After ten years of dispute before the Danish competition authorities and the courts, the Supreme Court ruled by judgment of 4 April 2023 that there was no basis for setting aside the decisions made by the Danish Competition and Consumer Authority (the DCCA) back in November 2012 and May 2013 in relation to the fee that the payment solutions provider Nets charged online shops when the online shops' customers paid with the debit card Dankort.
The fee is regulated by the fee provisions of the Danish Payment Services Act (now the Payment Act), according to which no unfair prices and profit margins may be used when executing a payment transaction, i.e. higher prices and profit margins than would be the case under "effective competition".
The DCCA decisions ruled that Nets had violated Section 79 of the Payment Services Act in force at the time (now: Section 122(1) of the Payment Act) by setting the fee for using Dankort unreasonably high. According to the DCCA, the fees were not proportionate to Nets' costs, which led to above-normal earnings. In the first decision, the DCCA ordered Nets to reduce Dankort fees for online shopping to "a reasonable level" no later than 31 January 2013. In the second decision, the DCCA assessed that Nets had not complied with the order, which is why the DCCA decided that the fees should be reduced to an amount not exceeding an average of DKK 1.20.
After an overall assessment, the Supreme Court found that Nets had not established that the DCCA had made material errors in the exercise of its discretion. Likewise, the Supreme Court did not find that the DCCA's order for a maximum average Dankort fee per transaction of DKK 1.20 was contrary to the principle of proportionality.
Before both the High Court and the Supreme Court, Nets had argued that the competition authorities should have carried out a market analysis in order to assess whether there was effective competition. In this connection, Nets referred to Section 11 of the Danish Competition Act under which the competition authorities are obliged to carry out a market analysis as the basis for assessing whether the undertaking in question holds a dominant position and is thus subject to the prohibition against abuse of such a position.
The Supreme Court ruled that Section 79 of the Payment Services Act (or section 122(1) of the Payment Act) does not require the competition authorities to carry out a market analysis. The Supreme Court pointed out that the preparatory work behind the Act had assumed that there is no full or real competition in the payment card market, and that the provision – and thus the absence of the requirement for a market analysis – is justified precisely by this fact.
Bech-Bruun's comments
The case illustrates the difference in approach that applies to intervention by the authorities under the Payment Act's special regulation on unfair prices compared to the general prohibition on abuse of a dominant position in Section 11 of the Competition Act.
The differences are reflected, firstly, in the fact that intervention under Section 122 of the Payment Act is not conditional on a dominant position. This means that action may be taken against all players, regardless of their current strength in the market. Furthermore, intervention under that provision does not require a price or profit level as high as that under the general Competition Act. Finally, it is not necessary for the price and profit level in question to have been maintained for an extended period. Intervention may thus be taken immediately when it is found that an operator is charging unfair prices and profit margins.
The difference in approach was (and still is) justified by the fact that in the case of the liberalisation of areas in which a monopoly position has been acquired as a result of statutory regulation, it may be necessary to establish special regulation to prevent unfair prices in an area which is in transition, and which is therefore not yet free and competitive.
At the same time, the Supreme Court's ruling is an example of the difficulties in challenging the discretion exercised by the competition authorities in their enforcement of the special regulation on unfair prices in the Payment Services Act (the Payment Act). Referring to case law, the Supreme Court held that review of the competition authorities' decisions in cases such as the present case fully covers the factual basis and application of law, while setting aside assessments based essentially on a competitive assessment presupposes a firm basis. According to the Supreme Court, it is generally for the undertaking challenging the competition authorities' discretion to establish that there are deficiencies in the basis for exercising discretion and that the deficiencies have had an impact on the content of the decision. According to the Supreme Court, Nets had not met this burden of proof.
Originally published 23 June 2023
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