Two Danish utility companies have received fines of DKK 8 million in total for implementing a notifiable merger in 2012 without filing the compulsory merger notification. The case is an obvious reminder of how important it is to focus on competition rules in connection with mergers, acquisitions, sell-offs, joint ventures and similar transactions – also within the utility sector.
In 2012, SEAS NVE Holding A/S (SEAS NVE) and Syd ENERGI Holding A/S (SE) jointly acquired the company ChoosEV, a producer of charging solutions for electric cars, now known as Clever A/S.
The merger was notifiable – both according to the competition law of that time and the present. Hence, the merger should have been notified to the competition authorities for their approval before it was implemented.
However, it was not until 14 August 2017 that the Danish Competition and Consumer Authority (the DCCA) received a simplified notification of the merger, which was later approved on 23 August 2017.
The prohibition of implementing mergers without notification and approval
Mergers covered by the Danish Competition Act are subject to merger control. This means that a merger notification shall be filed to the DCCA for their approval after the merger agreement has been reached, and before the merger is implemented, cf. section 12b  of the Danish Competition Act. Furthermore, the merger may not be implemented before it has been approved by the DCCA, cf. section 12C  of the Danish Competition Act.
Failure of notifying such a merger, or implementing it before the competition authorities’ approval is granted, is sanctioned by a fine.
Fines for lack of merger control
The two Danish utility companies contacted the authorities themselves and admitted the violation. This constituted a mitigating circumstance at the sentencing, but the companies were not exempted from punishment, despite the later approval granted by the DCCA in August 2017.
On 20 June 2018, the State Prosecutor for Serious Economic and International Crime charged SEAS NVE and SE for violating the Danish Competition Act by implementing the merger before notifying it to the DCCA. Both companies each accepted the charge and a fine of DKK 4 million.
The size of the fines takes the gravity and duration of the violation and the companies’ turnover into consideration. As mentioned above, it is a mitigating circumstance that the two energy companies contacted the authorities themselves and admitted the violation. Pursuant of the legislative history of the competition law, failure to notify the authorities is considered a severe violation, where the fine is set between DKK 4 and 20 million. Consequently, the fines given to SEAS NVE and SE are to be considered a lenient sanction.
The fines are the first example of the fine level for violating the competition rules concerning failure to notify a merger, after the increase of the sanctions under the Danish Competition Act, which entered into force on 1 March 2013.
When do you have to file a merger notification?
The merger concept is wide and does not only include transactions, where two independent companies merges to one company. According to Danish law and EU law, change of control is the decisive factor. This means that a transaction is considered a merger, when it entails a direct or indirect change of control of the company.
Transfer of minority stakes is also included, if the transfer results in a change of control in the company. The creation or change of control in joint ventures may also be covered by the merger concept, if it is a full-function joint venture that manage all its functions and is established on a permanent basis.
A transaction comprised by the merger concept shall be notified to the competition authorities, if the participating companies’ turnover exceed the threshold limits. According to section 12 of the Danish Competition Act, a merger notification shall be filed to the DCCA, when:
- The sum of the participating companies total annual turnover in Denmark is at least DKK 900 million, and at least two of the participating companies each has a total annual turnover in Denmark of at least DKK 100 million,
- 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.
Participating companies are the companies, which directly participate in the merger. As far as the buyer is concerned, it is the turnover for the group of companies, which is considered, and as far as the seller is concerned, it is only the turnover, which belongs to the part of the company that is sold to the buyer, which is considered.