Legislative changes have expanded the Competition and Consumer Authority's tools and introduced new control mechanisms that increase focus on smaller mergers and tighten requirements for transaction processes.

What does merger control mean in practice for your business?

With effect from July 1, 2024, the Danish Parliament has adopted a number of amendments to the Competition Act that expand the Competition and Consumer Authority's (hereinafter 'the Competition Authority') enforcement options.

The changes cover three key areas:

1. a call-in rule for mergers below the thresholds,
2. a new market investigation tool that enables intervention without detection of an infringement; and
3. changes in the principles for calculating fines.

This article focuses on the call-in rule and its practical implications for merger control in practice.

Merger control

Prior to the amendment, companies were only required to notify mergers to the Competition Authority if their turnover exceeded the thresholds set out in section 12(1) of the Competition Act:

1. The participating companies have a total annual turnover in Denmark of at least DKK 900 million and at least two of the participating companies each have a total turnover in Denmark of DKK 100 million, or
2. At least one of the participating companies has a total annual turnover in Denmark of at least DKK 3.8 billion and at least one of the other participating companies has a total annual turnover worldwide of at least DKK 3.8 billion.

The call-in rule: New focus on smaller mergers

The amendment provides the Competition Authority with a so-called call-in right, which makes it possible to require notification of mergers even if the turnover thresholds are not met. The Competition Authority can use the call-in rule when:

The participating companies have a combined annual turnover in Denmark of at least DKK 50 million, and the Competition Authority assesses that the merger may significantly impede effective competition.

The low turnover threshold in the call-in rule may give rise to concern that the Competition Authority will face a significant workload, considering the number of transactions in Denmark where the participating companies have an annual turnover of more than DKK 50 million. However, the legislative history of the provision indicates that experience from other countries with similar schemes (including Norway, Latvia, Germany, etc.) shows that there will be at most one to two concentrations annually that require notification under the call-in rule.

The rule aims to prevent so-called "killer acquisitions," where larger incumbents acquire smaller, innovative start-ups whose future potential is not yet reflected in revenue. By eliminating such companies early on, incumbents can eliminate competition and weaken innovation in the market.

Deadlines for notification and control of mergers below the turnover thresholds

The new call-in rule also sets deadlines for when the Competition Authority can require mergers to be notified and make decisions on them. Firstly, the Competition Authority has 15 working days to decide whether the merger should be notified for merger tax control.

However, the time limit only runs from the time the Competition Authority has "become aware of a concentration", i.e. when the Competition Authority has received relevant and sufficient information to assess whether the concentration should be notified. The legislative history of the Act states that a press release or other mention of the transaction in the media is not sufficient.

In order to give the parties involved in a merger some certainty about the merger and its implementation, the Competition Authority cannot require a merger to be notified later than 3 months after a merger agreement has been concluded, unless there are special circumstances. Special circumstances may exist if the parties to the concentration have kept the agreement confidential to avoid the Competition Authority's attention or if they have not responded to the Competition Authority's request for information within the prescribed time limit. In such circumstances, a concentration may be required to be notified up to 6 months after its implementation.

If the Competition Authority determines that the merger is notifiable, the transaction must not be completed until it has been cleared. Violation of this requirement may result in fines and dissolution of the merger if it has already been completed.

Practical handling of the rules:

In all types of transactions, it is important to make a thorough assessment of the parties' competition law status before the exchange of competition-sensitive information is initiated. Clarification must therefore be made prior to initiating a due diligence process, regardless of whether the transaction falls within the merger control rules of the Competition Act, including the call-in rule.

The new rules mean that even in smaller transactions, a possible treatment by the Competition Authority is handled by introducing clauses in the transfer agreement that partly ensures the parties access to refrain from the transaction, depending on the Competition Authority's decision and partly postpones the completion of the transaction ("Closing") until the Competition Authority's decision is available or the deadline for call-in has expired.

In transactions covered by the call-in rule, the parties should also handle communication in relation to the Competition Authority.

For example, it could be that the transaction is not completed sooner:

1. the deadline of 15 working days has expired without the Competition Authority having required the merger to be notified,
2. The competition authority has confirmed that they do not require the merger to be notified,
3. the parties can obtain the Competition Authority's approval within an agreed timeframe; or
4. the call-in deadline (3 months or 6 months in exceptional circumstances) has expired.

If you are facing a transaction covered by the call-in rule, we recommend that you initiate the proposed deadline of 15 business days by notifying the Competition Authority of the merger and submitting necessary and relevant information.

Necessary and relevant information may, for example, include a description of the merger and the merging parties, their ownership and control before and after the merger, including ownership structure, turnover, market shares and market role.

In addition, transaction documents, such as a copy of the merger agreement or equivalent, should be attached to substantiate and document the content and scope of the merger.

If you have questions about merger control in practice or competition law in general, please contact us for a non-binding discussion.