act are accompanied by the Executive Order on the Calculation of Turnover in the Competition Act (No. 808 of 14 August 2009) and the Executive Order on the Notification of Concentrations (No. 1005 of 15 August 2013). The European Commission’s jurisdictional notice and ancillary restraints notice provide guidance.
The DCCA is the principal enforcer of competition law in Denmark. The Competition Council, which is part of the DCCA, consists of seven members appointed by the Minister for Business and Growth: a chairman, a vice chairman and two additional members with knowledge of competition law or other relevant academic background, two members with managerial background from the business world, and one member with special knowledge of consumer affairs. The Competition Council has the overall responsibility for the administration of the Competition Act and regulations issued thereunder. In addition, the Council shall make decisions on matters of principle or of particular importance.
The DCCA, which is also the secretariat of the Competition Council, is in charge of day-to-day administration of the Competition Act. The DCCA prepares the decisions of the Council and issues decisions in matters not dealt with by the Competition Council. The DCCA is divided into units in charge of different areas of business and industry. The DCCA also has transversal units and a management and administration secretariat.
The decisions of the competition authorities are subject to appeal before the Competition Appeals Tribunal, which is made up of a Supreme Court judge, and four other members with expertise in either economics or law. The Appeals Tribunal forms part of the administration and its decisions are in turn subject to appeals by the undertakings before the ordinary courts.Scope of legislation
What kinds of mergers are caught?
The provisions of merger control apply to ‘concentrations’. In accordance with the EU Merger Regulation, a concentration will be deemed to arise where either:
- two or more previously independent undertakings merge; or
- one or more persons already controlling at least one undertaking, or one or more undertakings, acquire, whether by purchase of securities or assets, by contract or by any other means, direct or indirect control of the whole or parts of one or more other undertakings.
The preparatory documents accompanying the Competition Act explicitly refer to the European Commission’s notices on merger regulation.
What types of joint ventures are caught?
The creation of a full-function joint venture (ie, a joint venture performing all the functions of an autonomous economic entity on a lasting basis) also constitutes a concentration. In this respect, the preparatory documents make explicit reference to the European Commission’s notices.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
The Competition Act contains a precise definition of control that is consistent with the law and practice under the EU Merger Regulation: control shall be constituted by rights, contracts or any other means that, either separately or jointly, confer the possibility of exercising decisive influence over an undertaking.
In cases where outright legal control is not acquired, rights attached to shares or contained in shareholder agreements, board representation, ownership and use of assets and related commercial issues may be considered. In the case of the acquisition of minority shareholdings, the Competition Council will assess the situation by looking at the strength of voting rights and other factors. Such considerations may lead to the conclusion that the possibility of exercising control as defined exists. It does not matter whether control has actually been exercised. The European Commission’s practice will be followed.Thresholds, triggers and approvals
What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?
The merger control provisions apply to concentrations where either:
- 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 of the 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 preparatory work to the Danish Competition Act states that ‘undertakings concerned’ is to be interpreted in accordance with the Commission’s practice. Moreover, it is stated explicitly in the Competition Act that where the concentration consists of the acquisition of parts (regardless of whether they are constituted as legal entities such as assets constituting a separate business) of one or more undertakings, only the turnover relating to the parts that are the subject of the transaction will be taken into account with regard to the seller or sellers. Two or more transactions that take place within a two-year period between the same persons or undertakings will be treated as one and the same concentration arising on the date of the last transaction.
Concentrations below the thresholds may in exceptional circumstances be referred to the European Commission under article 22 of the EU Merger Regulation. To date, no such concentration has been referred to the Commission.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
The filing of merger notifications in Denmark is mandatory if the turnover thresholds are met.
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
Foreign-to-foreign mergers satisfying the turnover thresholds are subject to Danish merger control even where no actual effects in the Danish market can be shown. The thresholds have been defined so as to require actual turnover in Denmark (generally interpreted as sales to customers located in Denmark) of a substantial magnitude.
Are there also rules on foreign investment, special sectors or other relevant approvals?
On 1 July 2015, a sector-specific threshold was introduced. Within the sector of public electronic communications networks, the second limb of the primary thresholds (ie, that each of at least two of the undertakings concerned is more than 100 million kroner) has been abolished. If a merger is within this sector, and the combined aggregate turnover in Denmark of all the undertakings concerned is more than 900 million kroner, the jurisdictional threshold is met and the merger must be notified (regardless of the aggregate turnover of the individual undertakings, see question 5).
Furthermore, exemptions apply with regard to the calculation of the turnover of (i) trade associations, (ii) financial institutions and (iii) the Danish State, Regions and Municipalities. These exemptions are set out in the Executive Order on the Calculation of Turnover in the Competition Act (No. 808 of 14 August 2009), sections 6 to 8.
Foreign Direct Investment screening mechanisms apply to the weapons industry and the financial sector. However, the central administration is currently working towards the introduction of a more general Foreign Direct Investment regime.
The acquisition of a controlling shareholding in a public limited liability company registered on the Copenhagen Stock Exchange creates an obligation to make a general bid to purchase the remaining shares.
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
Concentrations falling within the thresholds must be notified to the DCCA after the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest; and in any event before implementation.
Fines may be imposed for failure to notify and unlawful implementation. To date, three fines in the range of 4 million to 6 million kroner have been imposed on companies that had failed to notify a merger to the DCCA.
Which parties are responsible for filing and are filing fees required?
In principle, all the parties involved in a concentration are responsible for filing. In practice, however, the filing of acquisitions is often made by the acquiring party. The fee amounts to 50,000 kroner for simplified notifications and 0.015 per cent of the parties’ turnover for non-simplified notifications. However, the filing fee is capped at a maximum of 1.5 million kroner.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
A concentration that is notifiable to the DCCA must not be put into effect before it has been approved by the DCCA or the Competition Council’s time limits have expired.
This creates waiting periods of 25 working days (Phase I) or additionally 90 working days (Phase II) after the expiry of the first waiting period. A Phase I review can be extended by 10 working days if the undertakings propose new or revised commitments. A Phase II review can be extended by 20 working days in three scenarios:
- if the undertakings propose new or revised commitments late in the process (ie, if 70 working days or more have passed from the decision to initiate Phase II);
- at the request by the parties; or
- with the parties’ consent.
Hence, the maximum extension in Phase II is 2 × 20 working days (ie, if 70 working days or more have passed from the decision to initiate Phase II). The DCCA must declare whether a notification is complete within 10 working days. In practice, the DCCA may have several additional questions and sometimes even begin negotiations with the parties on possible commitments with the effect that the deadlines are not triggered.
There are two exceptions to this rule: first, a (conditional) derogation may be granted by the DCCA; second, an exception applies in respect of public bids that have been notified, provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the DCCA.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
Fines may be imposed for unlawful implementation of a concentration prior to clearance. However, since the introduction of merger control in Denmark in 2000, the Competition Authority has only once used its powers to ask the Public Prosecutor’s Office to pursue matters of failure to notify. (We are aware of at least one instance where the parties to a ‘foreign-to-foreign’ transaction notified considerably later than the one-week deadline, which applied at the time.)
Generally, the size of any fine will depend on factors such as the size and turnover of the undertakings concerned, the duration of the violation and whether the merger has impeded effective competition in the relevant market. Aggravating and mitigating circumstances may also be taken into account. However, the fine imposed can amount to up to 10 per cent of the undertaking’s revenue. Substantive violations of the competition rules may trigger fines according to the following base amounts: up to 4 million kroner for minor violations, 4 million to 20 million kroner for serious violations, and more than 20 million kroner for very serious violations. However, fines for procedural infringements are likely to be significantly lower than these base amounts, probably in the magnitude of some 10,000 to 500,000 kroner.
Where clearance is subsequently denied or made conditional, the transaction will have to be annulled or otherwise reopened and modified.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
In principle, the same sanctions are applicable to notifiable foreign-to-foreign mergers as to other notifiable mergers. However, the administrative practice and case law hold no examples of sanctions for filing late in foreign-to-foreign merger cases.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
Solutions such as ‘ring fencing’ or ‘hold separate’ would normally not be acceptable to merit a derogation from the ‘stand-still’ obligation. Most often, the best way to proceed is to demonstrate the absence of any effect on Danish markets, which may likely accelerate the process of obtaining an early clearance decision.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
The Competition Act does not prevent the implementation of a public bid that has been notified to the DCCA, provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the DCCA.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
Filing under the Competition Act requires the use of a specific form known as Annex 1. The form requires the provision of information about the parties, the markets, customers, suppliers and competitors, and is only a little less detailed than the form CO used under the EU Merger Regulation. For straightforward cases that are unlikely to raise competition concerns, a simplified ‘short-form’ filing using a form known as Annex 2 is also possible. This form is similar in structure to Annex 1 but requires less information to be submitted. Both forms require the lodging of a non-confidential version, which is intended to be used for market testing.
Fines may be imposed for supplying wrong or missing information. Fines of 50,000 kroner have been imposed in two unrelated merger cases involving the submission of incomplete information in one instance and omitting to correct previously submitted incorrect information in another.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
It is clear that pre-notification consultations with the DCCA may and should take place. Very often these consultations can have a significant impact on the outcome and provide the undertakings concerned with the opportunity to address possible competition concerns early in the process so as to ensure that the review process is accelerated. The informal pre-notification consultation is often initiated on the basis of a briefing paper or an early draft of the notification, which is shared with the DCCA.
The time frames (Phases I and II) are inspired by article 10(1) and (3) of the EU Merger Regulation. The Competition Authority may approve a concentration before the expiry of the initial investigation (Phase I). The Competition Authority cannot prohibit a concentration within Phase I but may initiate an in-depth investigation (Phase II) if there are serious doubts regarding the concentration’s compatibility with the Competition Act. The Competition Authority may ‘stop the clock’ at any time during the formal review periods in Phase I and II if the parties do not provide requested additional information within the time frame given.
What is the statutory timetable for clearance? Can it be speeded up?
The timetable for clearance is the same whether the merger is filed under the simplified procedure or the full-form notification procedure. Within 10 working days of the filing, the DCCA shall either declare the notification complete - thereby confirming that the time began running upon notification - or specify any missing information to be submitted. In cases of simplified notifications, the Competition Authority has 10 working days to decide whether to accept the simplified procedure or demand a full-form notification.
Unless the notification has been accepted as complete during the pre-merger notification consultation, the parties are often sent such requests, which will in effect extend the waiting period.
The DCCA must make its decision on the substance within 25 working days (Phase I) of the receipt of a complete notification. The Phase I deadline of 25 working days can be extended to 35 working days (extended Phase I) if one or more of the participating undertakings are proposing commitments. The Competition Council will decide to either approve the concentration or initiate further proceedings. In the latter case, the Competition Council must make a final decision within 90 working days (Phase II) after the expiry of the original 25 working days.
The time limit of 90 working days may be extended by 20 days if the undertakings propose new or revised commitments at a late stage (ie, if 70 working days or more have passed from the decision to initiate Phase II). The review period is thereby deadline is then extended to 110 days irrespective of the number of days remaining of the original deadline. The deadline can also be extended by up to 20 days on request by the parties or with the parties’ consent.
Similarly to the EU Merger Regulation, the Danish merger control scheme builds on close contacts as early in the process as possible. Cases that do not pose any substantive issues can often be cleared according to a simplified procedure. After a complete notification has been received, the DCCA decides within 25 working days whether a concentration may be approved on the basis of a simplified procedure. In practice, an approval on the basis of a simplified procedure will be given quickly, depending on the nature of the pre-notification.
Substantive assessmentSubstantive test
What is the substantive test for clearance?
The substantive test to be applied by the Competition Council is whether the concentration significantly impedes effective competition (SIEC), in particular as a result of the creation or strengthening of a dominant position. Unless this is the case, the concentration must be approved.
In the case of full-function joint ventures, which may also have the object or effect of coordinating the competitive behaviour of undertakings that remain independent, such coordination shall be appraised in accordance with the criteria of the provisions of the Competition Act applying to anticompetitive agreements (similar to article 101(1) of the Treaty on the Functioning of the European Union (TFEU)).
Is there a special substantive test for joint ventures?
The substantive test for clearance of concentrations that have as their object or effect the coordination of the competitive behaviour of undertakings is similar to that set out in the EU Merger Regulation. Such aspects of coordination shall therefore be appraised in accordance with the criteria laid down in the provisions of the Competition Act, which are the domestic equivalents of article 101(1) and (3) TFEU. This test applies in addition to the SIEC test.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
The DCCA and the Competition Council tend to follow the European Commission’s practice with regard to the applicable ‘theories of harm’.Non-competition issues
To what extent are non-competition issues relevant in the review process?
The Competition Authority is expected to apply the above substantive test without taking account of non-competition issues.Economic efficiencies
To what extent does the authority take into account economic efficiencies in the review process?
There is no express efficiency defence. However, section 1 of the Competition Act states that the purpose of the Competition Act is to promote ‘efficient resource allocation’ and, consequently, it can be argued that efficiency should be considered. In practical terms, an efficiency argument can be raised if available, and will be considered in the assessment of the case. However, in raising the efficiency defence the undertakings concerned might risk the competition authorities interpreting the argument as an indication of increased dominance, as the efficiency gained will make competition even more difficult for competitors that do not benefit from similar efficiencies. Therefore, the efficiency defence should be applied with due caution.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The transaction may be approved, approved with conditions, or prohibited. Commitments may be offered to eliminate competition concerns. The Competition Council has the power and duty to impose conditions; therefore, it may not, according to the principle of proportionality, prohibit the transaction if the parties can design suitable remedies that eliminate competition concerns. The parties to the merger might therefore be in the position of deciding whether to proceed with the transaction on the basis of remedies accepted by the Competition Council.Remedies and conditions
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
If the competition authorities assess that the concentration cannot be approved without conditions, the undertakings concerned will enter into a dialogue or negotiation with the competition authorities to agree on suitable commitments. The commitments agreed with the competition authorities will be formulated as conditions in the approval of the concentration. Such conditions can be appealed separately after approval of the concentration, even though they are agreed during the negotiations with the competition authorities. The Competition Authority may attach conditions including divestment orders or behavioural remedies for clearance of a concentration and may also issue orders to ensure that the parties fulfil these.
What are the basic conditions and timing issues applicable to a divestment or other remedy?
Based on the administrative practice to date, it appears that where relevant, divestments are conducted by way of an irrevocable power of attorney granted to an independent trustee. The trustee will generally be entitled to sell the relevant activity within a certain period, although the length of this period will not be publicly disclosed. In one case, the DCCA has accepted that if it is not possible to fulfil the divestment order within a certain period, the remedy is considered to have lapsed.
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
Only on rare occasions have remedies been necessary in foreign-to-foreign mergers. However, in one foreign-to-foreign merger with the acquirer having a subsidiary and the target having sales in Denmark, the parties were required to give an undertaking not to discriminate between customers to avoid a possible vertical foreclosure problem.Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
It is for the undertakings concerned to assess whether any individual terms of the merger agreement are to be categorised as ancillary restrictions. The practice in previous Danish merger decisions, as well as decisions made by the Commission, may serve as guidance to the undertakings in their assessment of ancillary restrictions associated with a merger. If a merger involves restrictions of a nature that is not covered by prior practice or that has not been dealt with by the Commission in its Notice on restrictions directly related and necessary to concentrations, the Competition Council may, upon request from the parties, assess the ancillary restrictions at the same time as it assesses the merger itself. Merger notifications in which the undertakings concerned request an assessment of ancillary restrictions cannot be processed by the simplified procedure.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
Depending on the particular circumstances, the DCCA may conduct market tests. Customers and competitors also frequently submit their observations to the DCCA. In practice, these processes may well affect the design of any remedies attached to a conditional clearance decision.
Third parties do not have a right to appeal the DCCA’s decisions to the Competition Appeals Tribunal, but can lodge a complaint with the courts.Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
The DCCA will make a public statement about the fact that a merger notification has been made and invite comments from third parties. The statement includes information on the identity of the parties, the nature of the concentration and the affected industry. As part of the review process, the DCCA will often seek comments from the market and perhaps perform ‘market testing’.
All merger decisions are published on the DCCA’s website. Generally, the DCCA issues press releases after it adopts decisions in important cases. Pre-merger notification consultations take place secretly. Confidential information is always omitted in public versions of decisions.Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?
Subject to reciprocity, the DCCA may exchange information with competition authorities in other countries. This right applies explicitly to information covered by the DCCA’s secrecy obligations. An agreement dated 16 March 2001 (as amended on 9 April 2003) exists between Denmark, Iceland, Norway and Sweden for exchange of data. The DCCA also generally cooperates with the Commission and competition authorities in other member states.
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
The Competition Authorities’ decisions may generally be appealed to the Competition Appeals Tribunal and its decisions may in turn be appealed to the ordinary courts by the undertakings.
Commitments in merger cases agreed to by the undertakings during negotiations with the competition authorities can be appealed independently to the Competition Appeals Tribunal. A recent example is the Nykredit case in which the Nykredit Group claimed that commitments made in connection with a 2003 merger had been fulfilled after some eight years in force. This was challenged before both the Competition Appeals Tribunal and the Maritime and Commercial Court, and appealed to the Supreme Court. The Supreme Court recently ruled that the commitments were given without any time limit, as such a time limit was not explicitly stated as part of the commitments. In its ruling, the Supreme Court made it clear that the commitments form part of the basis for the authority’s decision and that it is the undertakings that bear the risk of any ambiguities.Time frame
What is the usual time frame for appeal or judicial review?
To date, no merger decisions have been subject to judicial review. In most antitrust cases, an appeal to the Competition Appeals Tribunal should be expected to take between three and 12 months, while a subsequent appeal to the ordinary courts can take between one and three years.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
From 2000, when merger control was introduced in Denmark, until 1 October 2010 when thresholds were lowered, the Danish competition authorities approved approximately 95 mergers; approximately four out of five were cleared without commitments or other conditions, and the rest were approved after the undertakings concerned agreed to commitments. Since 1 October 2010 (and the introduction of new merger rules), the Danish competition authorities have approved approximately 260 mergers. So far, only one merger has been prohibited formally (in 2008), but we are aware of some five to 10 cases that were abandoned late in the filing process in recognition of the fact that substantive assessment posed serious challenges.
For mergers, the authorities’ enforcement concerns will always depend on the concentrations notified. Over the past year or so, financial services and foodstuffs have continued to dominate the area, but industries such as energy, transport and telecommunications remain as important as always.
Another area of focus is notification - specifically, striking the right balance between allowing the use of the simplified procedure as opposed to requiring a full notification.Reform proposals
Are there current proposals to change the legislation?
Most recently, amendments to the Competition Act were made on 19 December 2017. In the field of merger control, these changes have had an impact on the time limits in relation to Phase I and II. The amendments entered into force on 1 January 2018. Currently, there are no proposals or plans for further amendment of the legislation.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?Key developments of the past year36 What were the key cases, decisions, judgments and policy and legislative developments of the past year?
A recent trend in Danish merger control is the increased application of economics and econometric models in the DCCA’s merger decisions. The DCCA is thereby following in the European Commission’s footsteps.
The use of comprehensive data collections and econometric modelling are particularly apparent in two recent decisions by the DCCA:
- in SE/Boxer (2017), a merger between two Danish television and broadband providers, the DCCA attempted to estimate the consumers’ demand and price sensitivity with an econometric model. Additionally, the DCCA made a comprehensive mapping of the Danish television providers’ geographical coverage; and
- in Tryg/Alka (2018), a merger between two Danish insurance companies, the DCCA used insurance data to estimate the relative price differences between Danish insurance companies and did also attempt to estimate an entire demand system for subsequent use in a merger simulation.
For the parties and their legal advisers, this trend illustrates the importance of teaming up with economists in all but the ‘clear-cut’ concentrations.
Otherwise, the trend continues that the vast majority of merger notifications continue to be filed in the simplified format and are subjected by the authority to a ‘simplified review’ without any real market investigation.
Finally, minor amendments are expected to be made in the Executive Orders on the Notification of Concentrations and the Calculation of Turnover to ensure conformity with the equivalent provisions of EU law. Also, as in other jurisdictions, the Danish Competition and Consumer Authority have begun to consider the introduction of a ‘size-of-the-transaction-test’ as part of the merger thresholds. According to the authority’s ‘pre-hearing proposal’, a concentration (below the current thresholds) may become notifiable if the following cumulative conditions are met: the transaction value exceeds a new threshold of presumably 300 million kroner; the target company has significant activities in Denmark; and the merging entities have an aggregate annual revenue in Denmark in excess of presumably 900 million kroner. To adopt the proposal, a bill for the amendment of the Competition Act would have to be introduced, which is not yet scheduled.