The European Antitrust Review 2014 • Section 3: Country chapters
Finland: Competition and Consumer Authority
2012 was nothing if not significant in Finnish competition policy. Last year’s political decisions will determine the FCCA’s strategy choices and practical work for a long time.
First of all, there is reason to raise the issue of consumer policy on which a government programme was published in October 2012. The programme sets out goals for consumer policy in areas such as an increasingly digitalised market, and in public welfare services – in other words, on a market that is also on the agenda of the implementation of competition policy and competition legislation. According to the programme, consumer policy should increasingly be seen as securing the interests of citizens and their capacity for choice while securing free and healthy competition and freedom of enterprise, essential for the market economy. The programme also points out that on a functioning market, companies have equal opportunities to operate, which means that superior skills lead to success. At the same time, consumers can trust that their rights will be respected, and that companies investing in quality and respect for consumers’ rights will be the successful ones. The decision to merge the Finnish Competition Authority and the Consumer Agency was based on this kind of thinking – that is, on improving effectiveness by combining the ‘toolkits’ of each political sector. The merger was implemented at the beginning of 2013 as the result of preparations taking less than a year.
Another significant political decision in 2012 was the establishment of a programme for promoting healthy competition in the Ministry of Employment and the Economy. In the home market sector, inadequate competition in the retail and construction trades, for instance, raises the price of end products, reduces incentives for innovation and consequently lowers productivity and growth. The Finnish government decided to set up a programme for the promotion of healthy competition as a response to these challenges.
There are three subgroups, each with separate aims, in the healthy competition programme:
- alleviating the flaws of the centralised structure of the trade in daily consumer goods;
- maintaining competition neutrality in business activities of the public sector; and
- regulating impediments and restrictions to competition stemming from legislation.
The programme resulted in the addition of a provision to competition legislation, according to which a company can be seen to be in a dominant market position if its national market share in daily consumer goods exceeds 30 per cent. Parliament has passed the legislation and it is expected to take effect from the start of 2014. There are also proposals for new provisions in the Competition Act on whose basis the Finnish Competition and Consumer Authority might supervise the implementation of competition neutrality between private and public business activities. A proposed bill, which applies to the supply market and therefore does not cover the procurement of goods, is currently before parliament. In addition, the healthy competition programme includes measures for the elimination of obstacles to competition stemming from legislation or institutional structures. These apply to:
- the promotion of healthy competition in zoning and construction;
- the position of the third sector (ie, the non-profit sector) in the production of services;
- the waste market;
- the pharmaceutical market; and
- the digital market.
With respect to the last few items, the implementation of the programme is the responsibility of the ministries in question, according to a decision made by the government in September 2012. However, for the promotion of competition in zoning and construction and the waste and digital markets in particular, responsibility has also been allocated to the Competition and Consumer Authority. Tasks connected with this are one of our areas of focus for 2013.
Trade in non-durables and a dominant market position
In Finland, the trade in daily consumer goods is exceptionally concentrated. The market share of the biggest player is more than 45 per cent (the S-Group, comprising regional retail cooperatives), and the second largest is about 35 per cent (Kesko’s K-food store chain). The third largest company in the market has a market share of only about 8 per cent. Consequently, the market is largely in the hands of two players. It is quite possible that the market share figures might actually underestimate the market power of the two large trade groups, as the business locations and zoning practices tend to give them extra competitive advantage.
According to the new regulation, an undertaking and an association of undertakings whose market share in the retail sale of daily consumer goods in Finland is at least 30 per cent, is to be seen to be in a dominant market position in that market. It follows from this legal definition that the impact of the reform is not limited only to the purchasing market. So it is possible for a trade groups’ behaviour to also come under scrutiny in the sales market, or, for instance, foreclosure measures that directly or indirectly target competitors.
In practice, the new rule would mean that the activities of the central firms of the two largest trade groups could be evaluated from the point of view of abuse of a dominant market position. The goal of the proposed legislation is to bring the buying power and market power of the big trade groups under the control of society under conditions, in which competition no longer forms a sufficiently powerful steering mechanism. However, the rule would not mean that a regional cooperative store or a shop owner that is part of the Kesko group would be seen to have a dominant position.
The rule would not prevent larger retail groups from expanding their market shares further through conventional methods of competition and through their own superior abilities, but they would be required, in their operations, to obey the rules applying to a company in a dominant market position. The proposal does not have any impact on the indications of what constitutes misuse of a dominant market position, and it would have no impact on the application of rules on supervision of mergers.
As preparations for the proposed legislative changes were being made, various alternatives were put forward for the supervision of centralised commerce. The casuistic method of legislation, in which the different forms of a forbidden activity would have been listed, proved at a very early stage to be an impossible task. Code of conduct rules were not considered adequate for resolving the problems that arose. Compared with the alternative methods of supervision, the ban on the abuse of a dominant position was seen as expedient especially because the rule applies broadly to fighting the misuse of a market force (and buyer’s power). It is possible, in the application of the rules, to distinguish between anti-competitive and pro-competitive behaviour, and national and EU legal practice brings predictability to how it is applied.
The legislation is expected to take effect from the beginning of 2014. This year’s mission for the Finnish Competition and Consumer Authority is to engage in dialogue with commerce and its stakeholders. The goal is to make sure that there are no false expectations about the content of the bill and that phenomena indicating possible abuse would be eliminated already before it becomes law.
New supervisory mission to secure competition neutrality
According to proposed legislation now before parliament, the powers of the Competition and Consumer Authority would be increased in order to safeguard competitive neutrality between public and private business operations. If a conduct or structure (eg, municipal enterprise enjoying certain tax benefits due to its legal status) were applied by a municipality, a federation of municipalities, the state or a unit operating under their authority, which would distort competition or prevent the emergence of competition, the Competition and Consumer Authority would be required to remove the conduct or structure that endangers competition neutrality, primarily by negotiating. If negotiations did not lead to a solution, the Competition and Consumer Authority would be entitled to prohibit the activity, or to impose obligations securing competition neutrality as a condition of continuing the activity. However, the rules would not be applied if the activity is based on legislation. This restriction of jurisdiction works in two ways. First, it is not possible to take issue with methods that distort competition at all if legislation does not give any discretion in organising the activity – that is, it was the actual intention of the lawgiver that there should be no competition on the market (for example, pharmacies and the retail sale of alcohol). Second, it is not possible to ban the activity completely if legislation imposes an obligation for dealing with the activity. In this case the Authority can nevertheless impose obligations on pricing, for instance.
The Competition and Consumer Authority could impose a conditional fine to give more credence to a prohibition or obligation. Decisions by the Authority could be appealed to the Market Court. According to early assessments, the proposal includes a very efficient prioritisation rule. According to the rule, the Authority could decide not to investigate a matter if it is unlikely that the impact of the process on competition would be significant.
It should be pointed out that the new regulations would not give the Competition and Consumer Authority general jurisdiction for oversight over state subsidies or SGEI services. This means, for example, that evaluation of support given to private companies by municipalities or the state would not fall within the framework of the law. However, subsidies for a company owned by a municipality or the state may well fall under the purview if the support distorts or impedes competition.
If it is passed, the proposed legislation would significantly affect the work of the Authority, and hopefully also affect how competition operates in Finland. The right of the public sector, including the municipalities, to engage in business activities in a competitive market situation, has not been restricted, as a rule. Finland has about 170 municipal public utilities (not independent legal persons), whose combined turnover is about €4 billion). In addition, municipalities have about 2,000 subsidiary entities organised in the form of limited liability companies. Preparing for the new authority to secure market neutrality is one of the central tasks for 2013.
Next Chapter: Finland: Overview