Finland Competition & Regulatory newsletter Summer 2021
This newsletter features a look into notable recent Finnish competition and regulatory case law.
New rules on fines and the FCCA's powers introduced to the Finnish Competition Act
Concurrently with the implementation of the ECN+ Directive (Directive 2019/1 of the European Parliament and of the Council), the Finnish Parliament approved a set of other notable amendments to the Finnish Competition Act at the end of May 2021. These amendments , include significant changes to the Finnish Competition and Consumer Authority's (FCCA) enforcement powers and sanctions. We briefly summarise some key amendments below.
The FCCA's authority on interim measures extended
In addition, interim measures ordered by the FCCA may in the future remain in force for a year at time. These interim measures may be used to end a competition restriction if it is immediately established that the restriction may cause serious and irreparable harm to competition. The current time limit for interim measures is 90 days, so the amendments extend this period significantly.
New rules on the determination of fines
One of the most significant changes concerns the determination of fines, which has up until now been largely at the discretion of the FCCA (which makes a proposal on the fine to be imposed) and the Market Court (which imposes the fine). Under the new rules, the basic amount of the fine proposed by the FCCA can be up to 30% of the undertaking's turnover resulting from sales to which the infringement relates in the last calendar year of the infringement. The calculation of the exact percentage is based on an overall assessment, which may take into account the nature of the infringement, the combined market share of the participating undertakings and other factors.
The basic amount of the fine is multiplied with the number of years that the undertaking has participated in the competition restriction. For serious infringements, an additional 15–25 % of the turnover from the market at issue is added to the fine.
The total sum of the fine ultimately imposed may not exceed 10% of the undertaking's global turnover in the year preceding the imposition of the fine. In addition, these rules are only applied to the FCCA. The Market Court (as well as the Supreme Administrative Court, serving as the appeals court) may decide on the sum freely, bound only by the aforementioned 10% maximum level.
Following the implementation of the ECN+ Directive, members of trade associations may be held liable for fines imposed on the association. The details on the recovery of these fines face some constitutional law debate in Finland. Ultimately, it was decided that the fine imposed on the association may only be recovered from the members (primarily those represented in the association's decision-making bodies) based on the Market Court's decision following the FCCA's proposal. The new amendments curtail the FCCA's powers in this regard compared to what was originally proposed by the Finnish Government.
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The Finnish Market Court issues fines in driving school and thermal insulation panel cartel cases
The Finnish Market Court has recently handed down two judgments in cases involving alleged unlawful price cooperation.
In December 2020, the Market Court fined the Uusimaa Driving Schools' Association (the "Association") along with companies represented in its board for unlawful price recommendations.
According to an infringement fine proposal issued by the Finnish Competition and Consumer Authority, the Association together with six driving schools that were represented on the Association's board of directors had given anticompetitive price recommendations during 2012 and 2015. In addition, the FCCA claimed that three driving schools separately infringed competition rules by agreeing on price increases in 2013-2014.
In its decision the Market Court confirmed the FCCA's view on that the Association had issued unlawful price recommendations with an aim to increase the price level in the region. However, sufficient evidence was found only for an infringement of around one year. Fines were imposed on the Association and two driving schools. The conduct of the other four driving schools represented on the board of directors was deemed being so minor that no fines were imposed on them.
The Market Court dismissed the FCCA's other claims of the three driving schools' involvement in prohibited price co-operation. The FCCA claimed that locally operating driving schools had reached a common agreement to raise the total price for a certain type of driving instruction in connection with legislative reforms which were to enter into force in Finland in 2013. According to the Market Court, a newspaper article regarding the companies' similar price increases was not sufficient evidence of an infringement, especially because it was shown that each driving school had been interviewed separately for the article. The FCCA had failed to present any other evidence of prohibited conduct between the parties.
The judgment has been appealed by the FCCA and the Association.
In February 2021, the Market Court issued its judgment in another cartel case, concerning unlawful price cooperation between three manufacturers of expanded polystyrene thermal insulation panels. The Market Court imposed a fine of EUR 2 million on Jackon Finland Oy and a fine of EUR 1.2 million on UK-Muovi Oy. The third cartel participant, Styroplast, had been granted immunity from fines by the FCCA back in 2018. This is only the fourth time where the FCCA has granted an undertaking immunity from fines, even though the Finnish leniency regime was already introduced in 2004.
The companies were in the judgment found to have agreed on raising prices of thermal insulation panels on several occasions, forming a single and continuous infringement that took place from late 2012 to summer 2014, a somewhat shorter period than the one alleged by the FCCA. The Market Court concluded that the infringement ended when the application of the unlawfully agreed-upon prices ended, and the latter had not lasted beyond summer 2014.
During the Market Court proceedings, Jackon Finland and UK-Muovi questioned the evidentiary value of Styroplast's leniency statements. The Market Court found that the leniency statements had a stronger evidentiary value than statements given by the other two companies' representatives, as the statements involved a large economic and legal risk for Styroplast, and the CEO who gave the statements was acting in a capacity in which he had to act in the interests of the company. The Market Court held that the leniency statements, along with some corroborating evidence, were enough to establish the infringement.
The judgment has been appealed by UK-Muovi.
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Alleged cartel in real estate management may shed new light on what is a restriction by object
In February 2021, the Finnish Competition and Consumer Authority issued a proposal to the Market Court to impose infringement fines totalling EUR 22 million to six companies and a trade association active in real estate management services for housing companies. According to the FCCA, the companies engaged in price fixing in 2014-2017.
The FCCA's infringement fine proposal describes various interactions between the parties that the FCCA says breached competition law. Of a particular note is the FCCA's position that the parties engaged in price fixing by forming a common understanding that certain new services should be sold separately instead of being included in a standard set of services covered by a single monthly fee.
If the Market Court finds that the parties did form such a common understanding, the next question to be answered is whether it constitutes price fixing or any other competition restriction by object.
Under the framework established in European Union case law by the Budapest Bank ruling (C-228/18), sufficiently general and consistent experience on the negative effects of the practice must exist for the view to be taken that an agreement can be classified as a restriction by object. An argument can easily be made that not only is there scarce experience about the competition effects of such detailed understandings on how to offer products, but that the alleged practice may have positive effects (such as giving customers the opportunity to only pay for the specific services they use).
The Market Court's ruling, expected in 2022 at the earliest, is likely to provide some guidance as to how national courts in Finland will apply the Budapest Bank
standard on restrictions by object.
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The EU Court of Justice clarifies the assessment of the duration of bid rigging cartels (C-450/19, Kilpailu- ja kuluttajavirasto)
In January 2021, the EU Court of Justice ("CJEU") gave a preliminary ruling where it held that a bid rigging cartel ends when the contract determining the essential characteristics of that contract has been concluded. The case concerned a bid rigging cartel where the works were completed several years after the conclusion of the works contract and the payment of the price was made in instalments during and after the completion of the works.
Background
In October 2014, the Finnish Consumer and Competition Authority proposed a fine of EUR 35 million on Eltel Group and Eltel Networks ("Eltel") for having reached an agreement with a competitor on prices, margins and market sharing. In particular, prior to submitting a bid concerning the construction of a high-voltage line in Finland, Eltel had agreed with its competitor on the amount of their respective bids. The Market Court dismissed the proposal on the grounds that the infringement was time-barred.
Following the FCCA's appeal against the Market Court's decision, the Supreme Administrative Court requested a preliminary ruling from the CJEU on whether the infringement continues until
- The date when the undertaking has submitted its tender;
- The date when the contract has been concluded;
- The date when payment of the last instalment of the agreed price has been made; or
- The date when the work has been completed.
Assessment in the CJEU
The CJEU found that Eltel's participation in the infringement cannot extend beyond the date on which the essential characteristics of the contract - in particular, the total amount to be paid - were finally determined. According the CJEU's reasoning, the restrictive effects of a bid rigging cartel end at this moment, as it is at that moment that the contracting authority is definitively deprived of the opportunity to obtain the goods, works or services in question under normal market conditions.
In its assessment, the CJEU emphasised that there is a distinction between the restrictive effects of the cartel on competition and the resulting wider adverse economic effects on other market players.
Conclusion
The case is currently still pending at the Supreme Administrative Court. In the light of the CJEU's preliminary ruling, it seems likely that the Supreme Administrative Court will rule in favour of Eltel and conclude - like the Market Court - that the infringement is time-barred.
