Danish Competition Council: FK Distribution abused its dominant position

Background

Until 1 January 2018, FK Distribution and PostNord were both active on the Danish market for physical distribution of unaddressed mail such as advertising material, local weekly papers and other printed material. 

However, as of 1 January 2018, PostNord withdrew from the market, after which FK Distribution was the only nationwide distributor. Consequently, FK Distribution's market share was at least 85 per cent.

In May 2017, FK Distribution had in its contracts on distribution of unaddressed mail inserted a clause requiring the customer to also buy digital distribution via FK Distribution's digital platforms, www.minetilbud.dk and the app "minetilbud" (in English: "my offers"). Hence, the sales of the two products were tied to each other.

The market for digital distribution of advertising leaflets is a so-called two-sided market. This means that one side of the market is the businesses distributing their advertising leaflets, and the other side of the market is the consumers requesting digital access to the advertising leaflets. The larger the product is on one side of the market, the more attractive the product will be on the other side of the market, and vice versa. If many consumers use the product, it is more attractive for the businesses to place their advertising leaflets on the platform, and if there are many leaflets on the platform, it is more attractive for the consumers to use the platform. Therefore, by securing a large number of advertising leaflets on the platform by means of the tied selling, FK Distribution could increase the value of that product to the consumers.

The Danish Competition Council's decision

The Competition Council found that, by tying the sales, FK Distribution had abused its dominant position in the market for unaddressed mail. The Council found that FK Distribution's conduct had restricted competition in the market for digital platforms for advertising leaflets, particularly for the following two reasons:

• By means of the tied selling, FK Distribution ensured that a large part of their customers in the market for unaddressed mail would remain customers in the market for digital platforms for advertising leaflets as well.
• The tied selling reduced the customers' incentive to use other digital platforms for advertising leaflets, and competitors in the market for digital platforms for advertising leaflets faced more difficulties in attracting business customers and were therefore – considering that the market, as mentioned, is two-sided – less attractive to the consumers.

The Competition Council therefore concluded that FK Distribution had not been competing "on the merits" because FK Distribution had forced their customers to accept the tied selling, thereby gaining an unfair competitive advantage in the market for digital platforms for advertising leaflets through its already considerable market position in the market for unaddressed mail.

Increased focus on digital platforms

The decision is part of the Danish Competition and Consumer Authority's focus on digital platforms. In addition, the P2B Regulation entered into force on 12 July 2020 and will together with the competition rules secure that digital platforms offer businesses reasonable terms on the platforms. You can read more about that in our Insight: The P2B Regulation: New requirements for digital platforms (in Danish).