Monopsony Under Danish Competition Law

1. Introduction

Monopsony is the buyer-side counterpart of monopoly. It arises where a single undertaking, or a small group of buyers, possesses substantial purchasing power in an upstream market and can influence the price or other conditions on which suppliers sell goods or services.

Danish competition law recognises that dominance can arise on the purchasing side of a market. The Danish Competition and Consumer Authority expressly states that an undertaking purchasing goods or services can, in special circumstances, hold a dominant position through buyer power (“købermagt”). Such power may allow the undertaking to dictate prices or purchasing conditions to suppliers, or affect the conditions under which its competitors obtain inputs.

The important distinction is between:

• Monopsony power – the ability to reduce the purchase price/input price below the competitive level by restricting purchases or exploiting suppliers' lack of alternatives; and
• Bargaining power – the ability to negotiate better contractual terms while output and purchasing volumes may remain competitive.

The distinction matters because lower input prices resulting from genuine efficiencies or bargaining can benefit consumers, whereas exploitation of monopsony power can reduce supplier output, investment, innovation and ultimately competition.

2. Legal Framework in Denmark

The principal provisions are found in the Danish Competition Act (Konkurrenceloven), particularly:

A. Section 11 – Abuse of dominance

Section 11 prohibits abuse of a dominant position.

Although dominance is often discussed from the seller's perspective, Danish guidance expressly recognises that dominance can arise through purchasing power.

A dominant buyer may therefore potentially abuse its position through conduct such as:

• imposing unfairly low purchase prices;
• imposing unfair contractual conditions;
• discriminatory purchasing conditions;
• exclusionary purchasing arrangements;
• exclusive purchasing requirements;
• preventing suppliers from dealing with competing buyers;
• discriminatory access to procurement opportunities;
• retaliatory conduct against suppliers switching to competitors.

The same provision is supplemented, where applicable, by Article 102 TFEU.

B. Section 12 – Merger control

Monopsony concerns can arise particularly strongly in merger control.

A transaction may substantially increase buyer concentration and create or strengthen purchasing power. Authorities can therefore examine:

• concentration among buyers;
• suppliers' ability to switch buyers;
• alternative purchasers;
• entry by new purchasers;
• capacity constraints;
• geographic limitations;
• vertical integration;
• long-term supply contracts;
• exclusive supply arrangements.

The Danish Competition and Consumer Authority's merger assessments expressly consider buyer power alongside market shares, competitors and entry conditions.

3. When Does Buyer Power Become Monopsony?

A large buyer is not automatically a monopsonist.

The relevant question is whether the buyer can exercise purchasing power without being sufficiently constrained by alternative buyers.

Important indicators include:

1. Buyer market share

A very high share of purchases can indicate monopsony power.

2. Supplier dependence

The more dependent suppliers are on the buyer, the greater the potential purchasing power.

3. Availability of alternative purchasers

If suppliers can quickly sell to another buyer, monopsony power is weakened.

4. Switching costs

High costs associated with changing purchaser increase buyer power.

5. Geographic constraints

Transport costs, perishability and location can make alternative purchasers ineffective.

6. Capacity of rival buyers

Even where other purchasers technically exist, they may lack sufficient capacity to absorb suppliers' output.

7. Vertical integration

A vertically integrated buyer may be able to use upstream purchasing power to strengthen downstream market power.

8. Exclusive supply arrangements

Long notice periods or exclusivity can prevent suppliers from switching.

9. Countervailing supplier power

Large or sophisticated suppliers may be able to resist purchasing pressure.

4. Economic Effects of Monopsony

A competitive market generally produces an equilibrium where suppliers receive a competitive price and an efficient quantity is purchased.

Under monopsony, the dominant buyer may restrict purchases to obtain a lower input price.

Labor supply

Factor cost (MFC)

Revenue product (MRP)

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Monopsony hires 4.8 workers at MRP = MFC, then pays 4.4 from supply. Competitive labor would be 7.4 workers at wage 5.7.

Labor supply

Labor supply

Labor demand

Labor demand

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In a simplified model:

Monopsony → lower input price + lower quantity purchased → possible reduction in upstream output.

The consequences may include:

• reduced supplier investment;
• exit of smaller suppliers;
• reduced innovation;
• reduced quality;
• deterioration of working conditions in labour markets;
• reduced production;
• foreclosure of rival buyers;
• increased downstream concentration.

The ultimate competition concern is therefore not simply that suppliers receive less money. The central issue is whether the buyer's conduct distorts competitive conditions and harms the competitive process.

5. Monopsony and Bargaining Power Are Not the Same

This distinction is particularly important in Danish competition law.

Bargaining power

A supermarket, manufacturer or processor may negotiate:

• lower wholesale prices;
• volume discounts;
• promotional contributions;
• better payment terms.

That does not necessarily constitute unlawful monopsony.

Monopsony power

The problem becomes more serious where the buyer can systematically force prices below competitive levels because suppliers have no realistic alternatives.

For example:

Buyer A purchases 70% of a region's agricultural production. Farmers cannot economically switch to other purchasers because rival slaughterhouses have insufficient capacity. Buyer A then reduces the purchase price substantially while maintaining its purchasing volume.

This is much closer to a classical monopsony problem.

6. Major Case Laws and Authorities

There are relatively few Danish decisions involving a pure unilateral monopsony abuse. Danish and EU enforcement has instead addressed buyer power primarily through merger control, market structure and foreclosure analysis.

The following authorities are therefore particularly important.

Case 1: Danish Crown / Vestjyske Slagterier

European Commission, Case IV/M.1313 – Danish Crown/Vestjyske Slagterier (1999)

This is the leading Danish monopsony/buyer-power authority.

The transaction combined two major Danish slaughterhouse cooperatives.

The Commission specifically examined the market for the:

purchase of live pigs for slaughtering.

The merged entity would have purchased approximately 76% of Danish slaughter pigs, compared with 47% for Danish Crown and 29% for Vestjyske Slagterier individually.

The Commission concluded that the merger would create a dominant position in the Danish market for purchasing live pigs for slaughter.

Importantly, the Commission explained that its concern was not simply the extraction of monopsonistic profits.

The cooperative structure meant that lower purchasing prices could ultimately be returned to farmer-members through residual payments. Instead, the competition concerns included:

• reduction of farmers' choice;
• control over innovation;
• foreclosure of competing slaughterhouses;
• potential elimination of private slaughterhouses;
• reduction in alternative outlets for farmers. 

Legal significance

This case establishes that Danish competition analysis can treat the purchasing market itself as the relevant market.

It is therefore a foundational authority for:

farmer → slaughterhouse

rather than merely:

slaughterhouse → consumer.

Case 2: Danish Crown / Steff-Houlberg

European Commission / Danish competition authorities, Case M.2662 – Danish Crown/Steff-Houlberg (2002)

This transaction was particularly important because the Danish authorities specifically identified the market for:

“purchase of live pigs for slaughtering”

as one of the Danish markets requiring competition scrutiny.

The Danish authorities requested that the merger be examined under Danish competition law.

The transaction therefore illustrates the continuing importance of purchasing-side concentration following the earlier Danish Crown/Vestjyske Slagterier decision.

The eventual remedies included structural measures designed to preserve competing slaughter capacity, including divestiture commitments.

Legal significance

The case demonstrates that merger control can address monopsony concerns before actual exploitative conduct occurs.

The authorities can intervene because a transaction may create a purchasing structure capable of:

• restricting suppliers' alternatives;
• foreclosing rival purchasers;
• increasing supplier dependence;
• weakening competition at the purchasing level.

Case 3: Danish Crown / Vestjyske Slagterier – Cooperative Supply Restrictions

A particularly important aspect of the Danish Crown/Vestjyske Slagterier decision concerned exclusive supply obligations imposed on cooperative farmers.

Approximately 94% of Danish pig production was affected by cooperative supply arrangements, and farmers could face significant delays before being able to terminate membership and switch to another slaughterhouse.

The Commission considered that such arrangements could prevent rival slaughterhouses from obtaining sufficient supplies.

Remedies included greater freedom for farmers to supply other purchasers and shortening the notice period for leaving the cooperative.

Legal significance

This part of the case demonstrates the connection between:

monopsony → exclusivity → foreclosure of rival buyers.

A dominant buyer does not necessarily have to force down prices to create a competition problem. Restricting suppliers' ability to deal with alternative buyers can itself strengthen purchasing dominance.

Case 4: SCA/Metsä Tissue

European Commission, Case M.2097 – SCA/Metsä Tissue (2001)

This case involved tissue products in Denmark and considered the relationship between concentrated suppliers and the purchasing power of customers.

The Commission examined whether buyer power exercised by Danish customers could counterbalance supplier-side market power.

It concluded that the buyer power present in the relevant Danish markets was insufficient to prevent the creation of a dominant position by the merged supplier.

Legal significance

Although this is principally a countervailing buyer-power case rather than a pure monopsony abuse case, it is important because it demonstrates the analytical symmetry of competition law:

• supplier concentration can create market power; and
• buyer concentration can create purchasing power.

The existence of large buyers does not automatically eliminate concerns about market power.

Case 5: Coca-Cola / Carlsberg – Danish Soft Drinks

European Commission, Case IV/M.833 – Coca-Cola/Carlsberg (1997)

The Commission examined buyer power in the Danish carbonated soft drinks market.

Large supermarket chains possessed some negotiating strength, including the ability to negotiate discounts.

However, the Commission concluded that their buyer power was insufficient to neutralise the market power arising from the strong positions of the relevant suppliers and brands.

Legal significance

The case illustrates an important principle:

Large customers are not necessarily powerful buyers for competition-law purposes.

A buyer must have credible alternatives.

If retailers cannot realistically substitute away from a must-stock product or brand, their apparent bargaining size may not amount to effective countervailing buyer power.

Case 6: Danish Retail Market / Salling Group–ALDI Denmark

Danish Competition Council – Salling Group/ALDI Denmark (2023)

The Danish Competition Council's assessment of the Salling Group/ALDI Denmark transaction considered competitive conditions in local retail markets, including factors such as:

• ease of entry;
• customer switching;
• countervailing buyer power; and
• closeness of competition. 

Although the transaction was principally concerned with downstream retail competition rather than classical monopsony, the case is useful for understanding how Danish merger analysis considers buyer power as part of the overall competitive structure.

Legal significance

Buyer power must be assessed together with:

• market concentration;
• entry;
• switching;
• competitive closeness; and
• the ability of other market participants to constrain the undertaking.

It is not determined solely by market share.

7. Additional Relevant Authority: Danish Retail Buyer Power

The Danish Competition and Consumer Authority's guidance is itself particularly important.

It expressly states that an undertaking purchasing goods or services can, in exceptional circumstances, have a dominant position because of buyer power.

The guidance identifies situations where the buyer can dictate:

• prices;
• purchasing conditions; or
• the conditions under which competitors obtain supplies. 

This provides the clearest statement of the Danish legal position.

8. Monopsony Under Section 11

Where a buyer is dominant, Section 11 can potentially apply to several forms of conduct.

A. Unfair purchase prices

A dominant buyer could potentially exploit suppliers through excessively low purchasing prices where the circumstances establish abuse.

However, proving that a purchasing price is unlawfully low can be economically difficult.

B. Unfair purchasing conditions

Examples include:

• unilateral retrospective rebates;
• excessive deductions;
• arbitrary penalties;
• unreasonable payment terms;
• unilateral changes to supply contracts.

C. Exclusive purchasing

A dominant buyer may require suppliers to sell exclusively to it.

This becomes especially problematic where:

• suppliers are dependent on the buyer;
• rival buyers cannot obtain sufficient supply;
• entry is difficult;
• the arrangement has significant duration.

D. Discriminatory purchasing

A dominant buyer may potentially discriminate between similarly situated suppliers where the discrimination distorts competition.

E. Retaliation

A buyer could potentially punish suppliers for:

• switching to competitors;
• supplying rival purchasers;
• participating in competing procurement channels.

9. Monopsony in Labour Markets

Monopsony is not confined to physical goods.

It can occur in labour markets where one employer or a small number of employers possess substantial purchasing power over labour.

Potential indicators include:

• few employers;
• high employee switching costs;
• geographical immobility;
• professional licensing;
• non-compete restrictions;
• recruitment restrictions;
• coordination between employers concerning wages.

Competition-law analysis can therefore potentially address buyer power over labour, although the legal and economic assessment differs from traditional product-purchasing markets.

10. Agricultural Markets

Agriculture is particularly susceptible to monopsony because suppliers may have:

• perishable products;
• limited storage;
• geographically concentrated purchasers;
• high transportation costs;
• specialised production;
• long-term supply arrangements.

The Danish Crown/Vestjyske Slagterier litigation is therefore particularly significant.

The case showed how buyer concentration can affect not only the price paid to farmers but also:

• alternative outlets;
• innovation;
• downstream competition;
• investment;
• the survival of competing purchasers.

11. Public Procurement and Monopsony

A government body can sometimes become a very large buyer.

However, public procurement should not automatically be characterised as unlawful monopsony.

Competitive tendering may actually create competition between suppliers.

The relevant question is whether procurement design:

• unnecessarily excludes suppliers;
• favours a particular incumbent;
• reduces the number of bidders;
• creates excessive buyer concentration;
• artificially suppresses competition;
• facilitates coordination among suppliers.

Thus, a large public purchaser may exercise purchasing power without necessarily infringing competition law.

12. Buyer Cartels Versus Monopsony

A distinction must also be made between:

Individual monopsony

One dominant purchaser independently exercises purchasing power.

Oligopsony

A small number of buyers collectively possess substantial purchasing power.

Buyers' cartel

Competing purchasers coordinate their purchasing behaviour.

For example, several competing processors agreeing:

“We will not pay suppliers more than DKK X.”

could constitute a serious competition-law concern because competing buyers are coordinating rather than independently negotiating.

The OECD recognises buyer cartels and unilateral monopsony as separate forms of purchasing-power concerns.

13. Monopsony and Merger Control

A Danish merger creating substantial buyer power can raise concerns even when consumers do not immediately face higher prices.

The authority may examine:

14. Remedies

Where monopsony concerns arise, possible remedies include:

Structural remedies

• divestiture of facilities;
• sale of purchasing operations;
• creation of an independent competing purchaser;
• disposal of processing capacity.

Behavioural remedies

• prohibition of exclusivity;
• shorter termination periods;
• non-discriminatory purchasing;
• transparent purchasing criteria;
• access obligations;
• restrictions on retaliation.

The Danish Crown/Vestjyske Slagterier decision demonstrates how remedies can be directed toward restoring suppliers' alternative purchasing outlets, rather than merely regulating the buyer's price.

15. Monopsony vs Monopoly

16. Key Principles Emerging from Danish Law

Principle 1 – Buyer-side dominance is recognised

Danish competition law does not restrict dominance analysis to sellers. A purchaser can hold a dominant position through købermagt.

Principle 2 – Market definition can be upstream

The relevant market may be the market for purchasing an input, as demonstrated by the Danish live-pig market.

Principle 3 – Market share alone is insufficient

The authority must consider alternative purchasers, switching possibilities, capacity and entry.

Principle 4 – Supplier dependence matters

Where suppliers have no credible alternatives, purchasing power becomes stronger.

Principle 5 – Foreclosure is a major concern

The Danish Crown cases show that the competition problem can involve eliminating rival purchasers rather than merely reducing supplier prices.

Principle 6 – Merger control is particularly important

Danish monopsony concerns have historically appeared most clearly in merger proceedings rather than standalone Section 11 cases.

Principle 7 – Bargaining power is not automatically unlawful

A purchaser obtaining favourable terms through genuine competitive bargaining is not necessarily exercising unlawful monopsony power.

17. Conclusion

Monopsony is recognised within Danish competition-law analysis as a form of buyer-side market power. The Danish Competition and Consumer Authority expressly acknowledges that an undertaking purchasing goods or services may, in exceptional circumstances, possess a dominant position through purchasing power.

The most important Danish-related authority is Danish Crown/Vestjyske Slagterier, where the proposed merger would have resulted in approximately 76% of Danish live pigs being purchased by the merged entity. The Commission treated the purchasing market itself as a relevant competitive market and imposed commitments aimed at preserving farmers' ability to access alternative purchasers.

The subsequent Danish Crown/Steff-Houlberg proceedings reinforced the importance of purchasing-side concentration in Danish competition analysis.

Accordingly, the Danish approach can be summarised as:

Buyer concentration → supplier dependence → lack of alternative purchasers → purchasing power → potential monopsony/foreclosure concerns → assessment under Sections 11/12 and, where applicable, Article 102 TFEU.

The principal challenge in a standalone monopsony case is proving that the buyer's conduct goes beyond legitimate commercial bargaining and actually distorts competition, restricts output or innovation, forecloses rival purchasers, or otherwise constitutes an abuse of dominant purchasing power.