Finland Competition & Regulatory newsletter winter 2024
Finnish Market Court gives its first detailed ruling on joint bidding
In November 2023 the Finnish Market Court gave its judgment concerning a case on joint bidding in the field of public transport. This was the first time a Finnish court has in detail examined the lawfulness of joint bidding. The fines awarded in the case in total amounted to approximately EUR 1.5 million.
The judgment concerned three separate bids submitted by two joint ventures owned by bus companies in competitive tenderings for public transport services in the Turku region in southwestern Finland. The Market Court found that most of the bus companies could have submitted their own independent bids and were therefore potential competitors.
Upon being awarded the contracts, the joint ventures purchased the bus service operations from their owners. The Market Court found that in the long run, purchases from the owners were made in proportion to the bus companies' ownership in the joint ventures. Due to this, the Market Court concluded that although nothing prevented the parties from also submitting independent bids, the operating model of the joint ventures affected the independence of each company's assessment on whether to bid or not. This in turn affected the number of received bids and eliminated the price competition between the parties. The judgment concluded that the conduct of the parties amounted to price fixing and market sharing. This constituted a by object infringement, although the Market Court considered it as plausible that the conduct also had some positive effects on competition.
The Market Court also rejected the efficiency defence brought forward by the parties. The claimed efficiencies were based on the argument that individual bids would not have been more advantageous for the contracting entity. According to the Market Court, the parties had not justified why the market sharing was necessary for achieving the claimed efficiencies, and the criteria for the efficiency defence was therefore not fulfilled.
The judgment is not final as it has been appealed to the Supreme Administrative Court.
Finnish 2023 developments in merger control: first ever fine proposed for failure to impose commitments and shorter handling times
In the Finnish Competition and Consumer Authority's (FCCA) merger control enforcement, the past year saw several developments:
- In the end of the year the FCCA proposed its first ever fine (amounting to EUR 900 000) for a failure to observe commitments imposed as a condition for merger control clearance. The fine was proposed to dairy producer Valio. The company had in 2021, as a condition for the approval of the acquisition of food wholesaler Heinon Tukku, committed to block access to price data of competing dairy manufacturers obtained in the wholesaling business from its own dairy business. This was because the FCCA had found that internal access to this information would have affected Valio’s incentives concerning its dairy pricing. At the end of 2022, Valio informed the FCCA that it had discovered an error in its data systems that had resulted in the dairy competitors’ price data being disclosed within Valio’s own organisation. The failure to comply with the commitments subsequently led to the fine proposal. The Market Court will issue a decision in the matter later.
- The FCCA has for the first time in recent years exercised its right of referral under Article 22 EUMR, together with the Danish Competition Authority. The authorities jointly asked the European Commission to investigate the proposed acquisition of Nasdaq Power by EEX, a transaction that fell below national merger control thresholds.
Developments due to legislative and procedural reforms were also seen:
- Lower merger control thresholds were introduced in Finland in the beginning of 2023. Before the reform was implemented, the FCCA estimated that the revised thresholds would double the number of notified transactions. The number of notified transactions did not increase in 2023 as much as estimated, but more transactions were notified than was the median of the preceding five years.
- In the beginning of 2023, the FCCA also introduced a new merger control notification form and reforms to handling notifications. These reforms seem to have had a positive impact on handling times. The average handling times of simple phase one decisions have decreased, and also the average duration of the pre-notification phase in simple cases has decreased from two weeks to one week.
The level of intervention remained relatively similar to previous years. In 2023, the FCCA unconditionally approved 46 transactions during the first phase investigation. Out of the four notified transactions for which the FCCA opened in-depth reviews one was conditionally approved while three transactions were abandoned by the parties before the FCCA issued any decision.
Finnish coalition government places focus of competition policy on evening the playing field between public and private entities
Finland's new coalition government published its programme in summer 2023. As part of its broader goals, the new Government Programme looks to promote increased and fairer competition, listing several actions that will be undertaken in this regard.
One of the key issues highlighted is the adequacy of the FCCA's enforcement powers to monitor and enforce the competition neutrality of public sector business activities. Competition neutrality refers to rules aimed at ensuring that public or publicly controlled entities do not engage in market activities that distort or prevent fair and effective competition. Currently, the FCCA must address these issues primarily through guidance and negotiation. While the programme does not contain concrete proposals, it promises to ensure that the competitive playing field between publicly owned and private businesses is monitored with the same intensity and resources as mergers and cartels.
Regarding state monopolies in Finland, the state-owned companies Veikkaus and Alko currently have exclusive rights to provide respectively gambling and betting services and retail alcoholic beverages (above 5,5 % alcohol by volume (ABV)). However, the Government Programme takes steps to gradually open both markets to competition. In the gambling sector, a licensing system for online betting and casino games is to be introduced by 1 January 2026. The Government wants to ensure that online operators in particular are subject to licence fees and taxes and contribute to tackling gambling problems. Regarding the retail sale of alcoholic beverages, the Government Programme promises to allow online purchase of alcohol and to permit the retail sale in grocery stores of beverages up to 8% ABV, and, following an in-depth study and the assessment of its results, potentially even stronger beverages (up to 15% ABV).
The Government Programme also includes a proposal to review the regulation of pharmacies. Contemplated reforms to the pharmacy sector include a relaxation of rules on the number and location of pharmacies, allowing online-only operations, and releasing the most popular self-medication products for sale in other retail outlets. The programme also promises further support for the development of effective competition in the rail transport market, as the market remains highly concentrated despite previous efforts to open the passenger transport segment to competition.
Recent and upcoming developments in Finnish foreign direct investment screening
The current Finnish Act on the Monitoring of Foreign Corporate Acquisitions ("FDI Act") has been in place since 2012, much longer than corresponding legislation in several other European countries. Despite this, Finland has seen an increased focus on foreign investment screening in recent years. The legislation is flexible in scope and its application reflects the security of supply and national security situation at any given time. In recent years, the number of acquisitions notified under the FDI Act has increased significantly.
Decisions made under the FDI Act typically become public with a delay, and therefore the total number of transactions notified in 2023 is not yet available. However, what is known so far is that decisions given in 2023 involved target companies active in, e.g., logistics, ship management, telecommunication and electricity networks, wireless communication solutions, cyber security, and analysis and security inspection equipment.
The increase in notifications over time can also be observed from a 2022 annual report concerning the screening of foreign corporate acquisitions in Finland. According to the report, 35 acquisitions were notified in 2022, marking a significant increase from 28 in the previous year, while in 2018–2020 the number of notified acquisitions was around 15 annually. It is noteworthy that in 2022 around a fourth of the decisions issued stated that the notified transaction fell outside the scope of the FDI Act, reflecting the flexible and at times unpredictable scope of the act. Based on publicly available information, no acquisitions have been prohibited so far, but there have been instances where applications have been withdrawn by the applicant. The average processing time for notified transactions was two months in 2022, but the length of the process varies.
The increased focus on FDI is also likely to be reflected in legislative changes. In its Government Programme, the Finnish Government in June 2023 announced that the FDI Act would be reformed to better address risks relating to national security, security of supply and wide-ranging influence activities. The Government Programme also includes plans to improve the protection of infrastructure critical to the functioning of society, which may have an impact on which companies fall within the scope of the FDI Act.
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