The Danish Competition Act applies to all businesses
The rules of the Danish Competition Act applies to all businesses, and the purpose thereof is to prevent businesses from restricting fair competition and to secure perfect competition for the benefit of the consumers, the businesses and the community in general.
The Competition Act contains a prohibition against anti-competitive agreements between businesses and a prohibition against businesses’ abusing their dominant position.
In addition, the Competition Act contains rules on merger control and anti-competitive public support.
Severe punishment for violation of the rules
The Competition Act enables the competition authorities to control on own initiative the businesses’ conduct and contracts, e.g. by means of unsolicited quality checks. Investigation measures available to the authorities are e.g. wire tapping, data supervision, and other investigative actions.
A violation may also be detected, if another company complains to the authorities about the conduct of your business.
A violation of the competition rules may have serious consequences for your business – even if such violation was not intended. Sanctions may involve fines, prison sentences, claims for damages from third parties, exclusion from invitations to tender, invalidity of agreements, and negative publicity.
Both company chairmen, CEOs, and senior executives may be sentenced to imprisonment for up to 18 months. In case of specifically aggravating circumstances, the punishment may be increased to six years’ imprisonment.
The level of fines has been increased significantly. Less serious violations may cost up to DKK four million, and for the most serious violations, the minimum fine is fixed at DKK 20 million. The amount of the fine depends on the character, the seriousness and the duration of the violation. The fine may be up to 10% of the group revenues.
Deliberate violations of the rules are rare
Very few businesses deliberately violate the Competition Act. However, practice shows that it may be very difficult for the business itself to spot a particular violation.
Legislation implies that your business needs to be extremely careful when entering into agreements and concerted practice with competing businesses. A cooperation between two or more businesses seemingly coordinating their marketing conduct directly or indirectly is illegal.
Agreements with customers may also contain illegal provisions.
The problems may be hiding in the most unexpected places, e.g. in a long-standing distribution agreement, a cooperation agreement with a competitor, or in a company’s pricing policy.
Exchange of information within a trade association or a network may be problematic, and you should also be aware of any unintentional receipt of information from a competitor. Further, statements in public should only be made with all due respect to the rules.
In some cases, violations of the rules may be very serious, resulting in high penalties and sometimes even prison sentences. This applies e.g. to breach of the following types of agreements:
- Agreements on price coordination;
- agreements on restriction of the production or sale of goods and services;
- agreements on sharing of markets or customers;
- agreements on coordination of subsidies.
It is important to be aware that the form of agreement is irrelevant. Oral agreements and understandings are also comprised. An agreement is an understanding or concerted practice established between two or more businesses for the purpose of coordinating their marketing conduct directly or indirectly.
Further, a supplier’s demanding or inducing one or more of its distributors to sell its product at a price fixed by the supplier (i.e. “binding resale prices”) is considered an extremely severe violation of the rules.
Other restrictions in resale, e.g. in relation to geographical territories and sales channels may also constitute a severe violation of the rules.
Abuse of dominance
Businesses having a dominant position on the market are subject to additional restrictions in their activities and course of action. A dominant business has a particular obligation to refrain from distorting fair competition. On those grounds, the dominant business must not obstruct competition, also called exclusive dealing.
It may even be very difficult to define the relevant market for the purpose of evaluating subsequently, if the marketing conduct is expelling, thus constituting abuse of a dominant position. The application of several discount schemes, including exclusive dealing and loyalty rebates, is e.g. illegal, if the business is dominant. Likewise, a dominant business cannot freely fix the price for its goods and services but must ensure that these do not express an unreasonably high or low price.
In such situations, too, a business may be ordered to pay very high fines or be held liable in damages in case of any action contrary to the rules.
Further, the Competition Act contains rules on merger control. Major acquisitions or amalgamations may require a preceding application with and approval by the competition authorities.
Reducing the risk of non-compliance
The Competition Act applies to all businesses – major or small – meaning that they must all must decide how to remain on sure ground. The risk of non-compliance may be reduced by actively trying to understand the rules and identifying the areas specifically requiring focus from the business. This enables the business to stay on sure ground and educate employees.
Any initiative on the part of the business to comply with the rules are often referred to as a “compliance program”. An efficient compliance program will in part reduce the risk for the business of committing an unintentional breach and in part lead to leniency, if things go wrong. HjulmandKaptain offers to develop an appropriate compliance program for your business and to secure efficient implementation.
Aggravated sanctions give rise to being particularly careful.
- to develop and implement an appropriate compliance program for your business;
- to examine your business’s existing agreements and decisions;
- to provide continued counselling for the purpose of evaluating the business’s conduct, e.g. the risk of participating unintentionally in illegal concerted practice;
- to advise about major strategic contracts for the purpose of ensuring that these are not subsequently invalidated due to illegal clauses;
- to evaluate the business’s risk of being dominant on one or more markets and the importance thereof e.g. to the business’s pricing and price refund systems;
- to provide preparedness in case of a verification visit (“Dawn Raid”).
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