The amendment of Finnish competition legislation entered into force on 1 October 1998. The most remarkable change for the business life was the introduction of national merger control. All mergers, acquisitions (both of shares and of business or a part thereof) as well as independent joint-venture companies exceeding certain threshold values and made after 1 October 1998 shall be notified to the Office of Free Competition within a one week's period.
The competition authorities are allowed to interfere with arrangements, which create or strengthen a dominant market position in the Finnish market which significantly restricts free competition on the Finnish market or on an essential part thereof. As a primary interference method the Office of Free Competition may impose conditions for the acquisition. Ultimately, the Competition Council may prohibit the acquisition.
Threshold values
The provisions regarding control of acquisitions are applied to an acquisition if
- the aggregate turnover of the parties to the acquisition exceeds 2 billion FIM, and
- the turnover of at least two of the parties to the acquisition exceeds 150 million FIM and
- the target for the acquisition or an entity or a foundation belonging to the same group of companies, the merging entity or an entity or a foundation belonging to the same group of companies or the joint-venture company conducts business in Finland.
When calculating the turnover, also the global turnovers of the parent company, the subsidiary and the sister companies are taken into account. As the turnover of a part of the business is, however, considered only the turnover of this part of the business. The turnover of the selling company is not taken into account in the calculations.
According to the original estimates these limits will be exceeded in approximately 25-40 acquisitions yearly. According to recent estimates up to 60 acquisitions per year should be notified to the Office of Free Competition.
Term and procedure for the notification
The acquisition shall be notified to the Office of Free Competition within a one week's period which commences from the acquisition of controlling power, the acquisition of a business or a part thereof, the making of a merger decision or from a decision regarding the foundation of a joint-venture. The notification shall be made in accordance with the instructions given by the Ministry for Trade and Industry.
As the one-week's period in practice is very short and the instructions for notification may require extensive clarifications, it is in many cases recommendable to make a pre-notification to the Office of Free Competition. The Office of Free Competition may in such a case grant certain alleviation to the notification requirements. In the EU a corresponding pre-notification is an established practice in the notifications made to the Commission.
Powers of the competition authorities
The Competition Council may, based on a proposition of the Office of Free Competition prohibit an acquisition or order it to be cancelled or impose conditions for its implementation. This may be the case if, as a result of the acquisition, a dominant market position is created or strengthened which significantly restricts free competition in the Finnish market or a part thereof.
In case the restriction of free competition or the detrimental effects can be avoided by setting conditions for the acquisition, the Office of Free Competition shall negotiate and order these conditions to be complied with and not bring the matter to the Competition Council.
Schedule for the procedure
The Office of Free Competition shall investigate the notification immediately. In the first phase the Office of Free Competition shall decide whether the matter requires further investigation. If the Office of Free Competition does not give a decision regarding further investigation within one month from receiving the notification, the acquisition is considered approved.
Should the Office of Free Competition not impose any conditions or make a proposition to prohibit the acquisition within three months from the date when the Office of Free Competition decided on the further investigations, the acquisition is considered approved. The Competition Council may extend the period with a maximum of two months. The Competition Council shall give its decision within three months from the proposition by the Office of Free Competition. It should be noted that the acquisition may not, as a general rule, be effected before a final decision has been given in the matter or before the acquisition can otherwise be considered approved.
Impacts of national merger control
The new merger control legislation brings the Finnish competition rules to closer conformity with the EC-rules and gives the competition authorities effective means to prevent business concentrations that are detrimental to free competition in the Finnish market. It can, however, be expected that prohibition decisions will be made only in very rare cases, in which effective competition in the Finnish market cannot be secured by imposing conditions for the acquisition. For business the new legislation means more bureaucracy but also increased legal certainty.
Other amendments in competition legislation
The amendment of the competition legislation did not change the contents of the central provisions of the Act on Competition Restriction.
The provisions regarding tender cartels, agreements and other arrangements between competitors, restrictions of competition in distribution chains and the abuse of dominant market position remained unaltered as to their contents.
However, the legislation introduced a de minimis rule, according to which the Office of Free Competition does not examine competition restrictions in case the restraint of competition only has a minor effect on competition. As a general rule, a restriction of competition can be considered minor when the market share of the goods or services subject to the agreement or other arrangement does not exceed 5 % of the relevant market. In the consideration also such other goods and services of the parties are taken into account which the users consider substitutable as to their characteristics, price and intended use.
After the amendment of the legislation the legal protection of the companies is increased by the possibility to apply for a so-called negative clearance, i.e. the competition authority's statement that the applicant's agreement, decision or procedure does not fall under the applicability of sections 4-6 of the Act. The companies may, for example, receive a certificate stating that a certain arrangement will not be considered being against the prohibition of resale price maintenance or that certain co-operation between competitors will not be considered prohibited. On the contrary, the provision does not apply to section 7 (abuse of dominant market position) or to section 9 (so-called harmful competition restrictions) and does not remove the uncertainty in relation to these sections of the law.
The new legislation clarifies the obligation of entrepreneurs infringing the competition rules to pay damages to contract parties and to third parties, and makes this obligation more severe. An entrepreneur who deliberately or negligently violates a stipulated prohibition or a decision by the Competition Council is obliged to compensate another entrepreneur the damage he has caused. The compensation includes compensation for costs, price difference, lost profit and other direct and indirect economic damage caused by the competition restriction.
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.
