Legal Alerts / 23 Jun 2020

New Acts to Broaden the Consumer Protection Authorities’ Enforcement Powers Expected to Come into Force in July 2020

The Finnish Parliament approved government bill HE 54/2019, supplemented with HE 10/2020, on new acts to broaden the consumer protection authorities’ enforcement powers in its second reading yesterday on 22 June 2020. The reform is expected to come into force in July once ratified by the President of the Republic of Finland.

The reform complements the EU Regulation (EU) 2017/2394 of 12 December 2017 on cooperation between the national authorities responsible for the enforcement of consumer protection laws (“CPC Regulation”). Simultaneously it aims to meet a national request to strengthen the enforcement of consumer protection also in cases that do not fall within the scope of the CPC Regulation. By the proposed new acts, the consumer protection authorities will get substantially more enforcement powers.

A right for the Consumer Ombudsman to order injunction with immediate effect and the introduction of a penalty payment to be ordered by the Market Court on petition by the Consumer Ombudsman constitute the most substantial changes.

The reform was originally planned to come into force in January this year. The Government, however, supplemented HE 54/2019 with HE 10/2020 as a consequence of the Constitutional Law Committee’s report addressing the need for a possibility to directly appeal the Market Court’s decision in penalty payment matters.

Penalty payment for breach of consumer protection

The government bill introduces a new remedy applied in cases of a more severe breach of consumer protection provisions. The proposal sets out a penalty payment that can be imposed on traders if they intentionally or negligently violate the provisions set out in the Consumer Protection Act. The penalty payment can be up to an amount equalling 4% of the trader’s turnover in the financial year preceding the period of time when the act of breach ceased. In exceptional cases, a penalty payment can also be imposed on a natural person who is a member of the management body of a legal entity or exercising the effective control of a legal entity, or on another trader that acts on behalf of the trader up to a cap of EUR 40 000.

The Market Court will have the authority to impose a penalty payment based on a petition issued by the Consumer Ombudsman. The Market Court’s decision may be appealed to the Supreme Administrative Court without a leave of appeal. In order for the bill to follow the normal legislative procedure, the Constitutional Law Committee required that there is a possibility to appeal a Market Court decision on a penalty payment within an administrative procedure without a leave to appeal. The original proposal based on which penalty cases would have been handled in civil proceedings with a possibility to file for a leave of appeal to the Supreme Court was accordingly changed.

The FSA is able to directly impose a penalty in a matter that falls within the scope of its competence. Pursuant to the Act on the Financial Supervisory Authority, a decision given by the FSA is appealed to Helsinki Administrative Court as the first instance.

A penalty payment can be ordered in cases of severe breaches of a range of provisions concerning marketing activities that are aimed at consumers, the conduct in customer relationships, door-to-door selling and distance selling, the distance selling of financial services and instruments, consumer credits and  consumer loans related to residential property as well as the sale of building elements, building contracts, timeshares and long-term holiday products.

The Consumer Ombudsman’s right to order injunctions with an immediate effect

The Consumer Ombudsman can henceforward order injunctions with immediate effect, and the trader can oppose such order only by filing a petition to the Market Court. This is contrary to the present situation where the Consumer Ombudsman’s injunction order will lapse if the trader opposes such order, and the Consumer Ombudsman is the party that must file a petition to the Market Court for an injunction.

A decision by the Market Court in injunction proceedings may be appealed to the Supreme Court provided leave of appeal is granted. Since injunctions and penalty payments are handled in different procedures, a new section is introduced enabling the stay of penalty proceedings until a final decision in a related injunction proceeding is given.

Additional enforcement powers

The Consumer Ombudsman’s enforcement powers will further be increased by additional investigation and monitoring powers, and in more exceptional cases, even by the power to order the removal of web page content, web pages and, as the last resort, the removal of a domain name. The authorities can also conduct experimental purchases with a fake identity if deemed necessary.

Links to the Government proposals

For easy reference, please find links to the government bills on the Act on Certain Powers of the Consumer Protection Authorities as well as changes to relevant acts including the Consumer Protection Act, the Act on the Finnish Competition and Consumer Authority, the Act on the Financial Supervisory Authority and the Act on Proceedings in the Market Court in Finnish and Swedish:

HE 54/2019 vp (fi) / RP 54/2019 rd (sv)

HE 10/2020 vp (fi)/ RP 10/2020 rd (sv)

Next

The reform is expected to come into force in July 2020.

The reform stresses the need to comply with consumer protection laws. Although the reform emphasizes the need for negotiation proceedings to remain as the starting point, it is clear that the reform sets this into a new context.

Borenius’ lawyers are available to assist in addressing any questions you may have regarding the proposed changes.

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