1. Mergers March 2010
Contacts
For further information, Danish Competition Authority revokes
please contact your usual
Eversheds contact or its own merger decision: parties
Mogens Vind
Partner
+45 33 75 05 05
blamed for not correcting important
mogensvind@eversheds.com
misunderstanding
For a full list of our offices and
contact details please visit
The Danish Competition Authority has for the first time revoked a
decision to approve a merger between two Danish agricultural feed
www.eversheds.com
manufacturers.
Legal background
Pursuant to clause 12(f) of the Danish Competition Act the Danish
Competition Council may revoke an approval of a merger where the approval
to a substantial extent is based on incorrect or misleading information for
which one or more of the undertakings concerned are responsible.
Provided that the conditions in clause 12(f) are met the participating
undertakings also risk being fined if they are found - intentionally or by gross
negligence - to have provided incorrect or misleading information or
concealed matters of importance for the case for which the information is
obtained.
The Danish Competition Authority’s decision
On 25 January 2010 the merger between two Danish agricultural feed
manufacturers, Danish Agro A.m.b.A (“Agro”) and S.A.B Landbrugets Andel
(“SAB”), was approved by the Danish Competition Authority (“DCA”).
However, later on the same day the DCA was informed that a consortium
consisting of Agro and another large Danish agricultural feed manufacturer,
DLG A.m.b.A (“DLG”), had entered into a framework agreement on 13
January 2010 concerning their takeover of Aarhusegnens Andel A.m.b.A
(“AAA”). The underlying reason for this takeover was that AAA was
considered to be a failing firm.
In the approval of the merger between Agro and SAB the DCA had attached
great importance to the fact that AAA at the time of the approval was
considered a significant competitor (maverick) which had been able to enter
new markets as well as winning market shares and thereby minimising the
risk of any coordinated practices post-merger between Agro and SAB.
The DCA found that the parties had failed to inform the DCA of the
framework agreement and the fact that AAA was in a difficult financial
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2. situation despite the fact that the parties - as part of the standard procedure
- had been presented with a draft decision from the DCA on 20 January 2010
which highlighted in detail the importance of AAA’s presence in the market.
The parties argued to their defence that the information concerning AAA had
been obtained by the DCA itself and that the parties themselves had never
supplied information in relation to AAA.
The DCA was not persuaded by this argument. It found that the parties had
numerous opportunities to correct the misunderstanding in the period leading
up to the approval and it was clear from the facts of the case that the parties
were aware that AAA was suffering from financial problems.
Against this background the DCA assessed that the conditions for revocation
were met.
Comments
This is the first time the DCA has revoked a merger approval and the
immediate consequence of this revocation is that the merger cannot be
carried out until it has been re-notified and approved by the DCA.
According to publicly available sources this will likely take place during the
course of the next few weeks but whether the DCA will change the outcome
of its initial decision remains to be seen. However, in order for the merger to
be approved again, the DCA must still find - despite the changed facts in
relation to AAA - that the merger does not significantly impede effective
competition on the relevant markets.
In the meantime the DCA has ordered the parties not to take any further
steps to implement the merger as well as to inform the DCA of any steps
taken so far. In line with the EC Merger Regulation, the DCA may order the
parties to take measures capable of restoring effective competition.
The decision underlines that not only are the parties required to provide the
DCA with true and correct information but in certain instances the parties are
also required to correct information collected by the DCA and/or assumptions
on which the DCA has based its draft decision if - as the case may be - such
assumptions are incorrect. At least this is the case if the parties must be
deemed to possess inside knowledge.
On 26 February 2010 the DCA has approved takeover by Agro and DLG of
AAA. The DCA has in its decision emphasized that the approval is due to the
fact that AAA would otherwise fail.
A possible consequence of this approval could be that the merger between
Agro and SAB will not be approved (at least not without conditions) since the
DCA with its revocation of the Agro/SAB approval has stressed the
importance of an independent competitor on the market. However, the
approval of Agro’s and DLG’s takeover of AAA has been made subject to the
selling off of certain assets and whether this leaves room for another
takeover within this particular market remains to be seen.
Eversheds Copenhagen regularly issues competition newsletters and
briefings on current competition and public procurement topics of specific
interest for Danish companies.
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