News
Coloplast Danmark Has Abused Its Dominant Position
Coloplast Danmark A/S has sought to exclude competitors at the wholesale level from the task of supplying Coloplast’s ostomy care products to municipalities. Some competitors have withdrawn from the market. Furthermore, Coloplast’s conduct has led to a significant decline in the parallel import of Coloplast’s ostomy care products. The Danish Competition Council has determined that Coloplast Danmark has abused its dominant position.
The market for ostomy care products is very distinct. In hospitals, patients become accustomed to a specific ostomy care product. After being discharged, they typically continue using the same product. Municipalities are then required to offer all the products that patients may need, and wholesalers must therefore be able to supply a broad range of products, including those from Coloplast.
The Danish Competition Council has ruled that Coloplast Danmark abused its dominant position in a case concerning “margin squeeze” in the market for the sale of ostomy care products and related services to municipalities in Denmark.
It is practically impossible to win municipal contracts in this wholesale market without being able to offer Coloplast’s products. This is partly due to the fact that Coloplast’s ostomy care products account for more than half of the products used by patients in Denmark.
In 2019, Coloplast entered the wholesale market by forming a consortium with the company Abena. Coloplast Danmark subsequently sold its products to municipalities through this consortium. The price municipalities paid to Coloplast Danmark was significantly lower than the price Coloplast Danmark charged the consortium’s competitors between 2020 and 2022.
As a result, Coloplast Danmark’s conduct made it extremely difficult for competitors to win municipal procurement tenders.
Coloplast Danmark’s conduct also affected the parallel import of Coloplast’s products into Denmark. The consortium sources its Coloplast products directly from Coloplast Danmark, while other wholesalers have relied partly on parallel imports. As the consortium gained market share and other wholesalers lost ground, parallel imports declined. In 2020-2021, parallel imports accounted for 50-70% of the market, whereas by 2022, they had dropped to 30-40%. Coloplast sets different prices in different EU countries. Since Denmark is among the most expensive markets, wholesalers have been able to compete more effectively by parallel importing products at lower prices.
As part of its decision, the Danish Competition Council has ordered Coloplast to refrain from engaging in margin squeeze in connection with the sale of ostomy care products to wholesalers and the sale of ostomy care products and related services to municipalities in Denmark.
The Danish Competition and Consumer Authority will continue the case with a view to imposing fines.
For further information
Contact the Head of Communications at the Danish Competition and Consumer Authority, Hanne Arentoft, at the phone number +45 41 71 50 98.
The decision will be published (in Danish) once confidentiality issues have been resolved.
Municipal Procurement of Ostomy Care Products
- Patients with ostomies are introduced to their first ostomy care products in hospitals. For medical reasons, a single product from a specific manufacturer is typically considered optimal for the patient, taking into account factors such as body profile, skin condition, and activity level.
- After being discharged, the vast majority of patients continue using the product they were introduced to in the hospital. At this stage, municipalities are responsible for procuring their ostomy care products.
- Municipalities procure ostomy care products through public tenders or price inquiries, where they request a broad portfolio of products from different manufacturers along with various services, such as counseling and home visits.
- It is absolutely necessary for wholesalers to stock Coloplast’s ostomy care products if they wish to compete for municipal supply contracts. This is partly because Coloplast’s ostomy care products account for more than half of the products used by patients in Denmark.
- Wholesalers can either purchase Coloplast’s products directly from Coloplast or parallel import them from other EU countries. However, not all products are available for parallel import.
The Competition Act’s Prohibition on Abuse of Dominance
- A company is allowed to hold a dominant position in the market and to compete aggressively with its rivals.
- The prohibition on abuse of a dominant position is violated when a company holds a dominant market position and exploits that position in a way that harms competition.
- A dominant company has a special obligation not to undermine effective competition.
- Abusive conduct typically involves a dominant company seeking to:
- Harm competitors or exclude them from the market, for example, by offering particularly large discounts to competitors' customers (“exclusionary” or “foreclosure” abuse).
- Exploit its lack of competition by charging unfairly high prices to the detriment of consumers (“exploitative abuse”).
- The Danish Competition Council may order companies to cease unlawful conduct. In urgent cases where there is a risk of serious harm to competition, the Council may impose interim measures.
- Companies may also offer binding commitments to address the concerns raised by the Competition Council regarding their conduct as a dominant company.