This country-specific Q&A provides an overview to merger control laws and regulations that may occur in Denmark.
It will cover jurisdictional thresholds, the substantive test, process, remedies, penalties, appeals as well as the author’s view on planned future reforms of the merger control regime.
This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control-3rd-edition
The Danish merger control regime is governed by the Danish Competition Act, which is to a large extent based on the principles of EU merger regulation. The rules on merger control are administered by the Danish Competition and Consumer Authority (the DCCA) and the Danish Competition Council (the Council). The DCCA is the primary enforcer of the Competition Act in Denmark and decides most cases on behalf of the Council, whereas more complex phase II-cases are decided by the Council.
Under Danish merger rules, filing of a merger is mandatory if the jurisdictional thresholds are met. A merger which meets the Danish thresholds and is thus subject to scrutiny may not be implemented prior to clearance by the Danish competition authorities.
Though not mandatory, parties to a potential merger in Denmark are strongly encouraged to contact the DCCA before filing the notification in order to initiate pre-notification discussions on an informal basis. In practice, a pre-notification period may often last at least two to three weeks in simple cases, and four weeks or considerably longer in more complex cases.
However, while the discussions can be quite extensive and may last several months, in particular in complex merger cases, pre-notification discussions significantly increase the likelihood of the merger being cleared in Phase I.
Is mandatory notification compulsory or voluntary?
Prior notification to the DCCA is mandatory if the jurisdictional thresholds are met.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
Under Danish merger rules, it is prohibited to implement a merger prior to approval by the Danish competition authorities. Implementation of a merger prior to obtaining an approval from the DCCA may result in a penalty.
However, the implementation prohibition does not prevent the implementation of a public takeover bid or a series of transactions in securities, including securities that can be converted to other securities which can be traded in a market such as a stock exchange, whereby control is acquired from different sellers, provided that the merger is notified immediately to the DCCA and the acquirer does not exercise the voting rights attached to the securities in question or only does so to maintain the full value of his investment and on the basis of an exemption granted by the DCCA.
Moreover, the DCCA may exempt a merger from the prohibition to implement a merger before obtaining clearance if the DCCA finds that effective competition will not be impeded.
It is not possible to avoid breaching the prohibition by “carving out” the assets and legal entities of the target, as a transfer of assets, in so far as the assets allow the purchaser to develop a market presence, will be subject to the Danish merger rules itself.
Case law on pre-implementation in Denmark is scarce. However, on 31 May 2018 the ECJ rendered a preliminary ruling in C-633/16 Ernst & Young concerning the prohibition against merger implementation prior to clearance – so called “gun-jumping”. The ECJ held that the termination of a cooperation agreement does not constitute an implementing action covered by the prohibition. The ECJ stated that a merger is implemented only by a transaction, which – in whole or in part, in fact or in law – contributes to the change in control of the target undertaking.
However, at the same time the ECJ underlined the interaction between the EU merger regulation (Regulation 139/2004) and Regulation 1/2003 and made it clear that non-gun jumping behaviour may violate Article 101 and/or 102 TFEU despite not breaching the prohibition against pre-implementation.
Finally, on 20 June 2018, two Danish energy suppliers were fined DKK 4 million each for failure to notify a joint acquisition of a third undertaking back in 2010.
What types of transaction are notifiable or reviewable and what is the test for control?
The following types of transactions constitute a merger in Denmark:
- two or more previously independent undertakings amalgamating into one undertaking;
- one or more persons who already control at least one undertaking, or one or more undertakings, acquiring direct or indirect control of the entirety of, or parts of, one or more other undertakings by an agreement to purchase shares or assets or by any other means;
- or the establishment of a joint venture that will perform on a permanent basis all the functions of an independent business entity.
The decisive criterion in determining whether a transaction constitutes a merger is whether there is a lasting change or transfer of control in an undertaking, i.e. a shift in the decisive influence on the operating activity of a business for a period of at least one year. Intra-group mergers, i.e. internal reorganizations, do not constitute mergers within the relevant merger definition, as there is no change of control in such situations.
Control can be obtained through the transferal of 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. Control over an undertaking will often be achieved through the acquisition of shares or assets, but may also be obtained on a contractual basis, e.g. where the parties agree that one party is to exercise control over an undertaking without transferal of any shares or assets, or through rights attached to shares or contained in shareholder agreements. See further in Question 9 concerning full-function joint ventures.
In which circumstances is an acquisition of a minority interest notifiable or reviewable?
As described above, the acquisition of a minority shareholding may constitute a merger in so far as the acquirer obtains decisive influence on the strategic commercial behaviour of the undertaking. Apart from situations where legal or de facto control is obtained, the merger control rules do not apply to acquisitions of minority shareholdings.
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?
A merger must be notified to the DCCA where:
- the combined aggregate turnover in Denmark of all the undertakings concerned is at least DKK 900 million and the aggregate turnover in Denmark of each of at least two undertakings concerned is at least DKK 100 million; or
- the aggregate turnover in Denmark of at least one of the undertakings concerned is at least DKK 3.8 billion and the aggregate world-wide turnover of at least one of the other undertakings concerned is at least DKK 3.8 billion.
No form of local presence is required in order for a transaction to be subject to Danish merger rules as long as the jurisdictional turnover thresholds in Denmark are met.
The aggregate turnover of an undertaking is assessed at group level, i.e. it consists of the turnover of the parent company, subsidiaries, and affiliated companies. Intra-group turnover, however, is excluded. For central authorities, according to the Executive Order on calculation of turnover in the Competition Act, turnover shall be replaced by the aggregate gross operational expenditure in the preceding accounting year of the ministerial province concerned.
The turnover thresholds refer to revenue from all lines of business and not just revenue from the product markets directly influenced by the merger. However, if the transaction consists in acquiring control over part of one or more undertakings, the turnover threshold of the target company refers only to the parts which are the subject of the transaction.
As a main rule, the same jurisdictional thresholds apply to all sectors. However, mergers between providers of telecommunications (which are not, as such, subject to scrutiny under the Danish Competition Act) must be notified to the Danish Business Authority if the participating undertakings have a combined turnover in Denmark of at least DKK 900 million and the merger includes a public telecommunications network. The individual DKK 100 million turnover threshold does not have to be met in such cases.
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
The aggregate turnover of a party participating in the merger is calculated on the basis of the company’s latest audited annual account.
The aggregate turnover in Denmark includes the net turnover from the sale of goods and services to customers who resided in Denmark at the time of the sale. Any turnover from intra-group sales, however, is excluded.
The DCCA follows the general EU principles for accounting measures for valuation of assets.
Is there a particular exchange rate required to be used to convert turnover and asset values?
Turnover, including assets, calculated in foreign currency is to be converted into Danish currency (DKK) according to the average exchange rate in the company’s most recent financial year.
The average applicable exchange rates in 2017 were EUR 100/DKK 743.86 and USD 100/DKK 659.53.
In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?
Danish merger rules apply to transactions whereby a full-function joint venture is created on a lasting basis, or whereby a lasting change of control over an existing business creates a full-function joint venture.
According to a recent judgment of the ECJ (C-248/16), the creation of a joint venture shall, in either way, be subject to merger control only if it performs on a lasting basis all the functions of an autonomous economic entity. This involves that the joint venture must act independently of its parent companies and thus have its own access to or presence on the market.
Previous to this ruling, the DCCA – as similar to the European Commission - held that a change from a sole control to joint control of an existing undertaking was subject to merger control regardless of whether the full-function joint venture would perform on a lasting basis all the function of an autonomous economic entity. It may be expected that ECJ’s judgment will affect the Danish merger regime.
Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?
The Commission’s jurisdictional notice generally applies to matters regarding jurisdiction in Denmark. This includes, for example, successive transactions in which two or more parties acquire an undertaking jointly in one transaction and then succeed to splitting the undertaking in following transactions. According to the jurisdictional notice, if these transactions take place within a two-year period and concern the same parties, they are to be considered as a single concentration. Thus, only the latter transactions splitting the target undertaking are notifiable.
In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?
“Foreign-to-foreign” transactions, i.e. where the legal entities acquiring and being acquired are all located outside Denmark, are equally caught by Danish merger control rules in so far as the merging parties meet the Danish turnover thresholds in Denmark.
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies? Are there different tests that apply to particular sectors?
In essence, the substantive test applied by the DCCA to assess whether or not to clear a merger is whether the merger will significantly impede effective competition, in particular due to the creation or strengthening of a dominant position. When carrying out merger control, the DCCA will in general apply the same tests as the Commission.
Thus, the Commission’s merger practice and relevant case law from the EU Courts will apply. The Commission’s guidelines on the assessment of horizontal mergers as well as non-horizontal mergers will also provide an important contribution to the interpretation of the DCCA’s merger assessments.
Historically, the Council and the DCCA seemed to apply a more static, market-share based approach to findings of dominance and unilateral effects compared to the Commission. Over the last few years, however, there has been a change towards a more economic approach, and recent merger decisions thus show an increasing use of economic evidence such as diversion ratios and upward pricing pressure (UPP) calculations.
Furthermore, public statements from the DCCA indicate that the use of diversion ratios and UPP calculations is becoming the new standard in cases concerning consumerrelated markets, and that diversion ratios and UPP calculations may also be used for the purpose of defining the relevant markets. Nonetheless, during the initial assessment of a merger, the classic approach of defining markets and calculating market shares is still applied. The initial test may then be supplemented with a more economic assessment in case the DCCA finds that the merger could potentially give rise to concerns.
In general, the same substantive test applies to all sectors. However, it should be noted that mergers between providers of telecommunications (which do not meet the normal thresholds for merger control, cf. above) must be notified to the Danish Business Authority if the parties have a combined turnover in Denmark of at least DKK 900 million and the merger includes a public telecommunications network. The Danish Business Authority will consider whether such merger cases should be referred to the DCCA for further assessment. If a merger is referred to the DCCA, the DCCA will apply its usual substantive test applicable to all mergers.
Are factors unrelated to competition relevant?
Are ancillary restraints covered by the authority’s clearance decision?
Ancillary restraints are covered by the DCCA’s clearance decisions, but the DCCA is not obliged to carry out an assessment of such restraints. Consequently, the parties themselves must assess whether the individual terms of the merger agreement can be categorized as ancillary restraints. Practice in Danish and EU merger decisions as well as the Commission’s Notice on ancillary restraints serve as guidance.
The Council may, upon request from the parties, carry out an assessment of ancillary restraints when assessing the merger itself if the merger involves restraints giving rise to actual uncertainty, and such restraints have not been dealt with either in practice or by the Commission’s Notice. If the Council carries out an assessment of the ancillary restraints, the merger notification cannot be processed under the simplified procedure.
Depending on the circumstances, permissible ancillary restraints may include certain non-competition clauses, licence agreements, and purchase and supply obligations.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
A notification may be made once the parties have signed a merger agreement and must be made before the merger is implemented.
What is the earliest time or stage in the transaction at which a notification can be made?
In principle, the earliest time for notification is at the time when the parties have signed the merger agreement.
However, the parties are encouraged to contact the DCCA prior to submitting the notification (pre-notification). During the pre-notification phase, the DCCA may give its preliminary view on the merger and express potential concerns, thereby enabling the parties to address such concerns in advance. Pre-notification discussions may also reduce the number of questions asked by the DCCA after filing, thus increasing the likelihood of approval in Phase I.
In practice, the pre-notification phase will last at least two to three weeks in simple cases, and four weeks or more in more complex cases. Recently, we have seen cases where the pre-notification phase has lasted up to six months and where Phase I thus did not commence until the DCCA had no more questions and practically all of the case analysis had already been carried out. Consequently, in some cases the pre-notification phase essentially corresponds to a Phase I and a Phase II review.
Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?
It is usual practice – and recommended by the DCCA – to engage in pre-notification discussions prior to submitting a notification. The length of the pre-notification discussions varies and depends on the complexity of the merger, cf. Q17.
What is the basic timetable for the authority’s review?
The DCCA’s review is divided into a Phase I and a Phase II. Phase I begins once the notification has been deemed complete by the DCCA which includes, among other things, the receipt of the filling fee. See further about filling fees in Question 25.
If the parties submit a simplified notification form, the DCCA will have 10 business days to determine whether the merger meets the requirements for a simplified notification. If this is the case, the merger will be deemed complete at the expiry of the 10-day time limit at the latest. If necessary, the DCCA may request further information from the parties within the 10-day time limit. If the DCCA finds that the merger does not meet the requirements, the parties must submit a full notification.
The DCCA will also have 10 business days to determine whether a full notification is complete. If necessary, the DCCA may request the parties to submit further information within the 10-day time limit, in which case the merger will not be deemed complete until the DCCA receives this information (and perhaps further information as well).
Once the notification is deemed complete and Phase I commences, the DCCA will have 25 business days to determine whether the merger can be approved. Phase II begins if the DCCA decides to initiate further investigations of the merger. In Phase II, the DCCA will have 90 business days from the time of the decision to initiate further investigations to determine whether the merger should be approved or prohibited.
If the DCCA does not make a decision within the relevant time limit, this will be considered to be a decision to approve the merger.
Under what circumstances may the basic timetable be extended, reset or frozen?
The time limit under Phase I may be extended from 25 to 35 business days if one or more of the participating undertakings propose commitments, including revised commitments.
The 90-day time limit under Phase II may be extended by to 20 business days if one or more of the participating undertakings propose commitments, including revised commitments. The time limit may only be extended if, at the time when the commitments are proposed, less than 20 business days remain until a decision should have been made under Phase II.
The time limit under Phase II may also be extended upon a decision from the DCCA if one or more of the parties request or consent to the extension, which may not exceed 20 business days.
The time limits may be suspended if one of the participating undertakings files a complaint to the Danish Competition Appeals Tribunal concerning the administrative procedure, until the Appeals Tribunal has rendered a decision on the complaint.
Are there any circumstances in which the review timetable can be shortened?
In general it can be expected that the formal review timetable will be shortened if the parties initiate pre-notification discussions with the DCCA. However, the actual total processing time is probably largely unaffected, as a good part of the DCCA’s review is simply performed during the pre-notification stage.
Which party is responsible for submitting the filing?
Both parties to the merger are responsible for submitting the notification in the sense that both parties can be penalised for failure to file a merger. However, in practice, one of the parties will usually assume the responsibility of preparing and submitting the notification to the DCCA.
What information is required in the filing form?
The parties generally have to submit information about the companies involved in the transaction and provide a comprehensive description of the merger, including an assessment of the merger’s impact on the relevant market(s). Furthermore, the parties are required to submit information regarding the competition on and access to the relevant market(s).
The DCCA can generally require additional information about the transaction if the notification proves to be unsatisfactory.
In some cases, the parties may use the simplified procedure (short-form filing) instead of a full-form notification (standard filing). The simplified procedure requires less information to be provided to the DCCA.
If the simplified procedure is applicable, the parties are not required to provide an extensive and thorough assessment of the general terms of the merger or the general market conditions. However, the DCCA enjoys a wide margin of discretion when deciding whether a merger can be submitted under the simplified procedure or not.
Moreover, under both the simplified and the full-form procedure, the DCCA enjoys a wide margin of discretion when deciding which specific information is required. Finally, even if the requirements for submitting a simplified notification are fulfilled, the DCCA may, e.g. due to the mere size of the parties, still require a full-form notification, which will trigger an enhanced filling fee. See further about filling fees in Question 25.
Which supporting documents, if any, must be filed with the authority?
The parties will have to enclose the following documents when submitting the notification:
- the most recent audited annual financial statements and annual reports for each of the parties to the merger;
- copies of the final or most recent versions of all documents concerning the merger, regardless of whether the merger is brought about by agreement between the parties to the merger, acquisition of a controlling interest or a public takeover bid;
- analyses, reports, minutes of board meetings and similar documents related to the merger;
- flowcharts and similar overviews for each of the parties to the merger;
- a non-confidential version of the notification;
- documentation of payment of the merger fee; and
- a signed declaration in which the notifying party declares that the
information stated in the notification is correct.
The documents may usually be provided by both parties to the transaction, and must be submitted in Danish, or in English if permitted by the DCCA.
Is there a filing fee?
The filing fee for the simplified procedure is DKK 50,000.
The filing fee for a standard filing is 0.015 % of the parties’ combined turnover but will in no case exceed DKK 1.5 million.
A standard filling will have to be paid if the DCCA require a full-form notification, also if it would otherwise qualify for a simplified procedure.
Is there a public announcement that a notification has been filed?
Once the parties have made a notification to the DCCA, a press release will be published on the DCCA’s website. Furthermore, a press release will be published on the DCCA’s website when a merger has been approved or prohibited.
Does the authority seek or invite the views of third parties?
During the assessment of the merger, the DCCA will generally invite anyone interested (primarily customers, suppliers and competitors) to comment on the proposed merger. However, when the simplified procedure is applied, the DCCA will usually depend solely on the information submitted by the parties.
What information may be published by the authority or made available to third parties?
The pre-notification phase is confidential and no documents or information will be published, should the merger be cancelled by the parties.
The notification in itself (including supporting documents) will not be published on the DCCA’s website, but the DCCA will issue a press release shortly after receiving notification of a merger, which generally includes information such as the names of the parties, the type of transaction, and the relevant market(s).
If the DCCA carries out market tests etc., the DCCA may make a non-confidential version of the notification available to third parties.
A non-confidential version of the DCCA’s merger decision is published on its website shortly after a decision has been made.
Does the authority cooperate with antitrust authorities in other jurisdictions?
Under the EU merger control rules, the DCCA is obliged to cooperate with the Commission. Moreover, the DCCA cooperates with national competition authorities in other EU member states when a merger is subject to review in more than one member state. The parties to the merger will have to consent to the exchange of any confidential information between the national competition authorities.
What kind of remedies are acceptable to the authority?
In general, the DCCA can require the parties to take appropriate measures – structural or behavioural - in order to secure stable and efficient competition. The remedies acceptable to the DCCA include a full or partial disposal of assets, companies, subsidiaries and other proprietary interests.
Furthermore, the DCCA can request the parties to grant third party access to any supply systems, production machinery or distribution channels. As in the EU, the DCCA has a preference towards structural remedies as opposed to behavioural remedies, and in recent practice behavioural remedies are generally only used in combination with structural remedies.
The DCCA recently provided a model text for Divestiture Commitments and a separate model text for Trustee Mandate. Use of the model texts is not mandatory - they are intended to serve as guidance in preparing divestiture commitments and to ensure that the parties include all the relevant data when proposing commitments.
What procedure applies in the event that remedies are required in order to secure clearance?
If the DCCA finds that a merger gives rise to concerns, the parties may propose remedies in order to obtain an approval. Remedies should preferably be offered as early as possible. Remedies offered late in Phase II will extend the time frame of Phase II in order to grant the DCCA at least 20 business days to assess the remedies. The offered remedies will usually be market tested.
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
The parties will be punished with fines if they;
- fail to notify a merger/implement a merger prior to clearance;
- fail to submit a full-form notification within ten business days upon request from the DCCA in a situation where the DCCA has first approved a merger under the simplified procedure, but the approval was based on the parties’ submission of incorrect or misleading information;
- implement a merger despite a prohibition against implementation;
- fail to comply with a condition imposed or order issued by the DCCA as a precondition for approving the merger; or
- fail to comply with a requirement to separate undertakings or assets that have been taken over or merged or a requirement of cessation of joint control or any other measure capable of restoring competition when the DCCA has decided to prohibit a merger which has already been implemented.
On 20 June 2018, two Danish energy suppliers were fined DKK 4 million each for failure to notify a joint acquisition of a third undertaking back in 2012. In setting the fine, it was considered a mitigating circumstance that the undertakings informed the DCCA themselves of the breach of the obligation to notify the merger.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
If the parties provide insufficient information, the DCCA will usually grant the parties a deadline to submit the relevant information.
If the parties deliberately provide incomplete or misleading information, or fail to comply with an obligation to submit a full-form notification, this may result in the rejection of the notification and the imposition of a fine upon the parties.
Furthermore, an amendment to the Competition Act entered into force on 1 January 2018, introducing a “stop the clock” provision, under which the DCCA may suspend the time limit for a merger review if the participating undertakings fail to disclose information requested by the DCCA within the set time limit.
Can the authority’s decision be appealed to a court?
The DCCA’s decisions on mergers can be appealed to the Danish Competition Appeals Tribunal within four weeks after the parties have been notified of the decision. This option is only available to the addressees of the decisions.
Once a merger decision has been brought before and tried by the Danish Competition Appeals Tribunal, the parties, or anyone with a legal interest in the matter, may bring the case before the Maritime and Commercial Court within eight weeks after notification of the decision.
To this date, no decisions on mergers have been appealed to the Danish Competition Appeals Tribunal.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
There has been a trend towards a more economic approach in merger cases, and recent merger decisions from the DCCA illustrate an increasing use of economic evidence, especially in cases concerning consumer-related markets.
Furthermore, there is an increasing tendency among merging parties to withdraw notifications in cases where it seems highly likely that the merger will otherwise be prohibited. Thus, even though the DCCA has only prohibited one merger to date, this tendency may indicate that the DCCA’s approach to assessing mergers is becoming stricter.
Finally, we have seen an increase in the number of merger filings over the last couple of years. In 2017, the Danish competition authorities received 50 notifications and approved 49 mergers. One merger (JP/Politiken/Dagbladet Børsen) was withdrawn by the parties after the DCCA had conducted an extensive Phase II investigation. The DCAA did not prohibit any mergers in 2017.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
On 1 January 2018, a number of amendments to the Competition Act concerning, inter alia, merger control entered into force. The amendments introduced a “stop the clock” provision, under which the DCCA may suspend the time limit for a merger review if the participating undertakings fail to disclose information requested by the DCCA within the set time limit. This amendment corresponds to the EU merger regime.
Further, the amendments brings along changes and clarification to the regulation of merger commitments. According to the current wording of the Competition Act, the undertakings involved can propose commitments during the merger review and by doing so affect the time limits for the review. By altering the wording in the relevant provisions, the proposal seeks to ensure that only binding commitments, as opposed to non-committal suggestions, will obtain procedural effect.