Recent Developments in Finland

Anna Kuusniemi-Laine, Sari Hiltunen and Anne Laine

Castrén & Snellman

Investigations focused on oligopolistic markets and service sector
In its Action Plan for 2008 to 2011, the Finnish Competition Authority (FCA) states that in regard to investigating horizontal restraints it gives priority to uncovering ‘hard-core’ cartels. It plans to monitor especially markets where competition has traditionally been weak and concentrates on competition restraints in oligopolistic markets and service sector. The FCA has also announced that it will pay particular attention on vertical restraints that prevent the transfer of common market benefits to the Finnish market. The aim of the FCA is furthermore to focus on fields that suffer from entry barriers and a lack of efficient competition.
Following the modernisation of the EC Competition Law, the FCA has been active in the European Competition Network and experiences of cooperation in the Network have been very positive. The FCA has also carried out investigations on request of competition authorities from the other member states. Thus far, the European Commission has not used its right to take over a case investigated by the FCA concerning the application of the EC competition rules.

Participants of asphalt cartel fined heavily

The Market Court gave its decision in the first large Finnish cartel case in December 2007. The Court imposed a total of €19.4 million fines on seven asphalt companies for having colluded to fix prices and share markets in 1994 to 2001. The fines represent the biggest penalties ever imposed for antitrust offences in Finland, even though the Market Court eventually cut the fines to one-fifth of the FCA’s initial proposal of €97 million. The largest single fine imposed on one of the biggest Finnish asphalt companies amounted to €14 million.
In addition to the increase in the level of fines in Finland, the decision illuminates several procedural issues, for instance the conformity of the Finnish Competition Authority’s enforcement practices with international treaties concerning human rights as well as attributability and succession of antitrust liability.
The Market Court’s decision has been appealed to the Supreme Administrative Court. The case is still pending. Several follow-up private actions (claims for damages) are also expected.

Competition Authority ordered to pay legal costs of a dominant company for the first time

The rules concerning abuse of a dominant position under Finnish law correspond to article 82 of the EC Treaty. Section 6 of the Finnish Act is applicable to abuse of a dominant position by one or more undertakings.
The Market Court gave a decision in July 2008 on the first of a series of the FCA’s proposals for fines for alleged abuse of a dominant position by local telecom operators. The case dealt with the access into wholesale internet broadband in western Finland in 2001–2004 and its pricing.
The incumbent operator refused access to the DSL-wholesale service from its competitors in the downstream market (ie, broadband services for end customers), before the telecom SMP regulation required it to do so. Instead, the operator was willing to provide wholesale service in 2003–2004 by an alternative, IP-based technology. The competitors did not purchase this seemingly unappealing technology and had low success in entering the downstream market.
Even though the Market Court considered the incumbent operator to be dominant on the wholesale market, it concluded that the operator in question had not abused its dominant position. Moreover, it ordered the FCA to pay the defendant’s legal costs up to €300,000, which was the first time in Finnish competition law history where the authority has been ordered to pay such costs.

Competition Authority’s merger decision annulled

There also have been new developments in the case law regarding merger control. In March 2008, the Market Court dealt for the first time with an appeal concerning a case where the FCA had approved a concentration subject to conditions (ie, undertakings proposed by the notifying party). The notifying party, a major Finnish energy company, appealed against the decision and claimed that the concentration should have been approved without conditions.
The Market Court decided to annul the FCA’s decision to the extent the FCA had imposed conditions on the concentration. The main conditions the FCA had set for the acquirer consisted of divestment of certain power plants. Already before giving the final decision, the Market Court had issued an injunction according to which the acquirer had to make the divestments while the appeal was pending before the Market Court.
The FCA has appealed against the decision to the Supreme Administrative Court, where the case is still pending.

Brief overview of Finnish competition legislation

Horizontal and vertical restraints

Finnish competition legislation is laid down mainly in the Act on Competition Restrictions (480/1992) (the Competition Act). The substantive provisions of the Competition Act closely follow EC competition law:
• section 4 of the Competition Act corresponds to article 81(1) of the EC Treaty;
• section 5 of the Competition Act corresponds to article 81(3) of the EC Treaty; and
• section 6 of the Competition Act corresponds to article 82 of the EC Treaty.

When a competition restriction may affect trade between EU member states, the provisions of articles 81 and 82 of the EC Treaty shall be applied. Thus far, there is no Finnish case law concerning the application of article 81(3).
Finland has not enacted block exemptions under the national legislation but EC Block Exemption Regulations, notices and guidelines are used in the interpretation of the national rules. The Finnish Competition Authority (FCA) has, however, issued guidelines on the following:
• the application of section 5 of the Competition Act to horizontal competition restrictions (Horizontal Guidelines);
• the application of section 5 of the Competition Act to vertical competition restrictions (Vertical Guidelines);
• the interpretation of sections 4 and 12 of the Competition Act (De Minimis guidelines); and
• the application of sections 8 and 9 of the Competition Act, reduction and non-imposition of competition infringement fine (Leniency Guidelines.)

Leniency

The new Finnish leniency system is based on sections 8 and 9 of the Competition Act:
• section 8 is a general provision on the reduction of the infringement fine and is applicable to all forms of competition restrictions, including abuse of a dominant market position; and
• section 9, on the other hand, is applied only in cases where a cartel member exposes a cartel to the FCA.

Under section 9 and the FCA’s Leniency Guidelines, the FCA shall not make a proposal on the imposition of a fine to the Market Court if a business undertaking involved in a cartel:
• provides the FCA with comprehensive and precise information of a competition restriction, which allows the Authority to intervene in the restriction;
• provides the information before the Authority has obtained it from elsewhere, that is, the FCA does not have prior evidence of a cartel;
• delivers all information and documents in its possession to the FCA;
• cooperates with the FCA during the whole investigation of the competition restriction; and
• has ended or immediately ends involvement in the restriction upon providing the FCA with the information.

In order to obtain immunity, all of the above conditions must be fulfilled.
Only the first cartel member to expose the cartel can obtain immunity. The order of priority is determined at the moment the information is verifiably at the FCA’s disposal. To ascertain whether another member of the cartel has already confessed to the same competition restraint, a cartel member may provide initial information to the FCA anonymously through an agent. In such cases, it is necessary to report the industry involved and the type of the competition restraint.
Under section 8, the reduction or non-imposition of fines becomes relevant both when an undertaking contacts the FCA on its own initiative and reveals the infringement, and when the FCA has already begun its investigation into the matter. The competition infringement fine may be reduced or not imposed at all with regard to more than one party to an infringement. In order for section 8 to be applicable, an undertaking must participate actively in the investigation and supply information on its own initiative.
So far, the FCA has given two proposals based on a leniency application. The leniency provisions were applied for the first time in a case concerning wholesalers in the automobile spare part business, in which the FCA made a proposal to the Market Court in 2006. The second decision concerned unlawful price cooperation and exchange of confidential information in connection with purchase of timber in which the Market Court made its proposal in the same year (2006). The two cases are still pending.

Consequences of infringements

Fines

Competition law infringements have not been criminalised in Finland. The fines that the Market Court imposes based on the proposal of the FCA are administrative in nature. According to section 7 of the Competition Act, an undertaking infringing the provisions of sections 4 or 6 or articles 81 or 82 of the EC Treaty shall be fined for a competition infringement, unless the conduct is deemed to be minor or the imposition or the fine otherwise unjustified in respect to safeguarding competition. In fixing the amount of the fine, attention shall be paid to the gravity, extent and duration of the competition restriction. The amount shall not exceed 10 per cent of the total turnover of the preceding year of undertaking or an association of undertakings concerned.

Non-enforceability

If an action by an undertaking violates sections 4 or 6, or an injunction, prohibition or an obligation issued by the Market Court or by the FCA, or an interlocutory injunction or an obligation issued by the FCA, the action shall not be applied or implemented. Thus, arrangements contrary to prohibitions of the Competition Act are considered null and void.

Damages

The Competition Act includes a special provision regarding damages payable for competition restrictions.¹ According to section 18a, an entrepreneur who deliberately or negligently violates one of the prohibitions in sections 4 or 6 or articles 81 or 82 of the EC Treaty is liable to compensate other entrepreneurs for damages.
Damages can include compensation for costs, price differences, lost profit and other direct and indirect damage caused by the competition restriction. The provision applies whether or not the injured party and the entrepreneur who violates competition rules had or still have a contractual relationship. The provision covers only damages caused to another entrepreneur and not, for example, damages suffered by consumers. The damages may be reduced if full compensation is unreasonable after considering the nature of the violation, the scope of the damage, the position of the parties, and certain other issues.
The major damages cases in Finland have mostly been settled out of court. However, claiming damages in court is likely to become more and more common. In the aftermath of the abovementioned asphalt cartel case, damages have been claimed in court. The proceedings are still pending.

Merger control

Thresholds

The merger control rules of the Competition Act apply to the following transactions (provided that the turnover thresholds are exceeded):
• acquisition of control;
• acquisition of business operations or a part thereof;
• mergers; and
• establishment of an independent, full-function joint venture.

The legislation refers to the above transactions as ‘acquisitions’.
The FCA must be notified of a concentration if:
• the combined world-wide turnover of the undertakings concerned exceeds €350 million; and
• the turnover accrued in Finland of each of at least two of the undertakings concerned exceeds €20 million.
The Finnish rules regarding calculation of turnover are generally in line with the corresponding EC competition law.
In order for the Finnish merger control rules to apply, the parties to a concentration do not have to have a presence in Finland. Imports to Finland are also taken into consideration as turnover accrued from Finland. Thus, Finnish merger control also applies to foreign-to-foreign transactions.
The Competition Act’s merger control provisions also contain a two-year rule. Where business operations are acquired through two or more successive transactions, the turnover of the target of the acquisition will be the combined turnover related to the business operations acquired from the same entity or foundation during the preceding two years.

Notification terms and procedures

A notification is mandatory if the concentration fulfils the conditions set out in the Competition Act and if the thresholds of the EC Merger Control Regulation are not met.
The FCA must be notified of an acquisition within one week from the date when:
• an acquisition agreement is signed;
• a merger decision is made;
• a decision regarding the foundation of a joint venture is made; or
• a public bid is announced.

The notification must be made in accordance with the Ministry of Trade and Industry’s decision on notification requirements. However, the FCA’s revised Merger Guidelines include a short form notification for joint ventures, which only have a minimal effect on the Finnish market.
As detailed market information may be required in the notification, it is recommended that parties notify the FCA informally prior to the transaction.

Procedural schedule

The FCA must investigate notifications immediately upon receipt. If the FCA does not give a decision regarding further investigation within one month after receiving the notification, the acquisition is considered approved.
Should the FCA not impose any conditions or make a proposal to prohibit the acquisition within three months from the date the FCA decided on further investigations, the acquisition is considered approved. The Market Court may extend this period up to a maximum of two months. The Market Court must give its decision within three months from the date of the FCA’s proposal.
It should be noted that an acquisition may not be implemented before a final decision is given in the matter or before the acquisition can otherwise be considered approved. This implementation prohibition has been considered by the FCA to cover all jurisdictions, and is therefore global in scope. However, the prohibition does not hinder the implementation of a public bid. In case such a transaction is later prohibited, the shares acquired through a public bid must be divested.

The substantive test

The substantive test of the Finnish Merger Control corresponds to the EC’s former dominance test included in the old Merger Control Regulation 4064/89.
The Market Court may, upon the proposal of the FCA, ban or order a concentration to be dissolved if a dominant position which would significantly impede competition in the Finnish market or a substantial part thereof would arise or be strengthened as a result of the concentration. The dominance test also covers situations involving joint dominance.²
If the restrictions on competition or detrimental effects thereto can be avoided by setting conditions for the acquisition, the FCA will approve the acquisition with conditions and refrain from bringing the matter to the Market Court.

Legislative amendments expected

According to the new government’s programme, the government will examine the need for reform of the Competition Act and implement necessary amendments. A Committee has been set up to assess the needs for the reform. The Committee shall give its report by the end of 2008. New provisions are likely to be in force in 2010.
Merger control is one of the committee’s focus areas. According to the FCA Action Plan for 2008, the objective is to assess to what extent concentrations that are problematic from the point of view of the national economy remain outside the FCA’s jurisdiction due to the high turnover thresholds. The FCA is particularly concerned about concentration trends in the services sector. Thus, the notification thresholds are expected to be amended. In addition, amendments concerning the substantive test are expected.
The Committee also deals with questions concerning leniency, damages claims, criminal sanctions as well as also certain other procedural issues.
A major problem regarding enforcement of competition law in Finland is currently the long handling time of the Market Court, mainly caused by heavy case load in the public procurement field. It seems unlikely that this problem would be cleared in the near future.

Notes

1 Amendment 303/1998, entered into force on 1 October 1998.
2 The Competition Act also contains special substantive rules for the electricity market: the Market Court may prohibit an acquisition in the electricity sector in which the aggregate domestic transfer business of the parties with 400 volt current exceeds 25 per cent of the total transferred electricity in the distribution network.

An extract from The European Antitrust Review 2009