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Non-compliance with Merger Commitments Escapes Fines
6 Nov 2018 On 24 October 2018, the Finnish Competition and Consumer Authority (the "FCCA") ended a 6-year long investigation concerning a breach of merger commitments relating to the acquisition of C More Group AB ("C More") by TV4 AB ("TV4") in 2008, without seeking any sanctions. The FCCA investigated whether the launch of the MTV Total pay-TV channel package in 2012 by MTV, a subsidiary of TV4, was contrary to the conditions to which TV4 had committed in order to obtain the FCCA's approval for the acquisition.  The FCCA's decision closing the investigation reveals that the FCCA considered that the merger commitments had been breached with the launch of the MTV Total channel package. The FCCA's reasoning for not taking any further action despite this is questionable, and the outcome is unfortunate for the credibility of the FCCA's merger control enforcement. The Law Merger commitments, also known as merger remedies, are conditions and obligations the parties to a concentration may propose to competition authorities in order for an otherwise problematic concentration to be permitted. The object of the commitments is to eliminate the competition concerns identified by a competition authority during the review of a notified concentration. The commitments are attached to the decision clearing the concentration and their compliance is monitored. Non-compliance with commitments may lead to an administrative fine of up to 10 per cent of the annual worldwide turnover of the group of companies in question. The fine is imposed by the Market Court on the FCCA's proposal. Background and Facts In July 2008, TV4, a Swedish company, notified the acquisition of C More to the Finnish Competition Authority (currently the Finnish Competition and Consumer Authority). TV4 belongs to the Swedish Bonnier Group, which is active on the Finnish free-to-air and pay-TV market through MTV. The FCCA's main competition concerns at the time of the merger decision related to the fact that TV4 and C More were the two largest providers of pay-TV services in Finland and they had the broadcasting rights for the main sports events. Following an in-depth investigation – which included extending the Phase II review period twice with the permission of the Market Court – the FCCA finally decided to clear the acquisition in November 2008, subject to several commitments. One of the main purposes of the conditions imposed by the FCCA was that MTV and C More pay-TV services had to be kept separate. In November 2012, MTV launched the MTV Total channel package which combined the MTV and C More pay-TV services. Interestingly, the channel package was launched despite the fact that the FCCA had rejected – in a decision in 2010 – MTV's application to have certain merger commitments lifted. In 2014, two years after launching the MTV Total channel package, MTV applied, again, for the lifting of the commitments. This time the application was accepted in 2015. In 2015, the FCCA also prepared a draft Statement of Objections with a view to asking the Market Court to impose fines for the non-compliance of the commitments. The Outcome The FCCA closed the case on 24 October 2018 without seeking any sanctions. The FCCA's decision (in the form of a memorandum) closing the investigation makes it clear that the FCCA considered that the merger commitments had been breached with the launch of the MTV Total channel package. Despite this, the FCCA did not take the case to the Market Court as it did not consider it reasonable. According to the decision, the reasons of the FCCA for not considering it reasonable to make a proposal to the Market Court for the imposition of fines were as follows: (i) inaccuracy of the commitments, (ii) contradictions between the wording and the objectives of the commitments, (iii) ambiguity of the interpretation of the FCCA's earlier advice, (iv) the length of the FCCA's investigation, and (v) the fact that the conditions had eventually been lifted in 2015 due to significant changes in the market conditions as applied by MTV in its second application to this effect. As can be seen, the reasons for not finding it reasonable to seek any sanctions depend largely on the FCCA itself. Key Observations Despite having merger control rules in place for 20 years, there has not yet been a decision in Finland imposing fines on non-compliance with merger commitments. For a long time, the case at hand seemed to become the first one. The FCCA's withdrawal in this case – and the reasons leading to the withdrawal – are unfortunate for the credibility of the FCCA's merger control enforcement, and also somewhat at odds with its call for tougher sanctions in competition law that has been witnessed in the media and public speeches lately. Also, customers, suppliers and competitors of the parties to a concentration should be able to rely on the fact that commitments cannot be and are not unilaterally lifted, even due to significant changes in market conditions, as in law the power to remove or mitigate the commitments lies solely with the FCCA. Even though the case calls into question the binding nature of merger commitments, one should be careful to draw a hasty conclusion that commitments need no longer be complied with. On the contrary, due to the potentially very severe consequences of non-compliance, it is naturally still important to comply with the commitments. Even though in this particular case the consequences did not materialize, we trust that the case will contribute to improving the development of the practical application of commitments. We represented a competitor of the notifying party in the case at hand.
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Government proposes changes to the Competition Act
24 May 2018 On 24 May 2018, the Government put forward a number of amendments to the Competition Act. The following presents the main proposals relating to investigation proceedings, merger control and competition neutrality. Investigations The proposal contains a number of amendments relating to the inspection procedure. The FCCA would have the right to take temporary copies of data, and continue the inspection of such collected electronic data at its own premises in addition to those of the undertaking. According to the proposal, such an amendment would enhance the inspection proceedings and would enable the FCCA to go through large amounts of data in a manner which would cause less harm to the undertaking concerned. Additionally, the Act would be amended to clarify that the FCCA has the right to examine the business correspondence, bookkeeping, computer files, other documents, and data of an undertaking irrespective of the medium in which it is recorded (e.g. mobile devices). The proposal also seeks to enhance the exchange of information between various national authorities. Following the amendment, the FCCA would be given the right to submit information and documents to the prescribed authorities if such information and documentation are necessary in order to carry out certain tasks assigned to the authorities by law. The FCCA would in turn have the right to obtain information necessary for the investigation of competition restrictions or merger control from such authorities, such as the tax authority and the Grey Economy Information Unit. Merger control The Government has proposed to extend the review period in phase I proceedings from one month to 23 working days. Similarly, the review period in phase II proceedings would be amended from three months to 69 working days, and the Market Court could suspend the deadline by 46 working days as opposed to the current two months. The purpose of the amendment is to clarify and unify the duration of merger control proceedings. Competition neutrality The proposal also contains a number of amendments relating to competition neutrality. For example, municipalities, provinces and the state entities engaged in economic activity would have an obligation to keep separate records of that activity. In addition to the aforementioned, the Government proposal also contains a number of other amendments, e.g. on clarifying the limitations in the scope of application of the Competition Act, prioritizing the tasks of the FCCA, unifying the obligation of an undertaking to submit information, extending the time limits of interim injunctions and extending the use of a shortened application for fine reductions. While some of the proposed changes are fairly straightforward and uncontroversial, we expect the debate to heat up especially with regard to safeguarding the rights of undertakings and their employees in the context of inspections and with regard to the proposed increased possibilities for various information exchanges between numerous authorities. As a main rule, the proposed amendments are intended to enter into force as soon as possible. The Government's proposal (HE 68/2018 vp) is available here (in Finnish).
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Temporary Obligation to Notify Concentrations to the FCCA on Social and Health Care Sector
15 Jun 2017 On 15 June 2017, the Council of State put forward amendments to the Competition Act concerning a wider obligation to notify concentrations to the Finnish Competition and Consumer Authority (the FCCA) for companies providing social and health care services. The amendment would have a fixed term and be implemented by adding a temporary provision, Article 22(a), to the Competition Act. The proposal relates to the reform of the social and health care legislation and is processed in Parliament in connection with other legislation relating to the reform. According to the government's proposal, the aim of the reform is to ensure the functioning of the market and the customers' freedom of choice by limiting the concentration of the social and health care sector before the social and health care reform becomes effective. According to the proposed Article, the merger control rules in the Competition Act would be applicable to concentrations – regardless of the turnover thresholds in the Competition Act normally determining the notification obligation – where at least one party to the concentration provides its customers in Finland with social or health care services, or laboratory or imaging services relating to health care services. The notification obligation would therefore arise if only one of the parties to the concentration operates on the social and health care sector as defined above. This means that different vertical and conglomerate concentrations where only one of the parties operates in the field of social and health care services would as a rule fall within the scope of application of the new notification obligation. According to the government's proposal, the aim of the proposal is not to prohibit a significant number of concentrations but to ensure access to information and the possibility to intervene in those probably relatively few cases where the effects on competition would be considered significant. There are four exceptions to the scope of application of the proposed Article. First, the proposed widened notification obligation would not apply to concentrations between self-employed persons. Second, the provision would not apply to concentrations between undertakings (e.g. a company of a single doctor) selling their services within and in the name of the same company or group of companies providing social and health care services (e.g. a big medical center). Third, the notification obligation would not apply to concentrations between two parties where one of them is an undertaking selling the services of at most five social and health care professionals. Fourth, the notification obligation would not apply to concentrations where the target, the merging undertaking/foundation or the joint venture to be established does not operate in the market for social and health care services, or in the market for laboratory or imaging services relating to the health care services, or in the markets closely related to these markets, in Finland. The last exception mentioned above would exclude from the scope of application e.g. investments by private equity firms in undertakings in other sectors. The proposal also contains several specifications regarding the scope of application; for example, so-called employee leasing companies, i.e. companies that only provide personnel for social and health care services, would fall outside the scope of the proposed Article. The proposed widening of the scope of application of the merger control rules would only concern the notification obligation. The proposal would not change the conditions for interfering with or prohibiting concentrations, and thus the conditions for prohibiting or imposing conditions on a concentration would still require that the concentration may significantly impede effective competition in the Finnish markets or a substantial part thereof, in particular as a result of the creation or strengthening of a dominant position (the so-called SIEC test, Significant Impediment to Effective Competition). The proposal would not affect the so-called one-stop shop principle according to which the merger control rules of the Competition Act are not applied if the concentration falls within the scope of the EU Merger Regulation and is therefore as a rule handled by the European Commission. The proposal also includes the introduction of a simpler notification form. This aims at decreasing the administrative burden of the new rules. At the same time, however, the time period for the FCCA to review the case in Phase I of the proceeding would be increased from one month to 45 working days. Therefore, the proposed provision would mean that in practice the time period would increase by approximately four weeks from the present state. The underlying idea is that in this way the FCCA would be in a better position to ask for more specific information of the concentration if need be. In its press release on 15 June 2017, the Ministry of Economic Affairs and Employment estimated that in most cases the additional information is not needed and thus the review would not take all of the time period. It is important to note that the proposed time limit of 45 working days would also apply to concentrations where the merger control turnover thresholds in the Competition Act are exceeded, provided that at least one of the parties to the concentration provides social or health care services, or laboratory or imaging services relating to health care services. In addition, the proposed Article contains a longer time period compared to the current one-month period regarding the prohibition to implement a concentration: The prohibition to implement a concentration will expire unless the Market Court orders otherwise within 45 working days of the FCCA's proposal to prohibit the concentration. The proposed Article would be applicable to concentrations concluded on or after the date the Article entered into force, but, however, before 1 January 2019. A concentration is concluded when control, the entire business operations or a part thereof is acquired in accordance with Article 23(1) of the Competition Act, or a public bid referred to in Chapter 6, Article 3 of the Securities Market Act (495/1989) is announced, or a merger has been resolved upon in the undertakings that are parties to the merger, or it has been decided to establish a joint venture in a constitutive meeting. The proposed Article is intended to enter into force as soon as possible in fall 2017. In the government's proposal, it is estimated that remarkably many merger control cases will be brought to the FCCA in 2018. The government's proposal (HE 76/2017 vp) is available on the website of the Finnish Parliament (in Finnish).
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Valio fined for competition infringement, amount largest in Finnish history
29 Dec 2016 In 2012, the Finnish Competition and Consumer Authority considered Valio Ltd, a Finnish producer of dairy products and other foodstuffs, to have engaged in predatory pricing in the markets for basic milk with the intention of abolishing effective competition in dairy markets in Finland. The Authority, in its decision handed down in late 2012, ordered Valio to cease its abuse of a dominant position and submitted to the Finnish Market Court for ruling a MEUR 70 fine for infringement of competition law. 'Predatory pricing' refers to sub-cost pricing by a company in a dominant position with the intention of excluding competition. The Market Court ruled on the matter on 26 June 2014, imposing on Valio a MEUR 70 fine in accordance with the Competition and Consumer Authority's submission. Thereafter, Valio appealed to the Finnish Supreme Administrative Court. The Supreme Administrative Court, with a ruling handed down today on 29 December 2016, upheld the outcome of the Market Court ruling. The Supreme Administrative Court viewed Valio's pricing of milk as a prohibited restriction of competition and imposed on Valio a MEUR 70 fine. The fine is the largest such administrative fine to be imposed on a single undertaking in Finnish history. Dittmar & Indrenius' Competition practice acted as counsel to the Competition and Consumer Authority, whose submission was approved both in the Market Court as well as in the Supreme Administrative Court. Prior to the current matter, the largest fine for a competition infringement on a single undertaking in Finland had been imposed by the Supreme Administrative Court on Lemminkäinen Corporation in what is known as the 'asphalt cartel' case, decided on 29 September 2009 with an amount of MEUR 68. The MEUR 82.55 aggregate of all fines imposed on the asphalt cartel still stands as the largest aggregate of fines ordered in a single matter in Finland. Likewise, Dittmar & Indrenius' Competition practice acted as counsel to the Competition and Consumer Authority in this matter. Victims of a competition infringement may claim damages from the infringing company. The relevant statute, the Finnish Act on Damages for Competition Infringement, entered into force on 26 December 2016. In addition to acting as counsel to the Competition and Consumer Authority in the Valio matter, Dittmar & Indrenius' Competition lawyers have assisted or currently assist various parties in all other major cases of competition infringement and/or the damages litigation related thereto, including for example in the asphalt, raw wood, car spare parts, power line, and coach cartel cases.

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