Legal Alerts/19 Nov 2020
Finnish Government proposes amendments to the Finnish Competition Act
The Finnish Government has recently issued a proposal (HE 210/2020 vp) to make numerous amendments to the Finnish Competition Act (948/2011) in order to increase the Finnish Competition and Consumer Authority’s (FCCA) enforcement powers in the wake of the so-called ECN+ Directive (2019/1), which aims to empower national competition authorities to become more effective in enforcing EU competition rules via enhanced powers, independence and cooperation within the European Competition Network. The principal amendments set forth in the Government proposal provide the FCCA with new and more far-reaching investigative and enforcement powers in relation to inspections, remedial actions, hearings, interim measures, procedural fines, fines imposed on associations of undertakings as well as the calculation of fines, as detailed below.
Lower threshold to inspect premises other than business premises
The Finnish Competition Act empowers the FCCA to conduct unannounced inspections of business premises in order to supervise compliance with competition rules. However, inspections of premises other than business premises have thus far been subject to a higher threshold, requiring a reasonable suspicion of a serious infringement of competition rules. Inspections on premises other than business premises are not similarly qualified by a serious infringement criterion in the ECN+ Directive, and thus the Government proposal advocates the removal of the said criterion, effectively lowering the threshold for inspections on premises other than business premises.
Following the amendment, the FCCA would be empowered to conduct unannounced inspections on premises other than business premises under a reasonable suspicion that information related to the business and relevant to the subject matter of the inspection is being kept on such premises, including the homes of directors, managers and other staff members of the undertakings subject to investigation. Despite the lower threshold, inspections on premises other than business premises would continue to require prior authorisation of the Finnish Market Court.
Power to impose structural remedies
Potentially the most far-reaching new power that the proposal provides to the FCCA concerns the right to impose structural remedies in relation to competition infringements, such as obligations to dispose of a shareholding in a competitor or to divest a business unit. While structural remedies are possible and fairly commonplace under the merger control regime of the Finnish Competition Act, imposition of structural remedies has previously been impossible in the context of cartels and abuses of dominance. Given the severity and often irreversible nature of structural remedies, the Government proposal sets forth important qualifications for the utilisation of the structural tool.
Firstly, structural remedies would be subject to proportionality review, and could thus be imposed only as the last measure when non-structural remedies are considered inadequate to bring the competition infringement to an end. When choosing between equally effective remedial actions, the FCCA must by default choose the least burdensome remedy for the undertaking. Secondly, the FCCA would have to ensure that the structural remedy does not impair the operating conditions of the undertaking’s remaining commercial activities. Thirdly, imposition of structural remedies would be subject to judicial review at the Finnish Market Court, which remains free to impose a non-structural remedy in lieu of a structural one, should the Court find this more appropriate. Fourthly, prior to the imposition of structural remedies, the FCCA would have to reserve the relevant undertakings the right to be heard on the nature and extent of the envisaged structural remedies, albeit the content of the structural remedy would ultimately remain at the discretion of the FCCA.
Expanded powers for hearings
Pursuant to the Finnish Competition Act, the FCCA has the right to summon persons that act as representatives of undertakings or are suspected of having participated in the implementation of a competition infringement for a hearing. The ECN+ Directive, however, sets forth a broader mandate for national competition authorities’ hearings. Accordingly, the Government proposal provides the FCCA with the right to summon any person who may be in possession of information relevant for the investigation of anticompetitive practices to attend a hearing.
The distinction between persons acting as representatives of undertakings and other persons is of crucial significance, since the FCCA’s right to impose periodic penalty payments applies exclusively to legal persons, and the ECD+ Directive does not introduce changes in this respect. Hence, if a natural person acting as the representative of an undertaking refuses to respond to the FCCA’s summon for hearing, the representative’s undertaking may be fined, not the natural person as such. While the scope of natural persons subject to the FCCA’s hearings will be broader following the amendment, in practice the FCCA’s enforcement powers remain slim with regard to natural persons that lack any connection to a legal person.
Expanded powers for interim measures
In cases involving immediate risk of serious and irreversible harm to competition, the FCCA is entitled to issue injunctions or obligations as interim measures in order to prevent the application or implementation of anticompetitive practices. However, the application of interim measures has thus far been constrained by the requirement for the FCCA to submit its infringement decision to the Finnish Market Court within 90 days of issuing the interim order in question. Given that the FCCA’s investigations may take several years to complete, the Government proposal sets forth an amendment whereby interim orders may remain in force for a fixed-term, subject to extension, or until the FCCA issues its infringement decision.
While the Government proposal extends the FCCA‘s powers with respect to interim measures, it also imposes a counterbalancing obligation for the FCCA to immediately repeal interim orders that become unnecessary under changed circumstances. The purpose of the obligation is to ensure the removal of any interim orders that unduly restrict undertakings’ operations if the FCCA finds that the interim measure has become unnecessary during its investigations. This might be the case for example in situations where the risk of serious and irreversible harm to competition has disappeared after the undertaking suspected of anticompetitive practices has changed its behaviour or operations during the investigation.
Power to impose fines for procedural infringements
The Government proposal extends the FCCA’s powers to impose fines for procedural infringements. The exhaustive list of procedural infringements subject to fines include: (i) objecting, hindering or otherwise failing to comply with the FCCA’s inspections on business premises; (ii) breaking seals affixed by the FCCA during inspections; (iii) failing to rectify incorrect, incomplete or misleading answers given during the FCCA’s inspections; (iv) supplying incorrect, incomplete or misleading information in response to the FCCA’s information requests or refusing to supply the requested information; (v) failing to ensure the appearance of the undertaking’s representative at the FCCA’s hearings; and (vi) failing to comply with the FCCA’s injunctions, interim orders or commitment decisions. The maximum amount of the procedural fine is capped to one percent of the infringing undertaking’s total worldwide turnover.
It is noteworthy, however, that procedural fines related to objecting the FCCA’s inspections (i.e. point (i) above) cannot be imposed when the inspections concern merger control or premises other than business premises. In addition, imposition of procedural fines would only be possible in instances where the procedural infringement has been committed intentionally or negligently. As is the case with the FCCA’s non-procedural fines, the imposition of procedural fines would always be subject to the Finnish Market Court’s judicial review. In addition, procedural fines could also be imposed on the infringing undertaking’s parent company or its legal or economic successor, irrespective of corporate restructurings. In the latter respect, the Government proposal and the ECN+ Directive are in line with the established case law of the European Court of Justice on antitrust liability in situations of economic continuity.
Expanded powers to impose fines on associations of undertakings
The Government proposal includes far-reaching changes to the FCCA’s powers to impose fines on associations of undertakings. The proposal provides that in situations where fines are based on the turnover of an association and its member undertakings, and the association proves unable to pay the fines, the FCCA has the right to require any of the member undertakings whose representatives were part of the decision-making bodies of the association to pay the fine. If the payment of the fine is still outstanding, the FCCA may then require any of the other members of the association that were active on the market wherein the infringement occurred to pay the outstanding amount of the fine.
Despite the extended scope of secondary liability for associations’ fines, the FCCA cannot under the current practice require the fines to be paid by such member undertakings that are able to demonstrate that they have not implemented the anticompetitive decisions of the association and that they are either unaware of the said decisions or have actively distanced themselves from such decision before the FCCA’s investigations commenced.
Calculation of fines
One of the most discussed amendments to the Finnish Competition Act relate to the calculation of fines, aiming to increase the transparency of calculation methods and thereby enhance legal certainty related thereto. Within the proposed framework, the calculation procedure would be based on a so-called basic amount and it would be subject to mitigating or aggravating factors.
The basic amount of the fine would consist of a maximum of 30 percent of the turnover from the sale of goods related to the anticompetitive practice. When calculating the basic amount, the FCCA considers not only the turnover from the sale of goods that are directly related to the infringement, but also the turnover obtained from the sale of goods that are indirectly related to the said infringement, such as the turnover from products whose price is determined by the pricing of the goods directly linked to the infringement. The basic amount is multiplied by the number of years during which the undertaking has participated in the anticompetitive practice. Irrespective of the years of participation, the fine may be increased by 15–25 percent of the basic amount in cases of hardcore competition restrictions.
Mitigating factors include e.g. termination of the infringement immediately after the FCCA’s intervention, the undertaking’s minor role in the anticompetitive practice, as well as enhanced cooperation with the FCCA during its investigations. Aggravating factors would be applicable in cases of repeat offenders and leaders or instigators of the anticompetitive practice. Subsequent to the assessment of mitigating and aggravating factors, the FCCA may take into consideration, as part of its overall assessment, the undertaking’s impending insolvency if the undertaking is able to provide objective evidence to demonstrate that the imposition of fines would inevitably jeopardize the undertaking’s commercial viability and render its assets completely worthless.
As discussed above, the proposed amendments enhance the FCCA’s already considerable investigative and enforcement powers and serve to further expand the scope of potential liability for anticompetitive practices, particularly in relation to associations of undertakings. In light of these notable expansions of enforcement power and potential liability, compliance with competition rules and upholding the rights of the defence will become increasingly important. While credible and efficient enforcement of competition law is of primary importance for the proper functioning of a market economy, it remains equally crucial that enforcement powers are sufficiently counterbalanced by appropriate judicial safeguards, as the ECN+ Directive and the recent Government proposal have underscored.
The implementation of the directive must be completed by 4 February 2021.