Finland's competition regime gets ever closer to that of its EU counterpart

Finland first entered the era of modern competition policy in the late 1980's when the Finnish Competition Authority (FCA) was established. At this initial stage the competition legislation was still mainly based on reporting and control of abuse instead of outright prohibition of competition restraints even in their most blatant forms. However, already in the beginning of 1990's the legal framework caught up with the European development when the 1992 Act on Competition Restrictions entered into force.

The 1992 Act on Competition Restrictions reflected EU competition policy by broadly prohibiting restraints on competition. The Act was amended in 1998 by introducing merger control which had been lacking in the toolkit of the FCA. The Act was further revised in 2004 when the wording of the substantive provisions concerning horizontal and vertical restraints as well as the provisions concerning the abuse of dominant position were harmonized to reflect more closely their European models.

Due to the above-mentioned and other smaller piecemeal amendments since its entry into force the 1992 Act on Competition Restrictions had lost its initial logic and become quite a burdensome piece of legislation. The evolution of national and European case-law as well as developments mainly in the field of merger control also raised certain needs for reform. This need for reform was widely recognized and after parliamentary elections in 2007 a working group was set up with the ambitious aim of full reform of the existing competition law framework under the heading "Competition Act 2010".

The main focus of the reform lies in the procedural provisions of the competition legislation as well as the substantive test in the merger control. There are no significant changes to the previous regime, but rather fine tuning towards a more developed and better functioning system of competition law. The key changes concern some procedural issues such as inspections and penalties, merger control, leniency and damages. The new Competition Act introduces certain "missing pieces" of the EU's competition regime to the Finnish competition system consequently bringing the two systems yet closer together.

The government proposal for a new Competition Act was submitted to the Parliament in July 2010 and approved on 11 March 2011. The new Competition Act is expected to enter into force during early summer 2011. This article introduces the main features of the Finnish competition law system as it will be after entry into force of the new Competition Act.

Enforcement system

Public enforcement

The Finnish competition law enforcement differs from the EU level enforcementin certain aspects. The main difference between the two systems lies in the separation of the powers of investigation and decision-making in the Finnish system into two different bodies. The FCA investigates competition restraints and "prosecutes" the offenders by making proposals for sanctions to a separate independent court (the Market Court). The Market Court functions as the first instance decision-maker in cases where sanctions are imposed or a merger is prohibited. The Market Court decisions may be further appealed to the Supreme Administrative Court.

The FCA has certain powers to make decisions concerning prohibiting a competition restraint or abuse of dominance as well as approving a merger with or without conditions. The decisions made by the FCA as a first instance may in most cases be appealed to the Market Court and again further to the Supreme Administrative Court.

The new Competition Act will bring certain new enforcement powers to the FCA, such as right to investigate private premises also in purely national cases. The Act contains also more detailed provisions concerning the rights of the parties involved in an investigation. These rights of defense are similar to the rights of defense in cases investigated by the European Commission.

As regards sanctions, the Competition Act is based on a system of administrative penalty payments, the amount of which may in maximum amount to 10 per cent of the infringing company's turnover of the year when the company last participated in the infringement. A leniency program with the possibility of total immunity for the first informer is available in cartel cases. No criminal sanctions are available for competition infringements.

Private enforcement

Parallel to the public enforcement system also private enforcement is possible in the form of claims in the courts of general jurisdiction or in arbitration tribunals. The role of private enforcement has been increasing in Finland during the recent years like elsewhere in Europe. For example, there are at the moment several follow-on damages cases pending in the Helsinki courts of general jurisdiction after imposition of administrative sanctions in the asphalt cartel. Other follow-on damages cases are pending in raw wood cartel and car part cartel cases.

The new Competition Act aims at enhancing the possibilities to private enforcement. The damages provisions will in future cover also damages claims by private individuals and public bodies and will not anymore be limited to companies. The period of limitation for claims of damages will be extended from five years to ten years and in any case the limitation period shall not end before one year after the final judgment by the administrative courts in cases prosecuted by the FCA.

Horizontal and vertical cooperation

The rules applicable to prohibited horizontal and vertical cooperation are contained in Sections 5 and 6 of the Competition Act. By closely following the wording of Article 101(1) TFEU, Section 5 prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices by undertakings that have as their object or effect the significant prevention, restriction or distortion of competition. Section 6 corresponds to Article 101(3) TFEU. Thus a prima facie competition restriction may benefit from an exemption where the efficiencies justifications contained therein are satisfied.

The FCA's enforcement efforts are concentrated in the fight against cartels. The new Competition Act includes an amended leniency framework that follows closely the European Competition Network's (ECN) model. Only the first undertaking to provide the FCA with relevant evidence of the cartel can be granted immunity. Reductions from fines are however available for other undertakings cooperating with the FCA. If an undertaking has pressurized another undertaking to participate in a cartel it cannot be granted immunity from fines. The FCA is currently preparing new guidelines on leniency to provide further assistance to potential applicants. In practice, the Finnish leniency program has not been a great success as there have been only few applications leading to full investigations and sanctions. It is not likely that the changes now made will change this record.

Traditionally, the sanction-levels for competition infringements were low also in cartel and other hard-core restriction cases. However, this was perhaps not due to the legislation or practice of the courts but the characteristics of the few cases ever brought to the Market Court by the FCA. The asphalt cartel judgment rendered by the Supreme Administrative Court in 2009 changed the traditional scene as the total amount of fines for the infringing companies amounted to 82.5 million euro and the highest fine to one company amounted to 68 million euro. Soon after this judgment the Market Court gave its decision in raw wood cartel case where the fines for two infringing companies amounted in total to 51 million euro. The raw wood cartel case was also the first case where one of the infringing companies got a total immunity following its application.

Abuse of a dominant position

Section 7 of the Competition Act prohibits the abuse of a dominant position. Abuse may be by a single undertaking or collectively by several undertakings. The provision is substantially similar to and is interpreted in a uniform way with Article 102 TFEU.

No specific market share thresholds for single dominance are contained in the Competition Act. However, in line with the EU Commission's interpretation, dominance is not likely if the undertaking's market share is below 40 % in the relevant market. Market shares, however, are not the only decisive factors for finding dominance. The FCA also considers for example the bargaining power of customers and suppliers, barriers to entry and potential competition.

The FCA's enforcement record has traditionally concentrated on dominance cases, perhaps due to the small size and high concentration of several Finnish industries. In recent years the FCA has indicated that it will follow a more economics-based approach in line with the European Commission. The FCA regularly investigates alleged or suspected cases of abuse of dominant position and issues a decision on 10 - 20 cases each year. However, the number of cases leading to the imposition of fines by the Market Court is relatively low. To date, the highest fine in an abuse case for one company was approximately 4.2 million euro.

Merger control

Rules on merger control are contained in Chapter 4 of the Competition Act. The Competition Act applies to concentrations which are defined as: (i) the acquisition of control of an undertaking; (ii) the acquisition of the whole or part of the business of an undertaking; (iii) a merger; and (iv) the creation of a full function joint venture. A concentration must be notified if the combined aggregate worldwide turnover of the parties exceeds 350 million euro and the aggregate turnover in Finland of each of at least two of the parties exceeds 20 million euro.

There is no specific deadline for the notification but the transaction may not be implemented before the FCA has issued its final approval decision with or without conditions unless the transaction can otherwise be considered to be approved. If the parties close the transaction before the FCA's approval they may risk a fine of up to 10 % of the total turnover of the relevant undertaking. The FCA may also request the Market Court to order the concentration to be dissolved or annulled.

The substantive test in merger control was changed from the traditional dominance-test to the now European standard SIEC-test by the Competition Act. Thus the substantive test is now whether the notified transaction significantly restricts effective competition in the Finnish market or a part thereof in particular by creating or strengthening a dominant position. The market power is assessed in view of the horizontal, vertical as well as conglomerate effects of the transaction. Market shares are important but are not the only factors the FCA takes into account when investigating the transaction.

The FCA may either clear a notified transaction with or without conditions or to request that the Market Court prohibits the concentration. Where the impediment of competition can be avoided by attaching conditions to the implementation of the concentration, the FCA shall primarily negotiate such conditions. Only if the impediment of competition cannot be avoided by attaching conditions will the FCA request the Market Court to prohibit the concentration. The FCA is currently preparing new guidelines on merger control.

A major difference with the EU system is the severe limitations to the rights to appeal merger decisions by the FCA. For example, the notifying party may not appeal the FCA decision conditionally approving the concentration. According to the established case-law third parties to the concentration (e.g. the competitors) do not have a legal standing to appeal merger decisions in Finland.

Concluding remarks

The impact of the new Competition Act to the competitiveness in the Finnish markets remains to be seen. The reform focused on the procedural aspects and the enforcement of the competition regime and thus the general effects will hardly be noticeable. However, in individual cases before the FCA the impact may be remarkable, in particular as regards the change of the substantive test in merger control which will arguably lower the threshold to intervene.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.