D&I’s annual merger control report highlights the most recent trends and developments in Finnish merger control enforcement. In many ways, the year 2021 was not as exceptional as the preceding few years of Finnish merger control enforcement. For example, there were no proposals by the Finnish Competition and Consumer Authority (the “FCCA”) to prohibit a concentration (there was one in 2019 and one in 2020). Also, the FCCA did not declare a single notification incomplete or use ‘stop-the-clocks’. However, this does not mean that the Finnish merger control enforcement would have eased off. On the contrary, for example, the FCCA started to require an upfront buyer in divestment remedies and made significant new legislative proposals to tighten the merger control rules, which might mean that the year 2021 was merely a calm before the storm.
Summary of the rules on review periods
In order to better understand what is discussed in this report, we have gathered here a brief summary of the rules on review periods in Finland. Those familiar with these rules can dive right into the next chapter.
After receiving a complete notification of a concentration from the notifying party (or parties), the FCCA has 23 working days at the so-called initial stage (“Phase I”) of its investigation to decide that the concentration does not fall under the Competition Act, to approve the concentration with or without commitments, or to decide that the concentration raises significant competition concerns and warrants an in-depth scrutiny during a further investigation stage (“Phase II”). Phase II extends over a period of max. 69 working days, which can exceptionally be further extended by up to 46 working days by the Market Court at the request of the FCCA. At the end of Phase II, the FCCA must either approve the concentration with or without commitments, or request the Market Court to prohibit it.
If the FCCA has submitted its prohibition proposal to the Market Court, the Market Court has 69 working days to clear the concentration with or without commitments or to prohibit it. A decision issued by the Market Court may be appealed to the Supreme Administrative Court within 30 days. The length of such appeal proceedings in the Supreme Administrative Court is not set in law.
If the parties do not provide in time the information the FCCA has asked for, or the information provided is substantially insufficient or incorrect, the FCCA may extend the review periods in both Phases I and II with the number of days the information requested is late (“stop-the-clock”).
If the notification is substantially insufficient, the 23 working day review period of Phase I does not begin to run until sufficient information is provided (“incomplete notification”).
The FCCA’s enforcement activity – back to more normal
In many ways, the year 2021 was not as exceptional as 2020. In 2020, the FCCA took a rare action by submitting a prohibition proposal to the Market Court in Mehiläinen/Pihlajalinna (see our alerts here and here) and the Market Court did something even more rare by accepting the FCCA’s prohibition proposal (from 2019) in Kesko/Heinon Tukku, the first ever prohibition decision in Finland (see our alert here). In 2021, there were no proposals to prohibit a concentration. Given the rarity of such proposals in Finland (only five since 1998), this is not surprising.
In 2020, the number of merger control notifications submitted to the FCCA was also significantly lower than usual with only 23 concentrations notified to the FCCA. However, in 2021, the number of notifications returned, more or less, to the usual level. In 2021, there were a total of 38 notifications. The number was 33 in 2019, 37 in 2018 and 31 in 2017.
In 2021, five cases were taken to Phase II, which is approximately 13 per cent of the cases notified in 2021. While this percentage may seem high, it is not as high as it was in 2020 (17 per cent).
The FCCA’s requests to Market Court to have Phase II review periods extended
Merger reviews are becoming increasingly detailed and data-intensive and, as a consequence, it may take longer for the FCCA to assess the competitive effects of concentrations. As explained above, the FCCA has the option to make a request to the Market Court to have the Phase II review period extended by up to 46 working days. In 2021, the FCCA utilised this possibility in one case (Assemblin AB (Triton) / Fidelix Holding Oy), or in 33 per cent of the three cases which were taken into Phase II and decided in 2021.
Between the entry into force of the Finnish merger control rules in autumn 1998 and the end of 2016, such an extension was granted only three times in total. However, during the period of 2017-2021 the Market Court has granted extensions in nine separate cases. The FCCA’s current policy is to not request a full 46 working days extension at once. This means that in some cases, like in Assemblin AB (Triton) / Fidelix Holding Oy in 2021, such an extension was requested and granted twice.
Incomplete notifications, ‘stop-the-clocks’
Although there was a rather surprising rise in the number of notifications declared incomplete by the FCCA back in 2018, representing an incredible 16 per cent of all notifications submitted that year, declaring notifications incomplete was not used as widely by the FCCA between 2019 and 2020. During that period, the FCCA declared incomplete only three notifications. In 2021, the number fell to zero as no notifications were declared incomplete.
Similarly, the FCCA did not use any ‘stop-the-clocks’ in 2021.
The first-ever short-form notification
To our understanding, the merger control notification D&I submitted in the USD 6 billion deal Blackstone Real Estate Partners IX and Starwood Capital Group / Extended Stay America, Inc. was the first‐ever short‐form notification to the FCCA although the rules on short‐form have been in place since 2011 (see our news here).
Conditional clearances, remedies
While six of the 13 cases that were taken to Phase II in 2017-2018 were eventually approved without conditions, none of the cases taken to Phase II in 2019-2020 received an unconditional clearance. This was the case in 2021 too. Hence, with its three conditional clearances, 2021 strengthens the view that the number of conditionally cleared cases still seems to be on the rise, especially among Phase II cases. In 2017-2021, 14 cases were approved with conditions, while in the 10-year period before that there was less than one conditional clearance per year on average. There were no conditional clearances in Phase I in 2017-2021, which is not surprising.
The remedies in recent cases have mostly been structural (divestments) or combinations of structural and behavioural commitments. Out of the three conditionally approved cases in 2021, one was accepted with purely behavioural commitments, the vertical concentration of Valio Oy / Heinon Tukku Oy.
The FCCA to require an upfront buyer in most divestments from now on
The FCCA has publicly highlighted that it is the responsibility of the parties to remove any uncertainties regarding the effectiveness and implementation of merger commitments. According to the FCCA, this means that the authority will increasingly require an upfront buyer in cases where divestments are required. The FCCA has justified this on the grounds that in many previous cases it has proved to be a challenge to find a suitable buyer in the Finnish market. An upfront buyer condition mean that the parties cannot close their transaction until a binding agreement has been concluded with a buyer who has been approved by the FCCA.
The merger between the Finnish alcoholic beverage brand company Altia Oyj and its Norwegian counterpart Arcus ASA in 2021 was the first time the FCCA imposed an upfront buyer condition. The merger was conditionally approved in April 2021. The parties to the transaction manufacture, import and distribute alcoholic beverages, mainly spirits and wines. According to the FCCA’s investigation, the merger would have significantly reduced the level of competition in Finland in the sales of both aquavit and berry liqueurs to the national retail monopoly Alko and in the sale of aquavit to hotel, restaurant and catering customers. The approval and implementation of the merger was conditional upon the sale of Altia’s Skåne Akvavit brand to a suitable buyer and the termination of Arcus’ distribution agreement for Metsmaasikas strawberry liqueur.
The FCCA also required an upfront buyer in another case only a few months later in July 2021 (Assemblin AB (Triton) / Fidelix Holding Oy, a transaction in the building automation sector).
The FCCA has publicly noted that sufficient time must be set aside for commitment negotiations. Even at the shortest, negotiations may be expected to take at least one month.
Important legislative changes implemented and proposed
In 2021, as part of the national implementation of the ECN+ Directive ((EU) 2019/1), the calculation of due dates in merger control cases in the Market Court were amended: as of 24 June 2021, the due dates are calculated by using a set number of working days instead of the previously used calendar months. For example, as mentioned above, the Market Court now has 69 working days to decide on the FCCA’s prohibition proposal in merger control cases instead of the previous three calendar months.
However, more important legislative changes have been proposed. In June 2021, the FCCA published its study concerning the need to change the notification obligation in merger control (see here, in Finnish). According to the FCCA, the current national turnover thresholds allow harmful mergers to escape the scrutiny of the authority. As a result of its study, the FCCA proposes that the current turnover thresholds in merger control should be lowered and, in addition, the FCCA should be granted the right to require a notification when the thresholds are not met.
The notification obligation in Finland is currently triggered when (i) the combined aggregate worldwide turnover of the parties to the concentration exceeds EUR 350 million; and (ii) the turnover resulting from Finland of each of at least two of the parties exceeds EUR 20 million.
According to the FCCA’s proposal, the notification would be compulsory when (i) the parties’ combined aggregate turnover resulting from Finland exceeds EUR 100 million; and (ii) the turnover resulting from Finland of each of at least two of the parties exceeds EUR 20 million. The additional suggested new right of the FCCA to require a notification even when the thresholds are not met would apply to cases where the parties’ combined aggregate turnover resulting from Finland exceeds EUR 50 million. According to the FCCA, if it is not granted the right to order a notification, the new turnover thresholds should be even lower than what it proposes.
The Ministry of Economic Affairs and Employment will assess the FCCA’s proposal and the need for legislative changes. It is currently unclear whether the amendments proposed by the FCCA will enter into law. The Ministry aims at circulating its assessment memorandum on the subject for comments early this year. If the FCCA’s proposal will be approved by the legislator, it would lead to more merger control notifications (approx. one third more, according to the FCCA’s assessment) and increased legal uncertainty for companies in M&A transactions, not to mention increased transaction costs.
The risk of ‘below-threshold concentrations’ to be scrutinized by a competition authority has already increased on another front. In March 2021, the European Commission (“EC”) published a new guidance on the application of the referral mechanism set out in Article 22 of the EU Merger Regulation (see our alert here). The main aim is to target so-called killer acquisitions. Effective immediately, the guidance allows Member States to refer transactions to the EC for its review even when the transactions fall below national notification thresholds. Before this new guidance, there was no such referral risk. In 2021, the FCCA did not yet apply the EC’s new guidance. We expect the FCCA to make such referrals very rarely.
We have seen the Finnish merger control enforcement to become tougher, more time consuming and more data-intensive over the last few years. Although 2021 may be seen as returning to more normal after a very exceptional year in 2020, the trend of tougher merger control is not going to disappear. This is evidenced, for example, by the FCCA’s strong will to have the national turnover thresholds lowered and its desire to have the right to require a notification even when the thresholds are not met.
As can be seen above, several trends and developments contribute to longer and more burdensome merger control investigations and to the growing uncertainty and decreased visibility regarding the review processes. Parties to concentrations should be prepared to allocate more time and resources to merger control related questions and processes – from the very beginning.