Finland: Merger Control: A Global Competition Review - Special Report

This article first appeared in Getting the Deal Through: Merger Control - A Global Competition Review Special Report.

The relevant legislation is in Finland’s Act on Restrictions on Competition (480/92) (‘the Competition Act’). The provisions entered into force on October 1, 1998. The Finnish Competition Authority (FCA) investigates concentrations in the first phase, and either clears them, with or without conditions, or asks the Market Court (former Competiton Council) to prohibit them. The Market Court is empowered to block concentrations.

The Competition Act applies to ‘concentrations’, defined as: the acquisition of control of an undertaking; acquisition of the whole or part of the business of an undertaking; merger; or the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity.

The establishment of a joint venture that performs on a lasting basis all the functions of an autonomous economic entity, ie a full-function joint venture, will be caught by the Competition Act. The competition authorities interpret the concept of ‘full-function joint venture’ in accordance with the guidelines set out by the European Commission.

There is no definition of control in the Competition Act. The definition of control corresponds to the European Commission’s practice. Consequently, minority shareholdings and other interests less than control may confer joint control and are therefore caught.

A concentration must be notified to the FCA if the combined aggregate worldwide turnover of the parties exceeds approximately € 336.3 million and where the aggregate worldwide turnover of at least two of the parties exceeds approximately € 25.2 million, provided that the target company or a company in the same group is engaged in business activities in Finland. In the calculation, the turnover of the buyer’s whole group will be taken into account, whereas of the seller’s turnover only the amount relating to the target of the acquisition will be relevant. The rules concerning the parties whose turnover will be taken into account as well as the manner of calculating the turnover correspond for the most part to the provisions of the EC Merger Regulation. In cases of uncertainty as to whether the turnover thresholds are exceeded or not, the matter can be discussed with the FCA.

If the target company is acquired in stages over a period of two years, all the relevant acquisitions are taken into account in the turnover calculation. Moreover, if the same company systematically acquires several companies operating in the same field each with a turnover of less than € 25.2 million, notification is required if the combined turnover of the target companies acquired during the last two years exceeds the threshold.

The filing of a notification with the FCA is mandatory if the concentration is caught by the Competition Act.

Foreign-to-foreign transactions will be caught by the Competition Act if the turnover thresholds are exceeded and the target of the acquisition, or a company in which the target exercises control, is engaged in business activities in Finland. The FCA has taken the view that this means a physical presence in Finland, eg a subsidiary, sales office, service provider or, in some cases, an appointed agent. An appointed exclusive distributor that does not belong to the group of companies of the target does not normally indicate a physical presence in Finland. A registered seat in Finland without any actual busi-ness activity would not, as such, lead to the application of the Competition Act.

It should be note that in a few cases, in which the products concerned have been marketed and sold in Finland under brands and trademarks and registered there, the FCA has considered the criteria of engagement in buiness activities in Finland as fulfilled. Theses cases had specific features affecting the question of the FCA’s jurisdiction, because of which similar cases should be reviewed on a case-by-case basis.

Notification must be made within one week from: the acquisition of control of an undertaking or the acquisition of a business, ie: from the signing of the acquisition agreement; if the merger takes the form of a direct merger of two undertakings by absorption (A merges into B) or by combination (both A and B merge into a new company established jointly by them), the decision to merge by the undertakings involved; or the holding of the constitutive meeting of the joint venture company. Failure to comply with the filing obligation may lead to fines of between approximately € 841 and approximately € 673,000, or, in exceptional cases, up to 10 per cent of the turnover of the relevant undertaking. However, fines will not be imposed unless deemed necessary in the interest of competition.

The FCA may impose a conditional fine upon a party that has failed to notify a concentration. Where the FCA has imposed a conditional fine to enforce a prohibition, injunction or condition, the Market Court may make the fine payable in the event of any breach of such conditions. (See 11 below.)

The acquirer of control, or those acquiring joint control, the parties to the merger, or the founders of a full-function joint venture, is/are responsible for the filing. There are no filing fees.

Under the main rule, no steps may be taken to implement the transaction prior to clearance of the concentration. However, when the Market Court is investigating a transaction at the request of the FCA, the prohibition on implementation ceases within one month from such request, unless the Market Court orders the suspension to continue. Moreover, the provisions of the Competition Act leave some room for interpretation regarding which measures can be considered to be implementing measures. The FCA and the Market Court may in certain cases, upon request, permit implementing measures during the investigation. Moreover, the party that has launched a public bid can purchase the shares offered prior to clearance, even though it may not use its voting rights to determine the competitive behaviour of the target company. The same rule applies in certain cases where shares are redeemed.

If the transaction is closed before clearance, fines of between approximately € 841 and approximately € 673,000, or in exceptional cases up to 10 per cent of the total turnover of the relevant undertaking, can be imposed. Furthermore, the Market Court may, at the request of the FCA, require the undertakings concerned or assets brought together to be separated, or order the cessation of joint control, in order to restore conditions of effective competition. The request of the FCA must be notified to the parties within one year from the date of the closing of the transaction.

There is no specific rule that would give relief to foreign-to-foreign transactions. Any notifying party may request from the FCA permission to put the transaction into effect prior to clearance if it can prove that the effects on competition are insignificant and that the suspension of the closing would cause harm to the parties to the concentration.

No (except for what is provided under question 10 above).

The notification form is broadly similar to Form CO of the EC Merger Regulation. Various types of data must be given, such as information on the size of the markets, competitors, customers, suppliers, entry barriers, trade associations and ancillary restraints. The form must be completed in Finnish or Swedish. The FCA may in individual cases grant waivers in respect of the information to be given, if certain information is deemed unnecessary for the investigation or if the transaction affects competition only to an insignificant extent.

In stage one the concentration will be examined by the FCA. The FCA has a period of one month during which it must either clear the concentration, conclude that the transaction will not be caught by the Competition Act, or decide to initiate a further investigation. If an in-depth investigation is carried out, the FCA must, within three months (or five months with the permission of the Market Court) of the decision to initiate the investigation, either clear the concentration or ask the Market Court to block it. On receiving the FCA’s request, the Market Court must make its decision to clear or prohibit the concentration within three months. The second-stage procedure could mean a maximum aggregate investigation period of nine months. However, this can be expected only in very exceptional cases; under the main rule, most of the concentrations would be cleared within the first month after notification. The FCA’s assessment can be speeded up by pre-notification discussions.

Under the main rule, the FCA will, after it has received a notification, send a questionnaire to the competitors, customers and suppliers of the parties to the concentration. The aim of the procedure is to establish the structure of the market and the com-petition conditions in it, and to hear the views of the competitors, customers and suppliers regarding the planned concentration. Should the FCA carry out an in-depth investigation, more detailed questions may be sent to the competitors, customers and suppliers. The statements and the case will be discussed with the parties. If necessary, formal hearings will be held.

The concentration may be prohibited if it creates or strengthens a dominant position as a result of which competition would be significantly impeded in the Finnish market or a substantial part thereof. Under the Competition Act, an under-taking is considered dominant if it significantly influences the level of prices or conditions of supply or other competition conditions at a certain production or distribution level. In the assessment of dominance, market share is not the only criterion, nor is there any specific market share threshold which the authorities would consider as establishing dominance. Among other factors to be taken into account are any specific competitive benefits that the concentration could exploit, the bargaining power of the customers and suppliers, potential competition and barriers to entry.

The FCA’s view is that the substantive test (see 17 above) also allows the Market Court to prohibit cases of joint or collective market dominance. However, this interpretation of the Competition Act has not yet been confirmed by the Market Court. The FCA has made three decisions which rely on the concept of collective dominance.

No. The competition authorities will apply the dominance test as with respect to other concentrations.

The number of concentrations approved by the FCA in 2001 was similar to that for the year 2000. No concentrations were prohibited in 2001. The application of the merger control procedure, which has been in force for approximately four years, can be said to be more flexible than was the case when the procedure was first introduced. In addition, special attention is paid to the rights of the parties and the effectiveness of the investigation.

The only transactions in which non-competition issues are relevant are those concerning electricity distribution, as explained under 31 below.

Both the FCA and the Market Court may clear a concentration on the condition that certain undertakings are given by the par-ties to the concentration. As a principle, under the Competition Act, the FCA should always endeavour to impose conditions rather than request the Market Court to ban the concentration. Where conditions are imposed, the authorities normally require structural measures, such as divestments, rather than behavioural measures. In connection with such undertakings, the FCA and the Market Court may impose a conditional fine. If an undertaking is breached, the Market Court may order the conditional fine to be paid.

The FCA may impose conditions on the implementation of the concentration if the harmful effects on competition (the creation or strengthening of a dominant position resulting in significant impediment of competition) can thus be avoided. Possible conditions should be explored prior to prohibition of the concentration. The conditions imposed should not be more severe than necessary for the removal of the anti-competitive effects of the concentration.

The FCA may decide that the conditions (eg divestment) imposed on the undertakings are to be fulfilled within a certain time period. The FCA supervises implementation of the conditions in accordance with its decision to approve the concentration and may nominate eg a trustee to monitor and report to the FCA on the implementation of the conditions imposed.

Where a situation calls for intervention, it is noteworthy that the FCA only considers whether a dominant position is created or strengthened in the Finnish market or a substantial part of it, and thus the FCA may not impose a remedy that does not strictly address and have an effect on this concern. In this context, it is likely that the FCA will cooperate with the authorities in other jurisdictions in the case of multi-filing transactions.

Under the main rule, competitors of the parties to the concentration will be heard in the investigation. The Supreme Administrative Court has recently stated that the competitors are not allowed to appeal against a decision to clear a concentration.

The FCA is reluctant to comment publicly on pending merger control procedures.

As noted above, the parties involved may be fined. The Market Court may require undertakings, or order assets brought together to be separated or the cessation of joint control, in order to restore conditions of effective competition.

In 2001, the FCA issued 104 merger control decisions. Five cases were approved after imposing conditions, one was approved during the second phase without conditions and 98 during the first phase. No concentrations were officially prohibited by the Competition Council in 2001. A total of 31 decisions concerned concentrations in which both of the par-ties were foreign.

The FCA cooperates on a regular basis with other antitrust authorities. The cooperation is of an informal nature, and there is no formal framework for collaboration.

The FCA’s decision on whether it will start an in-depth investigation may not be appealed. Other decisions of the FCA made under the merger control rules may be appealed to the Market Court by the parties involved. Decisions of the Market Court may be appealed to the Supreme Administrative Court by the parties involved.

There is a special provision relating to transactions in the electricity sector. A concentration which would lead to a 25 per cent share of electricity distribution in Finland in a network with a capacity of 400V being obtained can be blocked. The purpose of this provision is to control any negative effects of vertical integration between electricity producers and distributors.

No. The legislation regarding the establishment of the Market Court (replacing the Competition Council) entered into force in the beginning of March 2002.

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