Legal updates covering current topics.
The Market Court has rendered its much awaited, albeit brief, decision in the case concerning the proposed “3 to 2” merger in the Finnish health care market between Mehiläinen Yhtiöt Oy and Pihlajalinna Oyj on 29 December 2020. The Market Court did not rule on the merits of the proposed merger due to the deal having been abandoned.
On 29 September 2020, the Finnish Competition and Consumer Authority
(the “FCCA”) proposed to the Market Court the prohibition of the proposed merger between two large Finnish health care services providers, Mehiläinen and Pihlajalinna. This was only the fifth prohibition proposal in the history of the FCCA.
In its extensive investigation, the FCCA found that:
- The health services market has concentrated in the recent years in Finland as the largest market players, Mehiläinen, Pihlajalinna and Terveystalo, have increased their market shares significantly by acquiring many of the smaller players in the market. Should the merger be approved, the market would be controlled by two large players (the merged entity and Terveystalo) with superior market shares, which would irrevocably affect the health services market in Finland.
- Mehiläinen and Pihlajalinna compete in almost every segment of the health services market. The proposed merger would raise competition concerns in many of these segments, such as occupational health services, private medical services, private hospital services and certain public outsourcing segments in multiple locations in Finland. The merger would lead to higher prices and less choice for customers and, therefore, it would significantly impede effective competition in the Finnish health services market.
To address these competition concerns, Mehiläinen submitted two remedy proposals to the FCCA. However, the FCCA found neither of the proposals sufficient to eliminate the competition concerns due to the scale and gravity of the concerns. Consequently, the FCCA concluded that the merger could not be cleared even subject to the remedies proposed. The FCCA may not impose remedies which have not been proposed by the parties to the transaction.
The transaction represents the largest merger control investigation in the FCCA’s history and involved several extensions of the statutory time limits – also by using the “stop-the-clock” provision, which according to Mehiläinen constituted a procedural error by the FCCA. In the Market Court, Mehiläinen claimed that the transaction had indeed already been tacitly approved due to lapse of time and the alleged procedural error by the FCCA.
Decision of the Market Court
In its decision of 29 December 2020, the Market Court did not assess the substance of the FCCA’s prohibition proposal or Mehiläinen’s claims regarding alleged procedural error by the FCCA but found the matter to have lapsed.
Mehiläinen and Pihlajalinna had in stock exchange releases in November 2020 announced that Mehiläinen would not complete its public tender offer due to the non-fulfilment of the minimum acceptance condition in the offer regarding merger control clearance. As a result, the merger agreement between the parties had lapsed. Both parties stated that they would continue the Market Court process and await its outcome. Mehiläinen announced that it would seek to cooperate with Pihlajalinna should the decision of the Market Court be favourable. Pihlajalinna stated that it had not committed to any new negotiations with Mehiläinen and that the merger process between the parties had ended.
For the above reasons, the Market Court deemed the merger process between the parties to have been cancelled, even if Mehiläinen had not formally cancelled its merger control notification with the FCCA. Consequently, the Market Court found that there were no prerequisites for any further processing of the matter with the Market Court or any decision on the substance of the matter.
The Market Court stated that, should the parties aim at completing a merger in the future, Mehiläinen would have to make a new purchase offer and submit a new merger control notification to the FCCA, which would then be analysed in the specific market circumstances prevailing at that time.
Although the Market Court’s decision is logical and expected, it would have been interesting to obtain a ruling on the substance of the matter and the merits of the FCCA’s proposal, including the procedural issues. It now remains open how the Market Court would have reviewed the proposed horizontal “3 to 2” merger in the Finnish health services market, which has already seen much consolidation. Based on the decision, it is clear that the Market Court will not render any decision on the permissibility “in principle” of a transaction, which is not to be carried out as notified to the FCCA. Also, it may be concluded that the reasoning of the Market Court in merger cases does not have any binding legal effect. Accordingly, each merger will be reviewed in the light of the circumstance prevailing at the time of the merger. This is in line with the principles regarding market definition, which must be made separately in each case.
For now, the proposed acquisition of Heinon Tukku by Kesko, also a horizontal merger prohibited by the Market Court last year, remains the only merger which the Market Court has so far prohibited in the 22-year long history of merger control in Finland.
The case also shows that merger control proceedings can be extremely extensive and increasingly time-consuming with the use of stop-the-clock provisions by the FCCA. This may have an impact on deal certainty and should be taken into account when negotiating transaction documents and factored into transaction timelines.
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