We are pleased to provide you with this Quarterly EU & Competition Newsletter, which summarises selected key highlights and recent developments in Finnish and EU competition law. This newsletter covers the areas of Antitrust & Mergers, Public Procurement, State Aid and the Internal Market. We hope our newsletter will help you stay on track and welcome you to contact us for any questions or comments. You can also subscribe to our newsletters by signing up here.
ANTITRUST & MERGERS
- Commission adopted revised Vertical Block Exemption Regulation and Guidelines on Vertical Restraints
The Commission adopted a new Vertical Block Exemption Regulation (VBER) and related Vertical Guidelines on 10 May 2022. The revised rules include concrete amendments based on the experience gathered and evaluations made by the Commission as well as changes in the market environment since the publication of the previous VBER in 2010. The new rules aim to help businesses in assessing the compatibility of their supply and distribution agreements with EU competition rules. The revised VBER and Guidelines entered into force on 1 June 2022.
The key changes include i.a. the following:
- As regards exclusive distribution systems, the VBER clarifies that the supplier can appoint up to five distributors to a certain geographical area or customer group. Furthermore, the restriction concerning active sales to the territory or customer group exclusively allocated to another distributor can now be extended to the direct customers of the distributor, thus expanding the effects of the restriction.
- Also in a selective distribution system, the supplier may require its distributors to pass on the restriction of sales to unauthorised distributors to the customers of the distributors.
- The suppliers may set different wholesale prices for online and offline sales by the distributor. However, the difference in price the wholesale price must not make the selling online unprofitable or financially unsustainable and thus, in practice prevent the effective use of the internet as a sales channel.
- On restrictive side, the VBER now has stricter conditions on information exchange between the supplier and the distributor in cases where the supplier sells goods or services through independent distributors but also directly to end customers (dual distribution).
- The scope of the VBER is also limited as regards online platforms and provision of online intermediation services. This concerns, for example, the use of parity clauses, which refers to an obligation to offer the same or better conditions to the counterparty as offered to other parties and/or the seller’s direct sales channels, like its website (also known as a Most Favoured Nation clause).
The revised VBER and the Guidelines are available at:
- General Court annulled European Commission’s decision to impose a fine of close to EUR 1 billion on Qualcomm for abuse of a dominant position
The case concerned incentive payments made by Qualcomm to Apple on condition that Apple source all of its LTE chipsets from Qualcomm. The Commission had found that, between 2011 and 2016, Apple had obtained LTE chipsets exclusively from Qualcomm, which paid Apple in return between 2 and 3 billion US dollars.
The Commission found in its decision of 24 January 2018 that Qualcomm had a dominant position in the market of standalone LTE chipsets and integrated LTE chipsets, which enable e.g. smartphones and tablets to connect to cellular networks and are used both for voice services and data transmission. The Commission concluded that Qualcomm had abused its dominant position by making the payments concerned. To that end, the Commission stated that the payments concerned were exclusivity payments which were capable of having anticompetitive effects.
In its judgment of 15 June 2022, the General Court annulled the Commission’s decision because of procedural irregularities and faults in the analysis of anticompetitive effects. Specifically, the General Court found that the Commission had not recorded all interviews conducted during the investigation, and had not given Qualcomm an opportunity to be heard of the change in the scope of the investigation.
As regards the analysis of anticompetitive effects, the General Court found, first, that the Commission failed to take account of the fact that Apple had had no technical alternative to Qualcomm’s LTE chipsets for the majority of its products and, second, that a specific analysis concerning certain iPad models to be launched in 2014 and 2015 was not sufficient to conclude that the incentive payments had anticompetitive effects on all of Apple’s requirements.
The General Court’s press release can be found here: Abuse of dominance on the LTE chipsets market: the General Court annuls the Commission decision imposing on Qualcomm a fine of approximately €1 billion (europa.eu)
Link to the judgment, case T-235/18: CURIA – Documents (europa.eu)
- European Commission finds Hungary in breach of Article 21 of the EU Merger Regulation
According to the Commission, Hungary’s decision to veto the acquisition of the AEGON Group’s Hungarian subsidiaries by Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG) breached Article 21 of the EU Merger Regulation (“EUMR”). Pursuant to Article 21 of the EUMR, the Commission has exclusive competence to examine concentrations having an EU dimension and Member States shall not apply their national laws to such transactions, except where required to protect legitimate interests under certain conditions. VIG’s acquisition of the Hungarian subsidiaries of the AEGON Group is part of a larger transaction through which VIG intends to acquire certain businesses from AEGON in Hungary, Poland, Romania and Turkey.
According to the Commission, the veto did not genuinely aim to protect Hungary’s legitimate interests as set out in Article 21 of the EUMR, as it was unclear how the acquisition in Hungary would endanger fundamental interests of society. The veto was based on an emergency legislation on foreign direct investment introduced in the context of the coronavirus pandemic. Both AEGON and VIG have an existing presence in the country, and they are well-established insurance companies within the EU. Furthermore, the Commission also found that the veto restricted the right of VIG to engage in a cross-border transaction without a justified and proportionate legitimate reason. Thus, the Commission ordered Hungary to withdraw its veto.
This decision affirmed the Commission’s exclusive competence in examining concentrations with an EU dimension, which must be respected to ensure that businesses in all Member States can confidently invest in and make use of the single market.
The Commission’s press release is found here: Hungary’s veto over the acquisition of AEGON’s Hungarian sub (europa.eu)
- The Market Court imposed a fine of EUR 1.75 million for retail price maintenance
On 11 August 2022, the Market Court imposed a penalty payment amounting to EUR 1.75 million on Isojoen Konehalli Oy (IKH), an importing and ironmongery company, for fixing retailers’ online prices by prohibited resale price maintenance. Between 2010 and 2015, IKH had kept an electronical wholesale price list setting out i.a. recommended retail prices for products. The setting of recommended resale prices is not prohibited as such. However, the Market Court found that, as regards the online sale of goods, IKH and most retailers had agreed (or had reached a common understanding) that the recommended prices constituted the minimum prices for the sale of the goods in question. Representatives of IKH and authorized IKH retailers had discussed the recommended retail prices of IKH products and the margin accruing to the retailers in various parts of the IKH retail chain, and IKH had taken measures to limit and restrict retailers’ ability to determine their own resale prices below the recommended prices.
In May 2020, the Finnish Competition and Consumer Authority (the “FCCA”) proposed to the Market Court that a penalty payment of EUR 9 million be imposed on IKH for prohibited resale price maintenance. Pursuant to the FCCA’s investigations, IKH set recommended prices for the products it sold and pressured its retailers to comply with these prices in various ways. The prohibited price fixing was systematic and had a detrimental effect on price competition between retailers, especially since it was targeted at online sales.
The Market Court considered IKH’s conduct a serious restriction of competition but lowered the proposed penalty payment, since the scope of the proved infringement was significantly narrower than that set out in the draft penalty payment proposal made by the FCCA. For example, the Market Court found that it had not been demonstrated in a sufficiently reliable manner that IKH had required its retailers to comply with the retail price level in the offline sales of IKH products.
The decision of the Market Court can be found here (in Finnish): MAO:32/22
Link to the FCCA’s press release: The Market Court imposed a penalty fee of EUR 1.75 million on Isojoen Konehalli Oy for imposing retailer prices in online stores – Finnish Competition and Consumer Authority (kkv.fi)
- The Supreme Administrative Court’s decision in the thermal insulation cartel case
In a precedent decision KHO:2022:86 the Supreme Administrative Court assessed the credibility of a CEO as a witness of a company that had uncovered the existence of the cartel as well as the amount of the imposed penalty payments.
The FCCA found that in 2012–2014 the three largest companies in the thermal insulation sector in Finland had agreed on prices increases. The investigation started on the basis of a leniency application of one of the companies and the Market Court ordered two other companies to pay penalty payments of EUR 2 million and EUR 1,2 million respectively.
One of the companies appealed to the Supreme Administrative Court submitting, among others, that the CEO of the company that had applied for leniency and revealed the existence of the cartel was not a more credible witness than managers or employees of the two other companies.
The Supreme Administrative Court referred to the case law of the Court of Justice of the European Union, according to which a statement made by a person acting in the capacity of a representative of a company and admitting the existence of an infringement by that company entails considerable legal and economic risks, which makes it extremely unlikely that such statement will be made unless the person making it had information of the facts of the cartel. The Supreme Administrative Court also stated that there was written evidence supporting the oral statements and that the Market Court had not erred when it assessed, as a whole, that the oral statements of the CEO were credible.
Finally, the Supreme Administrative Court found that the penalty payment imposed on the appellant was in line with the gravity of the infringement and the penalty payment imposed on the other participant to the cartel. Hence, there were no reasons to reduce the penalty payment imposed by the Market Court.
The decision of the Supreme Administrative Court can be found here (in Finnish): KHO:2022:86 – Korkein hallinto-oikeus
See also the FCCA’s press release concerning the decision of the Market Court: Market Court imposed penalty payments of EUR 3.2 million in total – Finnish Competition and Consumer Authority (kkv.fi)
- Draft Government Bill on lowered thresholds for merger control notifications
According to a draft Government Bill published in June 2022, the turnover thresholds for merger control notifications in Finland are proposed to be lowered significantly. Based on the proposal, a mandatory merger control notification obligation would apply where:
- the combined turnover of all the parties generated in Finland exceeds EUR 100 million;
- the turnover generated in Finland of each of at least two parties to the transaction exceeds EUR 10 million.
Currently, a transaction must be notified to the Finnish Competition and Consumer Authority (the “FCCA”) where the combined worldwide turnover of all the parties to the transaction exceeds EUR 350 million, and the turnover in Finland of each of at least two parties exceeds EUR 20 million.
In the Nordic perspective, the Finnish turnover thresholds have been relatively high. Should the Government Bill be adopted, this will inevitably lead to an increased number of notifications and Phase 1 clearances of unproblematic transactions, which increases the administrative burden of both the FCCA and the parties of M&A transactions. The upside of the proposal is that a stronger nexus to Finland is required and that the FCCA would not have a right to review transactions that fall below the turnover thresholds, as contemplated in an earlier proposal by the FCCA published in June 2021.
Press release of the Ministry of Economic Affairs and Employment (only in Finnish and Swedish): Esitysluonnos yrityskauppojen ilmoituskynnyksen muuttamisesta lausunnoille (valtioneuvosto.fi)
- Lantmännen’s acquisition of Myllyn Paras approved by the FCCA
On 29 April 2022, the FCCA approved the acquisition of Sponmill Oy by Lantmännen ek för. Sponmill Oy is the owner of the Myllyn Paras Group, one of Finland’s leading operators in the frozen food and confectionery industry. Lantmännen is a Swedish agricultural cooperative that operates in the food industry and trades in cereals and sells products under i.a. its Vaasan brand. According to the FCCA’s reports, the acquisition does not raise competition concerns in Finland. The FCCA investigated the competitive impact of the acquisition, especially in the sale of frozen bakery products to retail and foodservice customers.
In the first stage of the investigation by the FCCA, it was found that the parties’ market shares would increase substantially as regards certain frozen bakery products. Subsequently, the case was referred to a Phase 2 investigation in which it was concluded, based on a survey carried out by the FCCA, that consumers consider different bakery products, such as Danish pastries, buns and doughnuts as substitutes, which made it justified to view the market as broader than single product groups. From this perspective, the parties’ market shares were considered to remain moderate after the acquisition. In its assessment, the FCCA also took into account the possibility for certain manufacturers to switch to delivering frozen bakery products to foodservice customers in addition to the retail sector.
Link to the press release: FCCA approves Lantmännen’s acquisition of Myllyn Paras – Finnish Competition and Consumer Authority (kkv.fi)
The public version of the decision (in Finnish) can be downloaded here: KKV hyväksyi Lantmännenin ja Myllyn Parhaan välisen yrityskaupan – Kilpailu- ja kuluttajavirasto
- The acquisition by BEWI ASA of Jackon Holding AS conditionally approved by the FCCA
On 1 July 2022, the FCCA conditionally approved the acquisition by BEWI ASA of Jackon Holding AS. Both Bewi and Jackon are Norwegian, internationally operating industrial groups of companies that manufacture and sell insulation, packaging and component products mainly made of EPS, XPS and EPP materials. The operations of the parties cover the entire production chain from the manufacture and sale of raw materials to the manufacture and sale of finished products.
Based on the FCCA’s in-depth investigation, the merger had adverse competition effects on the Finnish EPS insulation market. The combined market shares of the parties would have become significant, in particular in the market for EPS thermal insulation and frost insulation. The FCCA approved the acquisition on the condition that Bewi sells its Finnish subsidiary BEWI Insulation Oy to a third party. The acquisition may not be closed before a binding agreement has been entered into with a buyer approved by the FCCA.
The FCCA had previously identified a cartel in the market for thermal insulation in Finland (please see above), and the FCCA noted that the increased concentration of the market would facilitate the coordination of the activities of the undertakings operating in the market even in the absence of any actual agreement to such effect.
Link to the press release (in Finnish): KKV hyväksyi ehdollisena Bewin ja Jackon Holdingin välisen yrityskaupan – Kilpailu- ja kuluttajavirasto
- Court of Justice: Sale of shares resulting in the loss of in-house status is a material change that requires a new call for tenders
A request for a preliminary ruling concerning the interpretation of Article 12 of Directive 2014/24/EU on public procurement was made after the municipality of Lerici in Italy had approved a plan under which ACAM Ambiente SpA was awarded a contract to provide the municipality’s waste management until 2028. At the time the contract was awarded in 2005, ACAM’s share capital was held exclusively by certain municipalities, including the Municipality of Lerici, but following a debt structuring in 2013, ACAM chose to merge with IREN SpA, a state-controlled company listed on the stock exchange in Italy.
In 2018, the Province of La Spezia, which was authorised to provide the municipal waste management in e.g., the municipality of Lerici, approved an update of municipal waste management service plan by designating ACAM Ambiente as a service provider in that municipality until the end of 2028, supported by an in-house allocation. The municipality of Lerici brought an action against that decision, arguing that the conditions for the in-house exemption were no longer met. By judgment 847/2019, the Tribunale amministrativo regionale per la Liguria (Regional Administrative Court, Liguria, Italy) dismissed the action.
The Court of Justice ruled that the public procurement procedure through which IREN was selected cannot be equated with a procurement procedure which satisfies the requirements of Directive 2014/24, since IREN, both before the merger with ACAM and after the other municipalities became shareholders in the company, was a body separate from the municipality of Lerici. Thus, the Court held that Directive 2014/24 precludes the continued performance of a public procurement contract which has been the subject of an in-house award, without a procurement procedure, where the contracting authority no longer owns any share in the contracting entity to which the contract has been awarded and no longer has any control over it.
The case number is C-719/20 and the available language versions of the judgment can be found here: CURIA – List of results (europa.eu)
- The Government proposes amendments to the Acts on Public Procurement
On 25 August, a Government Bill was submitted to the Parliament, according to which certain amendments would be made to the Act on Public Procurement and Concession Contracts (1397/2016) and to the Act on procurement by entities operating in the water, energy, transport and postal services sectors (1398/2016).
According to the Ministry of Economic Affairs and Employment, the purpose of the proposed amendments is to give more emphasis to ecological, social and economic sustainability in public procurement. However, the proposed changes are fairly modest and do not seem to significantly affect the comparative assessment of tenders.
As regards ecological sustainability, a contracting entity shall exclude a tenderer if the contracting entity is aware that a member of the tenderer’s administration or management, or a person exercising representative, managerial or regulatory authority therein, has been convicted for aggravated impairment of the environment or aggravated nature conservation offence.
Furthermore, the Government Bill provides that the purpose of the legislation shall include the promotion of ecologically, socially and economically sustainable procurements (sustainability in general is already one of the aims of the current legislation). The Government Bill proposes a new obligation for contracting entities to explain in the procurement decision how the requirements concerning quality have been taken into account in the procurement. However, no appeal may be submitted to the Market Court concerning the description of the consideration of quality.
The FCCA’s competence to supervise procurements shall be enhanced by allowing the FCCA to propose that the Market Court impose sanctions for an illegal procurement without a prior call for tenders within 12 months (instead of the current six months) of concluding the procurement agreement.
Finally, improvements are proposed to the contracting entities’ possibilities to publish several different language versions of the same contract notice.
The amendments are proposed to enter into force on 1 January 2023.
Press release of the Ministry of Economic Affairs and Employment: Government proposes to increase quality and responsibility in public procurement – Ministry of Economic Affairs and Employment (tem.fi)
- New tip form for reporting suspected illegalities in public procurement
In spring 2022, the FCCA introduced a new tip-off service through which anyone can report a suspected illegal direct procurement or other unlawful procurement. The new tip-off form is designed to provide the FCCA with more detailed information about the suspected illegalities. These tips constitute an important source of information for monitoring public procurement, and tips can be submitted anonymously if necessary. The FCCA reviews the information provided and considers based on the content whether it is necessary to open investigations. Measures are taken primarily in direct procurement cases, which lack justification under the Act on Public Procurement and Concession Contracts (1397/2016).
During 2021, the FCCA received 31 requests for action on procurement supervision and approximately 200 tips through various contact channels. In total, 62 cases relating to the control of public procurement were pending, of which approximately half were initiated through a request for action. As in previous years, the ambiguities surrounding procurement in the social and health care sector were highlighted in the tips and cases initiated. In addition, the FCCA examined several requests for action concerning the procurement of transport services last year.
The report on supervision of public procurement is available here (in Finnish): Raportti valvonnan tuloksista
- Finnish schemes to support companies in the context of Russia’s invasion of Ukraine approved by the European Commission
After Russia’s invasion of Ukraine, the Commission adopted the State aid Temporary Crisis Framework to enable Member States to support the economy. The Framework will be in place until the end of 2022.
The Commission has approved four notifications made by Finland in order to grant aid to companies that have been affected by the Russian military aggression against Ukraine, including losses caused by the sanctions imposed by the EU or by its international partners and Russia’s counter measures. The schemes are:
State Aid SA.103159 – Limited amount of aid, which can be granted by any authority at national, regional and local level. The maximum aid amount per company is EUR 400,000. It can also be granted in a form other than direct grant in which case the total nominal value of such measure (e.g. loan or guarantee) must not exceed EUR 400,000. The maximum budget is EUR 500 million.
State Aid SA.103386 – Finnvera’s subsidised loans and guarantees. The measure is open to companies of any size and all sectors except for undertakings operating in the field of primary production in agriculture or forestry, and founder contracting (business activity in which a construction contractor also acts as a property developer), since these sectors are not eligible to receive financing from Finnvera.
State Aid SA.102914 – Refund of property tax on agricultural production buildings for 2022. The maximum aid amount is EUR 35,000 / farm.
State Aid SA.103668 – Temporary emergency support for livestock producers in Åland. The total estimated budget is EUR 475,000.
Link to the press release concerning Aid SA.103159: State aid: Commission approves 500 million Finnish scheme (europa.eu)
- Ryanair’s action against recapitalisation of Finnair was dismissed by the General Court
In June 2020, Finnair arranged a share issue in which the Finnish state (the majority shareholder of Finnair) subscribed to the new shares, after approval by the European Commission, on a pro rata basis in proportion to its existing shareholding. The Commission’s decision approving the recapitalisation was challenged by Ryanair (like many other of the Commission’s Covid-19 decisions concerning aid to air carriers).
In its judgment the General Court found that the Commission did not infringe the principles of equal treatment, legal certainty and the protection of legitimate expectations. In particular, the Commission could derogate from the application of certain requirements of the Temporary framework for State aid measures to support the economy in the current Covid-19 outbreak. For example, no exit plan concerning the sale of new shares was required since the Finnish state was already an existing shareholder of Finnair and its shareholding did not increase in the recapitalisation.
Furthermore, the General Court held that the Commission had not erred in its assessment in finding that Finnair did not have significant market power in the meaning of the Temporary framework even if Finnair carries almost 70% of all passengers carried to/from Helsinki Airport (Finnair’s main base). The Commission had based its finding on the fact that the share of slots held by Finnair at the Helsinki Airport was less than 25% of the total number of slots at the airport in 2019. Furthermore, slots are available at any time of the day for new entrants, including those wishing to compete with Finnair on one route or another.
The case number is T-657/20 and the link to the General Court’s press release can be found here: The action seeking annulment of the decision by the Commission to approve aid granted by Finland to the airline Finnair is dismissed in its entirety (europa.eu)
- European Commission approved 2022-2027 regional aid map for Finland
The European Commission has approved Finland’s map for granting regional aid from 1 January 2022 to 31 December 2027, within the framework of the revised Regional aid Guidelines (‘RAG’). The revised RAG enables EU Member States to support the least favoured regions in Europe in catching up and to reduce disparities regarding income, unemployment and economic well-being. The RAG also provides Member States with increased possibilities to support regions in transition or suffering from certain challenges such as depopulation. The aim is to contribute fully to the green and digital transitions by supporting economic development in disadvantaged areas of Europe, creating a level playing field between Member States. The RAG also aims to avoid unnecessary distortion of competition e.g., by preventing Member States from using public money to generate relocation of jobs from one Member State to another.
The Finnish regions eligible for regional investment aid are defined in Finland’s regional aid map, which also establishes the maximum aid intensities in these regions. Under the derogation of Article 107(3)(c) of the TFEU, regions covering 26.86% of the population of Finland will be eligible for regional investment aid.
The Commission’s press release can be found here: State aid: Commission approves 2022-2027 regional aid map for Finland
- Court of Justice: Finnish taxation of foreign investment fund, which invests in immovable property in Finland, is in breach of the free movement of capital
The judgment of the Court of Justice of the European Union (CJEU) of 7 April concerns the taxation of an alternative investment fund, a company incorporated under French law, of rental income and the profits from the disposal of immovable property located in Finland.
Under Finnish law, only investment funds constituted under the law of contract can benefit from an income tax exemption. The Finnish Supreme Administrative Court made a request for a preliminary ruling to the CJEU asking, in essence, whether an alternative investment fund constituted in France in the form of a company should be granted the same tax exemption in Finland as collective investment undertakings constituted under the law of contract.
The reason for the differential treatment under Finnish legislation is, broadly, that in Finland, it is not possible to establish this type of fund in the form of a company (EU law has not been harmonised in this regard). Therefore, there has been no need to grant a tax exemption to a fund in the form of company in the Finnish legislation.
The CJEU held, however, that the free movement of capital would be rendered ineffective if a non-resident collective investment undertaking, constituted according to the legal form authorised or required by the legislation of the Member State in which it is established and which operates in accordance with that legislation, were to be deprived of a tax advantage in another Member State in which it invests solely on the ground that its legal form does not correspond to the legal form required for collective investment undertakings in that latter Member State (Paragraph 61 of the judgment). Thus, the CJEU found that the relevant Finnish law is in breach of Articles 63 and 65 of the TFEU regarding free movement of capital.
The case number is C-342/20 and the judgment and the request for a preliminary ruling can be found here: CURIA – List of results (europa.eu)
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