Legal Alerts/14 May 2020
New Proposals for the Amendment of the Competition Act
The Ministry of Economic Affairs and Employment has published a draft bill concerning the transposition of ECN+ Directive in Finland.
In addition, the Ministry of Economic Affairs and Employment has proposed a temporary extension of time limit concerning merger control. This amendment is prompted by administrative challenges faced by the Finnish Competition and Consumer Authority due to the current COVID-19 pandemic.
Implementation of the ECN+ Directive
The working group was appointed on 14 June 2019 and its task was to prepare the national implementation of the so-called ECN+ Directive (Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market).
The working group also evaluated the need and means to increase the predictability of fines and penalty payments imposed for a restraint on competition. Furthermore, the group reassessed whether a prior consent of the Market Court is preferable before the Finnish Competition and Consumer Authority (FCCA) may conduct an inspection in an undertaking’s business premises. In this regard, the working group did not, however, propose any amendments to the existing system.
Under the ECN+ Directive, the national competition authority should have effective means to restore competition in the market by imposing structural and behavioural remedies that are proportionate to the infringement committed and necessary to bring the infringement to an end. It is proposed in the draft bill that the Market Court would have the power to impose structural remedies upon the proposal of the FCCA. Examples of these measures are an obligation to dispose of a shareholding in a competitor or to divest a part of business to a third party.
The ECN+ Directive requires that the national competition authority’s right to summon for an interview will be extended to any natural person who may possess information relevant for the investigation of a breach of competition law. In the draft bill, difference is made between representatives of an undertaking or association of undertakings and other natural persons since if a representative will not appear at an interview the undertaking may be imposed financial sanctions.
According to the draft bill, the FCCA should be able to conduct inspections in an undertaking’s business premises even in cases where the suspected infringement is not considered ”serious”.
Fines for the breach of procedural rules
In addition to substantial breaches of competition law, undertakings may be imposed financial sanctions if they fail to comply with procedural rules. The draft bill includes an exhaustive list of procedural breaches that may lead to fines, e.g.:
- failure to comply with an authorised inspection,
- breaking seals affixed by the FCCA,
- supplying incorrect, incomplete or misleading information; or
- failure to appear at an interview in case of a representative of an undertaking.
These sanctions are not applicable in the context of merger control or competition neutrality proceedings.
Fines on industry associations
Under the ECN+ Directive, a fine for an infringement of competition law imposed on an association of undertakings must be calculated taking into account its members’ turnover. If the association is not solvent, it is obliged to call for contributions from its members to cover the amount of the fine.
In the first place, national competition authorities may require the payment of the fine directly by any of the undertakings whose representatives were members of that association’s decision-making body. In the second place, where necessary to ensure the full payment of the fine, the competition authority may also require the payment of the outstanding amount of the fine by any of the members of the association that were active on the market on which the infringement occurred.
However, payment will not be required from undertakings that show that they did not implement the association’s infringing decision and either were not aware of its existence or have actively distanced themselves from it before the investigation started.
Predictability of fines
The working group also proposes an amendment that is not based on the ECN+ Directive. This amendment concerns the way the FCCA should calculate the amount of fines to be imposed on competition law infringements. The proposed method, which binds only the FCCA, is close to that applied by the European Commission. The FCCA should first determine the basic amount of fine based on the gravity and duration of the infringement. This basic amount would then be adjusted taking into account aggravating and mitigating circumstances.
Representatives of the Confederation of Finnish Industries and the Federation of the Finnish Entrepreneurs have issued a dissenting statement in which they criticise, first, that the FCCA’s decision to impose interim measures would automatically be valid until the conclusion of the proceedings by the FCCA instead of the current fixed period of 90 days. They also criticise some aspects concerning fines on industry associations and the way the FCCA currently answers to undertakings seeking guidance on the interpretation of competition law. In this regard, they propose the FCCA should give statements that are more binding in order to increase legal certainty especially for small and medium-size enterprises.
The representative of the Finnish Bar Association, our Partner Ilkka Aalto-Setälä, has also submitted a dissenting opinion stating that the working group has not paid enough attention to the safeguards in respect of the undertakings’ rights of defence, as required by the ECN+ Directive. The Bar Association calls for the right to an effective remedy before the court in terms of the documents taken by the FCCA during its inspection. The Bar Association also proposes that a fine for the infringement of a procedural rule should only be imposed if the breach has had an effect on the investigation. Finally, the Bar Association fears that the new method for calculating the amount of fine will lead to an increased fines even if it is not an explicit objective of the reform.
The ECN+ Directive must be transposed and implemented in Finland by 4 February 2021.
COVID-19 based extension of the FCCA’s time limit
The Ministry of Economic Affairs and Employment has published a proposal for the extension of time limit for phase II investigations. The FCCA should still examine a concentration notification immediately and decide on the need for further investigation within one month from the receipt of the notification. However, according to the new proposal, the FCCA would have four months (instead of the current three months) to decide whether to allow the concentration or to propose the Market Court to prohibit or attach conditions on the implementation of the concentration. The main reason for the time extension is that the execution of market analysis takes now longer than under normal circumstances. The amendment is intended to remain valid until 31 October 2020.
Borenius’ lawyers are available to assist in addressing any questions you may have regarding this draft bill.