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. We hope our newsletter will help you stay on track and welcome you to contact us for any questions or comments.
ANTITRUST & MERGERS
The European Commission simplifies the procedure for reviewing mergers under the EU Merger Regulation
The European Commission has adopted a package to further simplify its procedures for reviewing mergers under the EU Merger Regulation. The package includes a revised Merger Implementing Regulation, a Notice on Simplified Procedure, and a Communication on the transmission of documents. The main changes aim to simplify and expand the scope of the Commission’s review process for unproblematic mergers, reducing reporting requirements by 25%. The new rules will be applicable from 1 September 2023.
The key changes in the package are as follows:
- Expanded scope of simplified procedure: The Notice identifies new categories of cases eligible for simplified treatment based on market shares and concentration indexes. It also grants the Commission discretion to treat certain cases under the simplified procedure even if they do not fall under the default categories. For example, the notifying party may request the use of the simplified procedure if the combined market share of all the parties to the concentration that are engaged in a horizontal overlap remains below 25% (instead of the current 20%).
- Streamlined review process: The package introduces a new notification form (“tick-the-box” Short Form CO) for simplified cases with multiple-choice questions and streamlined questions for both jurisdictional and substantive assessments. Additionally, certain cases can benefit from “super-simplified” treatment, allowing direct notification without prior engagement with the Commission. The package also reduces and clarifies information requirements for non-simplified cases.
- Optimized document transmission: The new Communication introduces electronic notifications by default, improving the efficiency of document transmission to the Commission.
The Commission has continuously been working to streamline and simplify the merger review process for unproblematic cases. The new package is a result of evaluations and consultations carried out by the Commission to address specific issues in the existing procedures.
For more information, please visit: Commission further cuts red tape for merging businesses (europa.eu).
The Court of Justice permits ex-post control of acquisitions that do not fall within the scope of the Merger Control Regulation
In case C-449/21, Towercast, the Court of Justice of the European Union ruled that national competition authorities and courts can conduct ex-post controls, at the national level, on concentrations with a non-Community dimension, based on the prohibition of abuse of a dominant position laid down by EU law (Article 102 TFEU).
In the case in question, the main Digital Terrestrial Television (“DTT”) company in France, TDF, acquired sole control of its competitor Itas. The acquisition had not undergone prior notification or examination under the EU Merger Regulation or French Commercial Code, since the relevant thresholds were not exceeded. Prior to the liberalisation of the French audiovisual area, TDF had enjoyed a State monopoly on the French terrestrial television broadcasting market. Towercast, a competitor of TDF, alleged that TDF’s acquisition of Itas strengthened its dominant position on the DTT broadcasting services market, hindering competition in the field. The French Competition Authority rejected the complaint lodged by Towercast, which subsequently brought an appeal before the Court of Appeal in Paris.
In its ruling, the Court of Justice emphasized that the EU Merger Regulation’s “one-stop shop” system, which applies to concentrations involving significant structural changes crossing national borders, does not negate the purpose of subsequent controls on concentrations with a non-Community dimension based on the prohibition of abuse of a dominant position. Such subsequent controls can be carried out by national authorities using their own procedural rules. During such subsequent control, in consideration of the prohibition of abuse of a dominant position, the relevant authority must examine whether a purchaser, holding a dominant position in a particular market, has significantly hindered competition on that market through the acquisition and control of another undertaking.
In summary, national competition authorities can conduct ex post controls on a concentration under Article 102 TFEU, even if the thresholds for a prior notification were not exceeded. The Court of Justice clarified that, in this regard, the mere finding that an undertaking’s position has been strengthened is not sufficient for a finding of abuse, since it must be established that the degree of dominance thus reached would substantially impede competition, that is to say, that only undertakings whose behaviour depends on the dominant undertaking would remain in the market.
Link to the judgment, case C-449/21: CURIA – Documents (europa.eu)
Press release of the Court of Justice: cp230046en.pdf (europa.eu)
A Company in a dominant position may be held responsible for the conduct of the distributors of its products or services
The Court of Justice clarified the rules for implementing the prohibition of abuse of a dominant position under Article 102 TFEU in case C-680/20, Unilever Italia. The case focuses on alleged abusive conduct by independent distributors of the products of Unilever, which imposed exclusivity clauses on sales outlets, limiting competition on the merits.
The Court of Justice stated that abusive conduct by distributors may be imputed to the producer having a dominant position if the conduct is part of a policy decided unilaterally by the producer and implemented through the distributors. The authority must establish that the conduct was not independently adopted by the distributors but forms part of the producer’s strategy.
Regarding exclusivity clauses, the Court of Justice clarified that, in assessing their effects, the competition authority must consider tangible evidence beyond mere hypothesis. It must demonstrate that the conduct was capable of producing exclusionary effects on competitors, even if not necessarily showing actual anti-competitive effects.
The Court of Justice also explained that an undertaking in a dominant position can submit evidence, including economic studies, to demonstrate that its conduct did not have exclusionary effects. In such cases, the competition authority must assess the relevance and probative value of the evidence presented.
Furthermore, the Court of Justice clarified that the “as efficient competitor test” is only one of several methods for assessing exclusionary effects. The competition authority is not obligated to use this test, but if the undertaking presents its results during the administrative procedure, the authority must evaluate their probative value.
Link to the judgment, case C-680/20: CURIA – Documents (europa.eu)
Press release of the Court of Justice: Abuse of a dominant position: exclusivity clauses in distribution contracts must be capable of having exclusionary effects (europa.eu)
Merger control on oligopolistic market – CK Telecoms case
The EU Courts took quite the opposite view on the Commission’s burden of proof in a case concerning an acquisition of Telefónica Europe plc by CK Telecoms UK Investments Ltd (“CK Telecoms”). In short, the acquisition would have meant that the number of players on the retail market for mobile telecommunications in the UK would have decreased from four to three (excluding mobile virtual network operators who do not own a mobile network). However, none of the three remaining companies would have had a dominant position.
On 11 May 2016, the Commission declared the concentration incompatible with the internal market. The Commission found that the proposed concentration was likely to have significant non-coordinated effects on the market resulting from a reduction in the number of mobile network operators from four to three, the elimination of Telefónica Europe plc as an important competitive force, the removal of important competitive constraints which the parties had previously exerted upon each other, and a reduction of competitive pressure on the remaining players.
CK Telecoms brought an action against the Commission’s decision and the General Court annulled the decision on 28 May 2020. The Commission appealed to the Court of Justice which set aside the judgment and referred the case back to the General Court.
The most important issues in the judgment included the burden of proof and the standard of proof that the Commission (and the national competition authorities) must apply. For example, the General Court held that the Commission is required to demonstrate with a “strong probability the existence of significant impediments” to effective competition following the concentration and that “the standard of proof applicable in the present case is therefore stricter than that under which a significant impediment to effective competition is ‘more likely than not’”. The Grand Chamber of the Court of Justice set this approach aside and decided that “strong probability” is not required since “the Commission is not required to comply with a higher standard of proof in relation to decisions prohibiting concentrations than in relation to decisions approving concentrations.” Consequently, “in order to declare that a concentration is incompatible or compatible with the internal market, it is sufficient for the Commission to demonstrate, by means of a sufficiently cogent and consistent body of evidence, that it is more likely than not that the concentration concerned would or would not significantly impede effective competition in the internal market or in a substantial part of it.”
The Court of Justice also confirmed that the notifying party has the burden of proof concerning the efficiencies. The Court of Justice held that the Commission does not have to acknowledge that all concentrations give rise to “standard” efficiencies. This requirement would amount to creating a presumption of efficiencies caused by the concentration, and therefore a reversal of the burden of proof. Furthermore, the Court of Justice clarified that the Commission does not have to demonstrate that the parties to the concentration are “the closest competitors” or “particularly close competitors” as opposed to “close competitors”.
To conclude, even if the above considerations concerning the burden of proof may sound rather technical, they are likely to have a significant impact on the margin of discretion granted to the Commission and national competition authorities when assessing significant impediments to competition, efficiencies and, consequently, the need to prohibit a concentration in particular on an oligopolistic market.
Link to the judgment, case C-376/20 P: CURIA – Documents (europa.eu)
Press release of the Court of Justice: The General Court must rule once more on the lawfulness of the Commission’s prohibition f the acquisition of Telefónica Europe (‘O2’) by Hutchison 3G UK (‘Three’) (europa.eu)
The European Commission expands Whistleblower Tool to Merger and State aid infringements
The European Commission has broadened the scope of its anonymous whistleblower tool to encompass mergers and State aid matters. Consequently, individuals can now alert the Commission about any potential violations of EU competition rules while remaining anonymous. The tool was initially introduced in 2017 to allow anonymous reporting of cartels and other antitrust violations such as price coordination, agreements on procurement bids, and unfair exclusion of competitors. With this extension, individuals can also utilize the tool to report merger-related infringements such as gun jumping and cases of unlawful State aid.
Since its inception, the tool has expedited the detection of unlawful practices and contributed to the success of the Commission’s competition investigations, receiving an average of about 100 notices per year, helping the Commission take timely actions against anticompetitive behavior. By broadening the scope of the whistleblower tool, the Commission aims to promote synergy across all areas of EU competition law.
To further make use of the tool, the Commission encourages individuals possessing inside knowledge to submit anonymous messages through the provided platform to protect them from potential retaliation, as the purpose of this tool is to safeguard the anonymity of informants who may fear retaliation in any form for their reports. The tool uses a specially designed encrypted messaging system that facilitates two-way communication, allowing whistleblowers to provide information and the Commission to seek further clarifications without disclosing any metadata that could identify the informant.
For more information, please visit: Commission’s whistleblower communication tools’ website
Statistics on merger control in Finland
The number of merger notifications has increased due to lower turnover thresholds that came into effect at the beginning of the year (a merger is notifiable where the combined turnover generated in Finland exceeds EUR 100 million and the turnover generated in Finland of each of at least two parties to the transaction exceeds EUR 10 million). It should be noted that the number of notifications is also influenced by various factors such as the current economic situation and interest rates.
The number of merger notifications in the first three months of the current year 2023 approximately doubled compared to the same period in previous years. The impact of the lower turnover thresholds is expected to be seen with a slight delay because the new thresholds apply to mergers signed after January 1, 2023. It is, however, challenging to predict the final number of notifications for this current year as the number does not increase linearly throughout the year.
Furthermore, according to the statistics, the processing times for Phase I have shortened since 2020. The aim is to keep processing times short for simple Phase I cases and to allocate resources to the investigation of more demanding Phase II cases. The aim is also to expedite pre-negotiations for simple cases to ensure a smooth process within short processing deadlines. Accordingly, the goal is to focus the limited resources on investigating the most demanding and economically significant mergers.
According to the statistics, stop the clock decisions and incomplete notifications are rare in Finland, whereas stopping the clock is more common in the European Commission’s practice.
For more information, please visit (in Finnish): Yrityskauppavalvonta numeroina – Ajankohtaista kilpailusta
The Finnish Competition and Consumer Authority has introduced new techniques to detect cartels
The Finnish Competition and Consumer Authority (“FCCA”) has implemented novel approaches to expose cartels. Despite the detection of several cartels in Finland, the FCCA estimates that a significant portion of such illicit collaborations has gone unnoticed. The FCCA has therefore introduced new statistical techniques to identify markets where the behavior of companies indicates the presence of a cartel. The objective is to expose more cartels by leveraging these innovative methodologies. Initially, these innovative statistical methods will be primarily utilized in the realm of public procurement.
In Finland, cartels have been unveiled in various sectors in recent years, including bus transportation, property management, construction insulation materials, and driving schools.
Initially, the FCCA will focus on applying these novel methods to investigate public procurement. Annually, over 40 billion euros of taxpayers’ funds are allocated to public procurement, and public procurement presents fertile ground for illicit activities such as cartels and corruption. The impact of cartels on prices is substantial: international studies analyzing the price effects of numerous cartels estimate an average increase of 15-30% due to cartel behavior.
For more information, please visit (in Finnish) KKV: Yhä useampi kartelli jää kiinni uusien menetelmien avulla – Kilpailu- ja kuluttajavirasto
Wellbeing services county of Vantaa and Kerava accused of illegal in-house procurement
The FCCA has brough an action before the Market Court concerning the procurement of personnel administration services without prior publication (direct award) made by the wellbeing services county of Vantaa and Kerava. The service was purchased from Sarastia Oy, which is a publicly owned limited liability company. The value of the contract was EUR 9.3 million.
The contract was awarded without prior publication since the wellbeing services county of Vantaa and Kerava considered that it exercises control over Sarastia Oy similar to that which it exercises over its own departments. Thus, Sarastia Oy, which carries out business mainly with its owners, would qualify as an in-house entity of the wellbeing services county of Vantaa and Kerava.
The FCCA disagreed with this argument, since Sarastia Oy has approximately 280 owners and the share of ownership of the wellbeing services county of Vantaa and Kerava is only 0.04%. The FCCA considers that such a minor shareholding does not entitle the wellbeing services county of Vantaa and Kerava to exercise control over Sarastia Oy as required under procurement law.
The FCCA has proposed to the Market Court that the duration of the contract be shortened to terminate in 12 months after the Market Court’s decision has become definitive. The FCCA also proposed a penalty payment of EUR 1,000 to be imposed on the wellbeing services county of Vantaa and Kerava. The amount of the penalty payment is symbolic since the FCCA acknowledges that there is broad uncertainty of the correct application of the provisions concerning the in-house exception.
Sarastia Oy is only one example of public companies, which have several minority public shareholders and where it is unclear whether the control in the company fulfils the criteria laid down under procurement law. The purpose of the FCCA is to clarify the rules and to ensure that the in-house exception will only be used where a contracting authority exercises actual control over the in-house company.
Press release of the FCCA (in Finnish only): KKV vie Vantaan ja Keravan hyvinvointialueen Sarastia-hankinnan markkinaoikeuden arvioitavaksi – Kilpailu- ja kuluttajavirasto
Spanish tax lease case decided – Recovery of illegal State aid had to be extended to shipping companies
As a result of 12 years litigation before the EU Courts, the Court of Justice finally confirmed the Commission’s decision stating that the Spanish tax lease system (“STL System”) constituted illegal State aid (Joined Cases C-649/20 P, C-658/20 P, C-662/20 P, Spain and others v Commission). However, the Court of Justice disagreed with the way the Commission had ordered the recovery of the aid.
The STL System enabled shipping companies to purchase ships built by Spanish shipyards at a 20% to 30% rebate with the help of third party investors, which purchased shares in an economic interest grouping (“EIG”) set up specifically for this purpose. In the STL System, early and accelerated depreciation of the cost of the vessel was applied, which generated heavy tax losses for the EIG. Those losses were deductible from the investors’ own revenues in proportion to their shares in the EIG. Normally, the early and accelerated depreciation is offset later on by increased tax payments when that vessel is completely depreciated or when it is sold resulting in a capital gain. However, the STL System allowed, together with the tonnage tax scheme, the full exemption of the capital gains resulting from the sale of that vessel to the shipping company.
Under the STL System, the advantage (tax exemption) was granted to the investors which owned shares in the EIG. Therefore, the Commission considered (rather formalistically) that the illegal State aid had to be recovered in full from the investors. The Court of Justice noted, however, that the purpose of the STL System was to benefit (also) shipping companies. The investors could only benefit from the tax exemption if they committed to allocate a large part of the advantage to the shipping companies.
According to the case law, the beneficiaries of illegal State aid can not usually successfully oppose a recovery order by stating that (at least part of ) the aid has been transferred further to third parties. However, in this case it was one of the conditions for granting the aid that the investors are bound to channel a large part of the aid to the shipping companies. It was clear at the moment of granting the aid that also the shipping companies are beneficiaries of the aid and the aid amount to be transferred could be calculated on the basis of the documents submitted to the tax authority.
Therefore, the Court of Justice held that the Commission should have ordered the aid to be recovered also from the shipping companies and annulled the Commission’s decision inasmuch the investors were designated as the sole recipients of the aid.
Link to the judgment: CURIA – Documents (europa.eu)
Press release of the Court of Justice: State aid: the Court annuls in part the Commission’s decision on the ‘Spanish Tax Lease System’ (europa.eu)
The European Commission approved Finnish electricity compensation measures up to EUR 1 billion
The European Commission has given its approval to a EUR 1 billion Finnish scheme aimed at supporting natural persons and companies harmed by high electricity prices due to the Russia’s war of aggression against Ukraine. The scheme consists of two measures: direct grants to eligible beneficiaries, channeled through electricity suppliers, to offset part of the beneficiaries’ electricity bills (with a budget of EUR 400 million), and liquidity support in the form of guaranteed loans for electricity suppliers to enable delayed payments of electricity bills (with a budget of EUR 600 million).
The aid will be subject to certain conditions to prevent unfair competition. The Commission determined that the Finnish scheme aligns with the conditions set out in the Temporary Crisis and Transition Framework and approved the measures under EU State aid rules.
For more information, please visit: State aid: Commission approves €1 billion Finnish scheme (europa.eu)
Foreign Subsidies Regulation
The Foreign Subsidies Regulation (“FSR”) came into effect on 12 January 2023, aiming to address distortions caused by foreign subsidies in the EU’s internal market. The purpose of the FSR is to ensure a level playing field for all companies operating in the Single Market while remaining open to trade and investment. Foreign subsidies are capable of distorting the EU’s internal market, e.g. providing unfair advantages to recipients in acquiring companies or securing public procurement contracts.
The FSR grants the European Commission the authority to investigate previously unchecked financial contributions granted by non-EU governments to companies operating within the EU. If such contributions are found to be distortive subsidies, the Commission can take corrective measures. The Regulation introduces three tools:
- A notification-based tool to investigate mergers involving non-EU financial contributions, meeting specific turnover and financial thresholds (i.a., where the acquired company has EU-wide turnover of at least EUR 500 million).
- A notification-based tool to investigate bids in public procurement procedures involving foreign financial contributions, meeting specific contract value and financial thresholds (i.a., the estimated value of the procurement is at least EUR 250 million).
- A general tool to investigate other market situations, allowing the Commission to initiate reviews on its own (ex-officio), including greenfield investments.
Parties involved in mergers and public procurement procedures above the relevant thresholds must notify any financial contributions from non-EU authorities to the Commission before finalizing the transaction. Pending the Commission’s review, the transaction cannot proceed. If the Commission confirms the existence of a distortive foreign subsidy, it will assess its negative and positive effects to determine appropriate redressive measures or accept commitments from the parties involved. These remedies can include divestments or providing access to infrastructure. In notified transactions, the Commission can even prohibit the subsidised concentration or award of the public procurement contract.
On 10 July 2023, the Commission adopted the Implementing Regulation laying down the procedures for notifications and procedural rules concerning investigations in cases of suspected distortive foreign subsidies.
The Commission’s press release is available here: Foreign Subsidies Regulation (europa.eu).
Press release concerning the Implementing Regulation: Commission adopts rules for implementing the FSR (europa.eu)
Stay up to date with our news and events by subscribing to our newsletters here.