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Denmark: The Danish Competition Council finds that agreement between service providers on their subscription price for service on natural gas boilers is illegal.

30. november 2016

On November 30 2016, The Danish Competition Council (“DCC”) found that HMN Naturgas I/S (“HMN”), DEBRA – Energibranchen (“DEBRA”), Gastech-Energi A/S (“Gastech”) and Kiertner ApS (“Kiertner”) have infringed Section 6 of the Danish Competition Act by entering into an agreement which coordinate subscription prices for service on natural gas boilers to end users. The DCC orders the service providers to end the infringement immediately and to refrain from any action having the same or similar object or effect in the future.

On the basis of a complaint the Danish Competition and Consumer Authority (“DCCA”) conducted an inspection at the above mentioned entities premises in May 2015. The documents found showed that HMN, DEBRA, Gastech and Kiertner in the fall of 2013 and the spring of 2014 negotiated the content of a new standard subcontract. This contract regulates the vertical relationship between HMN and each individual service partner. Among other things the parties negotiated a new model for the remuneration of HMN’s service partners. DEBRA, Gastech and Kiertner negotiated on behalf of the service partners in the metropolitan area.  

In most cases there are no competitive concerns associated with negotiations about a vertical relationship. But when the main supplier and the sub-suppliers at the same time compete with each other with regard to end users, such negotiations can be used to restrict competition by agreeing to and coordinating conditions affecting the competition between them at the horizontal level. In this case the negotiations about the new standard subcontract resulted in an agreement that HMN should increase its subscription prices to its end users in order to ensure that i.a. it’s down-stream competitors, Gastech and Kiertner, were able to increase their subscription prices towards their own end uses.

It does not matter that the service providers have not agreed on a specific subscription price. The mere fact that they have coordinated an increase or a possibility for an increase in the subscription prices is sufficient to view the agreement and/or concerted practice as a device to reduce the competition, as this has changed the service providers’ incentives to compete with each other. The service providers’ incentive to determine their pricing policy independently has been limited, and the agreement was therefore capable of reducing the price competition between the parties. With market terms put out of force the coordination was likely o result in higher prices to the detriment of end users.

Based on the evidence in this case the DCC found that HMN, DEBRA, Gastech and Kiertner coordinated the subscription price for service on natural gas boilers and thereby restricted competition within the meaning of Section 6 of the Danish Competition Act. 

For more information please contact acting Head of Division, Martin Andreas Gravengaard, phone +45 71 51 83, e-mail mgr@kfst.dk

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Last updated: 30. november 2016