The ECN+ Directive will finally be implemented in Finland by amending the Finnish Competition Act. The Finnish Parliament has passed the Government Bill at the end of May, and the amendments are expected to be approved by the President in the coming weeks. Entry into force is likely to take place still in June. As a result of the implementation and also due to changes of domestic origin, the enforcement of competition rules will be strengthened, especially in relation to the allocation and calculation of fines, structural remedies, summoning persons for interview, dawn raids and interim measures. One of the most significant amendments has to do with members of an association of undertakings, such as industry organisations, risking to be held liable for the association’s fines.
The Competition Act (948/2011) is amended to comply with the EU’s Directive (EU) 2019/1 (the “ECN+ Directive”). The ECN+ Directive aims to improve the ability of the national competition authorities of the EU Member States to enforce EU competition law, and to ensure that all national competition authorities have sufficient powers to fulfil their duties. The ECN+ Directive includes a broad range of changes to investigation and enforcement procedures, remedies for infringements and rules on co-operation between national competition authorities. However, the proposal to reform the Competition Act, Government Bill 210/2020, also included a number of important but purely domestic amendments, for example concerning the calculation of fines and the deadlines in merger control cases.
For more detailed information on the amendments, please see our previous alert. The alert at hand focuses on key changes to the Government Bill of November 2020 and the new risk for members of associations to be held liable for the associations’ fines.
Key changes to the amendments proposed in the Government Bill
The amendments to the Competition Act were intended to enter into force already on 4 February 2021, which was the ECN+ Directive’s deadline for national implementation. However, due to certain constitutional law considerations, the legislative process was prolonged and the proposal was amended in spring 2021 so that it could be accepted in ordinary legislative procedure. Noteworthy changes to the amendments proposed in the Government Bill include the following:
- The Market Court decides on collecting fines from members of associations based on the Finnish Competition and Consumer Authority (the “FCCA”) proposal instead of the FCCA itself being able to demand a payment, as originally proposed. This is also better in line with the current division of powers between the FCCA and the Market Court.
- In case an association is unable to pay a fine, payment may be demanded from the members of the association that were represented in a decision-making body of the association. This concept was clarified to refer to the managing director, the board of directors, or other decision-making bodies that have been defined in the rules of the association.
- The FCCA may decide not to propose collecting a fine from members of an association if the unpaid portion of the association’s fine is very small, if the member has been granted leniency or if collecting the fine would result in the member being unable to continue its business. In addition, a specific reference to the general legal principles of administration, such as equal treatment and proportionality, was included in the law.
- Natural persons’ obligation to provide all necessary information for the FCCA’s investigations upon the authority’s request was limited; it now excludes certain special categories of personal data under the EU’s General Data Protection Regulation and information covered by attorney-client privilege. The original proposal did not mention these protected types of information.
- Interim measures imposed by the FCCA can last a maximum of one year at a time. In the original proposal, no such time limit was included.
What has changed for members of associations
One of the most significant changes to the Competition Act has to do with fines payable by associations of undertakings, such as industry associations. Members of an association now risk being held liable for the association’s fines, and the maximum amount for such fines is increased.
If an infringement committed by an association of undertakings is connected to the activities of the members of the association, then the maximum amount of the fine for the association will be 10% of the combined turnover of those members of the association that operate in the markets affected by the association’s infringement. This is a significant increase compared to the current situation where the maximum amount of the fine is tied only to the turnover of the association itself. Calculating the fine based on only the association’s turnover has been considered insufficient by the FCCA compared to the benefits gained from the competition law infringement.
In addition, in case the fine of an association is based on the turnover of its members, but the association is unable to pay the fine – as probably will often be the case – the association has to ask all its members for contributions to pay the fine. If the fine is not paid despite this in one year after the fining decision became final, the FCCA can make a proposal to the Market Court to demand payment from any of the undertakings whose representatives were members of the decision-making body of that association. Subsequently, if the fine is not paid in one year from the Market Court’s payment decision, the FCCA can propose that the Market Court orders any member of the association that was active in the market where the infringement occurred to pay the outstanding amount.
Therefore, the risk to become liable to pay fines for competition infringements has increased significantly along with the amended Competition Act for companies that are members of associations and especially for those companies whose representatives are members of decision-making bodies of associations. Naturally, a member of an association is liable to pay a fine also for its own competition infringement, if any.
Practical implications for members of associations
The amendments to the Competition Act will be challenging especially for associations whose members are of different sizes and have different levels of competition law knowledge. Companies’ compliance requirements will increase significantly when every member of an association of undertakings will have to ensure that all of the members of the association follow the law. Therefore, companies must know which associations its employees participate in and ensure that they are aware of what constitutes a competition infringement. Companies will also have to ensure that the associations comply with competition law in all their actions. In due diligence for M&A transactions, more attention should be given to memberships in associations because of the new liability risk.
The payment of an association’s fine cannot be demanded from a member of the association in case the member can show that it has not executed the infringing decision and it either has not been aware of the decision or it has actively withdrawn from it before the FCCA’s infringement investigation started. Therefore, more competition law training should be provided in companies to ensure that representatives in associations are able to prevent, spot and withdraw from possible competitively restrictive practices.