Competition Economics Handbook 2020

Finland

Copenhagen Economics

In the recent years, Phase II merger reviews have dominated the Finnish field of economics in competition law. Economists at the Finnish Competition and Consumer Authority (FCCA) are heavily involved in any large merger review. In December 2018, the FCCA brought its first cartel case to the Market Court since early 2016, breaking its period of silence. In early 2019, the FCCA also finished its almost five-year investigation in the alleged abuse of dominance case in the financial sector, without finding evidence of abuse. Even more recently, the Supreme Administrative Court upheld the FCCA’s findings of two cartels: the federation for bakeries and in bus transport. With its new Director General, the FCCA has also been more active in the media. Additional resources have been allocated to the authority resulting in the establishment of the Market Research Unit.

The trend of many Phase II merger investigations continues

During 2018–2019, we witnessed a continuation in the increased number of Phase II merger investigations at the FCCA. In 2018, the FCCA launched five Phase II investigations, the same amount as in 2017, whereas during 2010–2016 the number was two to three investigations per year. It now appears more common that the FCCA seeks extension to the deadline from the Market Court; with this happening at least twice in 2018. Publicly, the FCCA has cited that having enough resources for merger review and other enforcement work is a challenge.

During 2018 and the first half of 2019, the FCCA accepted five mergers with commitments. Four were accepted conditional on structural remedies (divestments) and only in one did the FCCA accept behavioural remedies. The structural remedies appear to be the FCCA’s preferred way to resolve competition concerns in problematic mergers.

The role of economists in Phase II mergers remains pronounced and the FCCA’s economist team is well represented in the pre-notification phase of large mergers. However, despite the heavy economist involvement from the FCCA, the analysis conducted is predominantly structural complemented by closeness of competition analysis based most often on survey data. The FCCA seems less willing to go for effects-based analysis. Consequently, the debate has focused on the definition of relevant markets or qualitative arguments rather than analysis on pricing processes and mechanisms in the considered industries.

One new cartel decision and a focus on taxi markets

December 2018 saw the end of the FCCA’s almost four-year hiatus on new cartel decisions as the FCCA proposed a €4 million fine on two manufactures of building insulations for an alleged cartel in the market of expanded polystyrene. The case is now pending at Market Court.

In public, the FCCA has expressed its worry on the proper functioning of competition in the taxi market, with the market having been liberalised in July 2018. There has been an active public discussion around prices and how well competition functions in the market following the deregulation. The FCCA has subsequently established a ‘taxi team’ and started investigating the market.

The FCCA’s two earlier cartel decisions, a bus cartel dating to 2016 and case involving price recommendations of Finnish Bakery Federation from 2015, were upheld by the Supreme Administrative Court.

A large abuse of dominance case in the insurance market comes to close

In early 2019, the FCCA gave its long-awaited decision in the alleged abuse of dominance case in the insurance market. The complaint was that OP, a Finnish insurance and banking conglomerate, unlawfully leveraged its market power in retail banking to the markets of non-life insurances via its bonus system. After almost five years of investigations, the FCCA ruled that there was no evidence of abuse of dominance. From the perspective of competition law economics, the investigation boiled down to the FCCA’s application of an ‘As Efficient Competitor’ (AEC) test. The FCCA’s AEC test incorporated a simulation of life cycle earnings and costs of from OP’s different customer groups.

Additional resources for research and impact assessment

Much anticipated additional resources have been allocated to the FCCA and in May 2019 a Market Research Unit with its primary focus in carrying out research in competition and consumer policy related topics was established. Significantly, the unit is responsible in preparing and assessing legislative proposals affecting competition and consumers. A number of new economists have been employed at the new unit, which is in accordance to the publicly announced plans to carry out research into at least the pharmaceutical, gambling, lending, and healthcare markets.

Agreement on Nordic collaboration in competition affairs

In November 2018, Finland entered into an agreement that increases the collaboration between the Nordic competition authorities. Following this, the Nordic competition authorities may cooperate with each other beyond the framework established by the EU legislation. The new collaboration allows for more efficient investigations between the Nordic authorities and enables investigation of competition restrictions across the Nordic states.