The object of the amendments to the Danish Competition Act (konkurrenceloven) is to implement the so-called ECN+ Directive designed to make national competition authorities more effective enforcers of the competition rules. The bill includes multiple substantial amendments to the enforcement rules in the Competition Act.
In December 2018, the EU enacted a directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market. The deadline for implementation was set at 4 February 2021.
In December of 2020, the Danish Government proposed an amendment to the Competition Act designed to implement the ECN+ Directive and consequently strengthen the tools and powers of the national competition authorities in their practical enforcement of the competition rules. Before being tabled, a draft bill had been submitted for public consultation by the Danish Competition and Consumer Authority.
On 28 January 2021, the Trade and Industry Committee issued a White Paper on the bill in which the Minister for Economic and Business Affairs tabled 28 proposed amendments, which were all passed by the Danish parliament in connection with the second reading of the bill. The adjusted proposed amendment of the Competition Act was finally adopted by the parliament on 9 February 2021.
The bill includes a number of substantial amendments.
Civil fines on undertakings
In future, the competition authorities (the Competition and Consumer Authority) will have the possibility of claiming the imposition of a fine in civil proceedings before the ordinary courts. This means that cases involving fines in future will be conducted by the Competition and Consumer Authority before the Maritime and Commercial Court according to the rules on civil procedure.
This also means that the ordinary legal guarantees and protection afforded under criminal law will not apply in these cases. Only the rules of the Charter and of the European Human Rights Convention will apply. It must be assumed that these rules will have special separate significance in these cases.
The court will not be bound by the parties’ claims on the size of the civil fine but may, among other things, fix a fine higher than the fine claimed by the Competition and Consumer Authority.
Violations relating to enterprises or other legal persons will be investigated by the Competition and Consumer Authority. Cases relating to fines or imprisonment imposed on natural persons will still be investigated and conducted before the courts by the Public Prosecutor for Serious Economic and International Crime according to the Danish criminal procedure rules.
Fines imposed for violations due to ordinary negligence
In future, fines may also be imposed on enterprises for violations of the competition rules caused by ordinary negligence, including violations of the prohibition against anti-competitive agreements or abuse of a dominant position.
A fine for violation of the merger control rules will still require intent or gross negligence.
Liability for parent companies and financial investors
According to the general rule of Danish law, only the enterprise committing a criminal offence may be punished for the offence. In other words, as a general rule no criminal law identity exists between a parent company and a subsidiary.
With this amendment, it will be possible to punish a parent company for a violation of the competition rules committed by a subsidiary, if we are talking about an economic entity in an EU-law sense.
Currently, enterprises are considered as being a part of the same economic entity if the subsidiary cannot freely determine its behaviour in the market, but must essentially comply with instructions from the parent company, in particular taking into account the financial, organisational and legal connections between the enterprises.
It is stated quite clearly in the preparatory legislative works of the bill that the amendment may mean that a buyer according to the circumstances may be held liable for the competition law violations of a target enterprise. In a recent decision from the Court of Justice of the European Union, a financial investor was thus held liable for a subsidiary’s long-standing competition law violations.
Secondary liability for members of industry associations
This statutory amendment means that the members of an association may be ordered to pay fines imposed on an association of undertakings.
If a fine is imposed on an industry association which the association is not able to pay, the industry association will thus be under an obligation to charge a contribution towards payment of the fine from its members. If the industry association fails to do so within a specific deadline, the Competition and Consumer Authority may collect the fine directly from the members.
Section 16 of the Competition Act authorises the competition authority to impose behavioural remedies on enterprises.
With this statutory amendment, the Competition and Consumer Authority will in future be able to impose structural remedies on enterprises.
A structural remedy may e.g. be (i) a functional separation of activities or employees in an enterprise, (ii) a requirement to divest the assets or proprietary interests of an enterprise, including sale of intellectual property rights, leased premises or proprietary interests, or (iii) divestment of all or parts of an enterprise, including employees.
Amendment of the limitation rules in connection with violation of the competition rules
The limitation period for cases involving fines is five years under the existing Competition Act. In case of violation of the prohibition of agreements, decisions and concerted practices, the limitation period is also five years according to the provision in this respect in the Danish Penal Code (straffeloven). The limitation period for concluding cartel agreements under particularly aggravating circumstances is ten years.
In civil cases, the standard limitation period is three years. The general rule may be derogated from if this follows from statutes. Demands for payment of e.g. a default fine correspond to a money claim and are accordingly covered by the Danish Limitation Act (forældelsesloven).
The new Competition Act stipulates a limitation period of five years for the new “civil fines”. In addition, an absolute limitation period of ten years is introduced from the day on which the violation ceased.
The limitation period will be interrupted if specific investigative action has been undertaken in the period. In such case, the limitation period will be interrupted, and the limitation period will subsequently only be caught by the absolute limitation period of 10 years or on the basis of a final decision.
Extended inspection powers and the introduction of a duty to participate in interviews
In future, the Competition and Consumer Authority will be able to conduct inspections in the private homes of directors, executives and other employees if reasonable grounds exist to suspect that information regarding the violation of the enterprise may be found in the private home of the person in question.
The Authority will also be able to convene members of the board of directors, executive(s) and employees from the enterprise subject to investigation to participate in interviews.
Increase of default fines
Failure to respond to requests for information and failure to comply with terms, orders or binding commitments may trigger default fines. In future, default fines imposed on enterprises will be determined in proportion to average global daily group revenues. Up until now, fines have been set at DKK 10,000 per week. The amount must now be expected to increase.
Entry into force
The Danish parliament passed the amendment of the Competition Act on 9 February 2021. The amendments will enter into force on 4 March 2021. The deadline for implementation of the directive has been exceeded by one month.
Click here to read the adopted bill (in Danish) and here to read the full text of the ECN+ Directive.
Comments by Bech-Bruun
The amended Competition Act gives the competition authorities multiple additional powers to enforce the prohibition in the Competition Act against anti-competitive agreements and abuse of a dominant position, respectively.
And it will in particular be interesting to observe the new system for “civil fines”. The model is an innovative step in Danish legal history and entails a number of restrictions in the due process protection in criminal law known from ordinary criminal proceedings.
The parent company’s liability for violations of competition law in subsidiaries makes demands on financial investors, among others. Before an enterprise is acquired, the buyer must be prepared to conduct an in-depth competition law due diligence investigation and consider to include a reservation for hidden competition law violations.
The extensive amendments to the enforcement rules in the Competition Act constitute a welcomed and obvious opportunity for enterprises to review and update their compliance programmes in order to protect themselves against competition law violations.