Finland: Cartel Regulation: A Global Competition Review - Special Report

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

Finnish competition law has undergone a number of amendments over the last few years. The Restrictions on Competition Act 1988 was replaced by the Restrictions on Competition Act 1992 (No. 480/1992) (the Competition Act), which since then has been amended several more times.

The Competition Act introduced significantly more stringent rules dealing with restrictions on competition in Finland. In particular, it contains several prohibitions enforced by sanctions in the form of an administrative fine, which has already been imposed by the Finnish competition authorities several times. The Act also increases the powers of the competition authorities to obtain information and to conduct investigations.

One of the objectives of the Competition Act is to bring Finnish competition legislation more in line with EC competition law. In some ways the Competition Act goes even further than EC law, providing for various per se prohibitions.

The two regulatory authorities responsible solely for competition matters are Kilpailuvirasto, the Finnish Competition Authority (FCA) and Markkinaoikeus, the Market Court.

The FCA’s role is to examine conditions of competition and investigate restrictions thereon. It is vested with the power to carry out investigations without prior warning, on its own initiative or upon receiving a request or complaint. In certain situations, where the detriment to competition is seen to be trivial, the FCA may decide to take no action. Appeals against decisions taken by the FCA can be made to the Market Court. The Market Court has the power to impose penalties on parties found to be illegally restricting competition. The Supreme Administrative Court acts as the court of appeal for decisions adopted by the Market Court.

The county governments also have powers to investigate restrictions on competition on a regional level with the cooperation of the FCA.

Article 6 of the Competition Act states that undertakings which are operating on the same level of production or distribution may not adopt decisions or agreements or any other comparable practices whereby they fix or recommend prices. Furthermore, companies may not limit production or share markets or sources of supply unless this is necessary for such arrangements that result in a more efficient production, distribution or further technical or economic development and mainly benefit customers or consumers.

Article 6 covers both formal and informal agreements, including oral or tacit agreements. Nevertheless, the Competition Act allows an undertaking to recommend prices, provided such recommendations are not binding.

Article 9 of the Competition Act contains a general provision concerning restrictive business practices. It states that a restriction, even though not forbidden, ‘shall be deemed to have a harmful effect on competition, if it, in a manner inappropriate for sound and effective competition, reduces or is likely to reduce efficiency within the economy, or prevents or hinders the conducting of business by another’. Consequently, the FCA is empowered to initiate consultations with the companies in question in a variety of situations under Article 9.

Areas excluded from the scope of application of the Competition Act include arrangements or contracts concerning the labour market and arrangements between agricultural producers, pro-vided they do not threaten competition or lead to the abuse of a dominant position within the market for agricultural products. There are no other specific rules in the Competition Act con-cerning sectoral protection.

The Competition Act applies to all economic activity carried out by undertakings or associations of undertakings. By definition this includes both natural and legal, private and public persons who are professionally engaged in offering for sale, buying or selling, obtaining, delivering or providing goods or services in exchange for remuneration.

The Competition Act’s provisions generally only apply to arrangements restricting competition in or imports to Finland. However, they might also apply outside Finland to the extent that restrictions on competition elsewhere affect Finnish cus-tomers. Furthermore, should the interests of Finland’s foreign trade or a treaty with another state so require, the Finnish government may take a decision to extend the scope of application of the Competition Act to cover that particular situation.

In order to comply with the EC implementating regulations for Articles 81 and 82, the Finnish Ministry of Trade and Industry started hearings in 2002 with regard to the possible reform of the Competition Act. The Ministry has proposed to review issues such as the FCA’s powers of investigation, sanctions for infringements of the Competition Act and the need for a leniency programme.

The FCA frequently sends questionnaires to undertakings in reaction to complaints from the public or allegations in the press.

The FCA is empowered to conduct ‘dawn raids’, such as surprise inspections at the offices of undertakings. Indeed, a dawn raid is usually the first step in an investigation of any serious potential infringement of the Competition Act. Thereafter the FCA listens to the parties concerned and then makes a decision on whether to refer the matter to the Market Court. The latter may issue an injunction and impose fines.

The FCA has far-reaching powers to investigate companies as necessary in order to enforce the provisions of the Competition Act. These investigations may include: 

Demands for specific documents by the FCA. Written requests for information must state the legal basis and pur-pose of the request and the time limit for provision of the information. Where an undertaking intentionally or negli-gently supplies incorrect information in response to the information request, or fails to do so within the relevant time limit, fines may be imposed.

Inspection visits. The FCA may decide to give the undertak-ing advance notice of its visit, but increasingly, and especially where serious infringements are suspected, the FCA will carry out an inspection without warning. Officials are empowered: 

• to enter premises and examine books and business records (including computer records);
• to copy, or take extracts from, such books and business records; and
• to request on-the-spot oral explanations.

The FCA may only enter business premises for the purposes of pursuing a current investigation. The FCA has far-reaching powers of entry and seizure and undertakings are required to cooperate with any investigation.

Based on the current Competition Act, the FCA has no right to enter the private homes of employees of undertakings under investigation. However, the issue has been raised by the Ministry of Trade and Industry in the course of the hearings to reform the Competition Act and it is possible that the FCA’s powers will be extended. The Constitution of Finland and the Act on Coercive Measures provide that no home searches may be conducted unless there are grounds to suspect the individual concerned of a crime for which the minimum imprisonment sentence is at least six months. There are no criminal sanctions in Finnish legislation for participation in cartel activities.

Officials of the FCA have the right to examine an undertaking’s business records and to make copies of any documents that are relevant to the investigation. The FCA generally takes the view that it is for it to decide whether or not a particular document is relevant to its investigation, except for those that contain business secrets of a technical nature. Following the inspection, the undertaking may write to the FCA setting out its objections to the inclusion of the document in the investigation.

Officials are not allowed to make personal copies of documents if this is not agreed to by the undertaking in question. It is recommended that a representative of the undertaking copy the documents, as this makes it easier for the undertaking to monitor which documents are being examined and to ensure it retains copies for itself.

Officials have the right to ask representatives of the undertaking for explanations during the investigation. The scope of this authority has not been clearly defined by the FCA. It is generally considered, however, that such requests should be limited to factual questions concerning the documents at hand, for example, the position in the company of a person named in a document, or explanations of abbreviations used in documents.

The FCA regularly cooperates on an informal basis with foreign antitrust authorities, especially within the framework of the EU. The modernisation of the EC competition rules and the new implementation regulation are likely to enhance cooperation between antitrust authorities.

In addition, as reported in the FCA’s 2002 yearbook, the members of the FCA’s cartel group take part in joint meetings organised by the Nordic competition authorities for the purpose of promoting cooperation and the sharing of experience between the Nordic authorities regarding cartel investigations .

The FCA is active in the OECD’s Committee on Competition Law and Policy.

In a report published on 17 December 1999, a working group of Nordic competition authorities found that there was a need for a closer collaboration. The working group held, in particular, that the Nordic authorities must further facilitate the exchange of confidential information and improve investigatory assistance. According to the report, ‘in a situation where companies become increasingly internationalised, this offers the authorities the necessary tools to intervene with anti-competitive activities and concentrations’.

The working group proposed that the present legislative obstacles be removed and a cooperation agreement jointly concluded by the Nordic countries. The Finnish Openness of Government Activities Act, in effect since 1 December 1999, permits the confidential exchange of information between authorities, provided that an international agreement to this effect and binding on Finland has been concluded. So far no such international agreement has been concluded.

The Market Court has the final decision on FCA proposals.

The Market Court’s decision can be appealed to the Supreme Administrative Court.

The onus of proof rests with the FCA, since its role resembles that of a prosecutor.

There are no criminal sanctions provided in Finnish legislation.

The Market Court may prohibit an undertaking from continu-ing a practice in violation of the Competition Act. Furthermore, it may impose an administrative fine for price-fixing, collusive bidding, concluding horizontal arrangements with competitors, and abuse of a dominant market position. The fines range from € 840 to € 690,000 or, in exceptional cases, up to a maximum of 10 per cent of the latest annual turnover of each undertaking or association of companies participating in the restrictive busi-ness practice. No fine is imposed if the violation is deemed to be minor (for example if the violation is limited in geographical scope, duration or economic importance), or if the fine is con-sidered unnecessary for the safeguarding of competition.

When determining the amount of the fine, the authorities will look at the nature, scope and duration of the restriction on competition. The Market Court must ex officio determine the amount in accordance with the criteria set out in Article 8(2) of the Competition Act. The Market Court is not bound by the FCA’s recommendation in setting the level of the fine.

There is a five-year limit for the imposition of fines, with time running from the date on which the restriction on competition was terminated or the date on which the FCA became aware of the infringement, whichever is later.

Conditional fines can also be imposed as an incentive for the purpose of securing access to information and documents during an investigation, or the implementation of an injunction. If a party is found to have given false information to the competition authorities it will also be fined.

When the provisions of the Competition Act are breached by an undertaking, either negligently or intentionally, another business undertaking that has suffered damage as a result can claim com-pensation for the damage suffered. This covers expenses, price differences, lost profits and other direct or indirect economic losses caused by a restriction on competition that is found to be illegal. The amount of compensation may subsequently be adjusted if it is considered unreasonable in the circumstances. Claims come under the jurisdiction of the ordinary courts, and the right to compensation expires within five years of knowledge or assumed knowledge of the damage.

Finnish law makes no provision for class actions.

On 23 November 2000 the predecessor of the Market Court, the Competition Council, imposed a record fine of € 1.7 million on each of the Finnish forestry companies Metsäliitto Osuuskunta, Stora Enso Oyj and UPM Kymmene Oyj .

The defendants were found to have infringed Article 6(1) and Article 6(2) of the Competition Act between 1993-97, having colluded to influence the price of raw timber through an exchange of information, as well as having shared suppliers. The alleged cooperation took place in a so-called ‘review’ meeting, at which representatives of both the forestry companies and local forestry bodies were present. The forestry companies’ line of defence was primarily that the alleged cooperation was organised in the interests and at the invitation of the sellers (the local forestry bodies).

In determining the amount of the fine, the Competition Council, in accordance with Article 8(2) of the Competition Act, considered the nature of the restriction, as well as its scope and duration. The Competition Council emphasised that a company is expected to know the laws affecting its type of business, and that companies as prominent as the three involved could not be ignorant of the competition rules. The fact that a large number of the meetings in question were initiated by the local forestry bodies for the purpose of exchanging legitimate information between buyers and sellers was regarded only as a mitigating factor. The fact that the geographic scope of the infringement was limited was also seen as a mitigating factor.

As an aggravating circumstance, the Competition Council noted that the companies were acting in breach of an exemption granted by the FCA in 1994 that expressly prohibited the exchange of information between these companies.

Because of these mitigating factors, the Competition Council decided that it was not reasonable to set the fine at the level of 10 per cent of the annual turnover of the companies. However, given the size of their turnover, and the fact that the actions of the companies were clearly illegal and harmful to competition, the Competition Council deemed it necessary to exceed the ordinary scale and increase the fines from € 690,000 to € 1.7 million.

Finally, the Competition Council did not attempt to establish the relative degree of blameworthiness of the individual defendants, and imposed the same fine on each of them.

The forestry companies subsequently appealed to the Supreme Administrative Court, which reduced the fines to € 0.5 million (each) on 12 December 2001.

The FCA intends to intervene more effectively against cartels in the future. In 2001, the FCA established a so-called cartel group within the FCA. Furthermore, in 2002 the FCA reformed its organisation and one of its units is now called the cartel unit. In its 2002 yearbook, the FCA states that it ‘aims to increase the number of inspections and to act quickly on well-grounded allegations so that the suspect companies do not find out about the investigations’. 

There are no other guidelines than those set out in the govern-ment bill of the Competition Act, which states that the fine must exceed the benefit derived from the restriction on competition. This follows from the general principle that breaching the law should never be profitable. Consequently, as a deterrent, the higher the turnover of an undertaking, the higher the fine imposed will be.

The government bill of the Competition Act also states that general principles of criminal law should be observed. The Competition Council has clarified that this means, inter alia, that penalties should only be imposed where the essential elements of the behaviour in question are defined in sufficient detail for the defendant to understand that it is indeed breaking the law.

See answer to question 18 above.

There is no leniency/immunity programme. The investigation of a cartel and the imposition of fines are the respective responsi-bilities of the FCA and the Market Court, and the FCA there-fore cannot make a promise of leniency as it does not set the level of fines. As noted above, the need for a national leniency pro-gramme was one of the issues raised by the Ministry of Trade and Industry in the hearings on the possible reform of the Competition Act. However, the Director General of the FCA has stated that it is questionable whether a leniency programme could be compatible with the Finish legal system as a way of lim-iting the liability of illegal actions. It is too early to tell whether the possible reform of the Competition Act will include a leniency programme, but based on the prevailing view on this issue in Finland, it appears to be unlikely.

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Counsel represent the undertaking under investigation and not its employees.

Counsel can represent multiple corporate defendants, except in cases where there are conflicts of interest. 

See answer to question 30 above.

Cooperation with the FCA is recommended where fines are likely to be imposed, but Finland has no leniency programme.

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