Competition Law Highlights in Finland and in Sweden 2017
- Increase in the number of merger control cases taken to Phase II (although most of the transactions were unconditionally approved).
- The Market Court delivered its judgment in the bus cartel case, resulting in a bittersweet victory for the FCCA.
- The FCCA closed several antitrust investigations without further action.
- The Finnish Supreme Court sought a preliminary ruling from the Court of Justice of the European Union in the asphalt cartel damages case and the Helsinki District Court dismissed damages actions brought by eight private forest owners in the raw wood procurement cartel damages cases.
- The FCCA assumed its new procurement enforcement powers.
- The reform process of the Finnish Competition Act continues.
- The Swedish Competition Authority (“SCA”) has been granted the power to block mergers, and, with its new General Director, is seeking additional powers.
- Four antitrust cases before the courts. The SCA won one and lost three.
- The SCA has closed several antitrust investigations without any further action and did not oppose any mergers.
- Judgments in two follow-on cases have added to the confusion in the Telia margin squeeze saga.
- Procedural rights of parties targeted in dawn raids under court scrutiny.
Finland: Mergers in figures
Merger activity in 2017 was at a similar level to that in 2016. There was a steady flow of notified transactions, with the FCCA concluding 30 merger cases, of which 24 transactions were unconditionally approved in Phase I. The number of cases taken to Phase II continued to increase, with a total of six transactions being approved in Phase II (Yamaha/Konekesko, Attendo/Mi-Hoiva, Scandic Hotels/Restel, SOK/Stockman Delicatessen, Terveystalo/Diacor (the Phase II investigation was launched in 2016 and the clearance decision was issued in 2017) and YIT/Lemminkäinen (the Phase II investigation was launched in 2017 and the clearance decision was issued in January 2018)).
Of the five transactions taken to Phase II during 2017, three transactions were unconditionally approved (Yamaha/Konekesko, Attendo/Mi-Hoiva and YIT/Lemminkäinen (in January 2018)) whereas in two cases the FCCA’s approval was subject to conditions (Scandic Hotels/Restel and SOK/Stockman Delicatessen). The FCCA also issued one decision whereby it approved Valio Oy’s request to amend the commitments concerning an obligation to sell raw milk to its competitors, attached to the FCCA’s conditional approval decisions from 2000 and 2004.
In the past two years, there has been a consistent trend towards the FCCA launching an increasing number of Phase II investigations. Notably, however, at the same time a high proportion of Phase II investigations ended in unconditional clearances in 2017. The reason for this could be that several of the mergers notified to the FCCA may have appeared problematic at the outset, thereby warranting further review. Many of the Phase II investigations have also related to mergers in already consolidated industries, such as the grocery and the social and healthcare sectors, which the FCCA tends to review vigilantly and prudently. This trend is expected to continue in 2018/2019 with already two Phase II investigations launched by the FCCA in February 2018.
Sweden: Mergers in figures
Merger activity has been fairly similar in 2017 in comparison with last year. However, in 2017, all mergers were cleared unconditionally. The SCA took three cases (Ahlsells Sverige/ ViaCon, Arla Foods/ Gefleortens Mejeri, and NIBE Industrier/ Enertech Group) to Phase II, but found no reason to oppose any of them. In 2016, on the other hand, the SCA opposed to four mergers. In three of these the parties withdrew their notifications, either after the SCA had referred the merger to court, or after the SCA had informed the parties that it would initiate proceedings. In the fourth case, the SCA suffered a major setback, as both the Patent and Market Court and the Patent and Market Court of Appeal rejected the SCA’s request to block the Logstor/ Powerpipe merger (originally notified in 2015). The notified mergers may have been less problematic in 2017, but the actions of the SCA might also be seen as a cautious approach in view of its previous loss in the Logstor/ Powerpipe case.
Finland: Detailed review
- Two conditionally approved Phase II cases in 2017, the FCCA cleared conditionally two mergers after a Phase II investigation (Scandic Hotels/Restel and SOK/Stockman Delicatessen). The Scandic Hotels/Restel case concerned the hotel accommodation business, and the merger intended to create the largest hotel chain in Finland with a 30% market share. According to the FCCA, the removal of Restel’s hotels from the market would have reduced the number of alternatives for corporate customers from three to two. To address the FCCA’s concerns, Scandic Hotels offered a set of remedies, consisting of the divestment of three hotels and a commitment not to acquire certain specific new hotel ventures.The SOK/Stockman Delicatessen case concerned the acquisition of Stockmann Group’s Delicatessen grocery business in six department stores in Finland on the already concentrated grocery retail and wholesale markets. The FCCA’s investigations showed that, despite high combined market shares, the acquisition would not significantly impede effective competition on the grocery retail market. However, the FCCA noted that Stockmann Delicatessen purchased its products through Tuko Logistics Osuuskunta (“Tuko”), which is the only operator and independent wholesaler offering an alternative to SOK and Kesko Food at a national level on the grocery wholesale market. The FCCA had concerns that removing Stockmann Delicatessen’s purchase volume from Tuko would lead to the weakening of Tuko’s purchase terms and economies of scale, which would also be to the detriment of smaller competitors in the grocery sector. SOK addressed these concerns by committing to continue to purchase products for Stockmann Delicatessen from Tuko until 31 December 2018.
- Substantial increase in unconditional Phase II clearances In 2017, a total of three out of the five Phase II mergers investigated were approved unconditionally (Yamaha/Konekesko, Attendo/Mi-Hoiva and YIT/Lemminkäinen (in January 2018)) whereas only one merger was approved in 2016.The Attendo/Mi-Hoiva case (and the Terveystalo/Diacor case, initiated already in 2016 but approved in 2017) concerned transactions in the healthcare and social services sector, which has been subject to increasing consolidation and the FCCA’s review in previous years. The FCCA’s investigations showed, however, that in both cases there would be a sufficient level of competition on the market even after the transactions. In the Yamaha/Konekesko case, the FCCA carried out an econometric assessment which showed upward pressure on prices following the acquisition, but also the existence of balancing factors, such as cost savings, increased efficiency, and entry. Moreover, the efficiency gains arising out of the transaction would neutralize most of the harmful effects on competition. The fourth case, YIT/Lemminkäinen, constituted (according to the FCCA) the largest transaction notified to the authority ever in terms of turnover, and concerned a market (the construction market) that was fairly unfamiliar to the FCCA. This resulted in a lengthy investigation requiring numerous extensive enquiries to the merging parties as well as other participants on the market. At the FCCA’s request, the Market Court extended the deadline for the Phase II investigation by almost a month. However, the FCCA’s investigations ultimately showed that the construction markets would remain sufficiently competitive for all types and size categories of construction even after the merger and, accordingly, the FCCA approved the merger unconditionally.
- Collusion – continued focus on anticompetitive agreements and practices and bittersweet victory for the FCCA 2017 saw a continued focus by the FCCA on anticompetitive agreements and practices. New investigations are understood to have been launched as the FCCA carried out surprise inspections (so-called “dawn raids”) in respect of companies operating on the healthcare and social services markets and the property management market. Other sectors on the FCCA’s radar included the payments markets, the transport markets and the energy markets, where the FCCA brought to an end several of its long-running investigations, although without proposing any sanctions.One of the cases closed by the FCCA concerned the investigation into the new mobile payments system produced by Automatia Pankkiautomaatit Oy’s (“Automatia”), a company owned by three Finnish rival banks. The FCCA had concerns that Automatia’s system, which utilized a nationally customized technical standard in processing wire transfers, would reduce the incentive for foreign payment service providers to join the system, thereby also reducing the ability for customers to join the system to start using competing, Pan-European standards in the future. The case was nevertheless closed after Automatia offered commitments concerning the technical implementation and procedures of the system, which alleviated the FCCA’s concerns. The FCCA imposed a conditional penalty of EUR 1 million on Automatia to ensure that it complies with its commitments.Trade associations remained a focus area for the FCCA in 2017. In May, the FCCA concluded its cartel probe into a recommendation issued by Finnish Energy (Energiateollisuus ry) concerning the harmonization of the time-based measurement of electricity transmission on the basis that there was no evidence that the purpose of such recommendation was to harmonize the behavior of competing electricity transmission companies or to restrict competition in the retail sale of electricity. Similarly, the FCCA decided to take no action in the long-running case concerning the potentially restrictive contractual terms applied by the national association of Finnish transport centers (Kuljetuskeskusten liitto, “KTK”) and certain KTK companies offering logistical services, after these parties revised the problematic terms and conditions.2017 culminated with the Market Court delivering its judgment in the bus cartel case. The FCCA had proposed to the Market Court that fines of EUR 38 million be imposed on seven bus companies, the Finnish Bus and Coach Association and Matkahuolto for anticompetitive behavior. In its judgment delivered in December 2017, the Market Court agreed with the FCCA, ruling that the Finnish Bus Association, Matkahuolto and the bus companies had engaged in prohibited cooperation between competitors and had attempted to restrict competition on the markets for bus and coach transport services in Finland, firstly by closing off new entrants from the information and ticket sales services provided by Matkahuolto and, secondly, by prohibiting the transportation of cargo from these new operators. The conduct lasted, to a varying extent, from 2010 to 2015. The Market Court also found that these practices may have made it more difficult for new competitors to enter the market, but they were not capable of preventing such entry completely. The Market Court, however, dismissed the FCCA’s claims that the companies had engaged in restricting competition in the context of discussions and negotiations relating to the representation of interests conducted by the Bus Association. The Market Court also rejected FCCA’s allegations that discussions and complaints relating to objections to scheduled service permits, as well as the service contract reform of Matkahuolto, restricted competition. Accordingly, the Market Court imposed significantly lower fines than originally proposed by the FCCA, namely only EUR 100,000 on each undertaking, or EUR 1.1 million in total. This was the second decision within the past two years concerning prohibited cooperation between competitors in which the Market Court sided with the FCCA as regards the existence of an infringement, but imposed a significantly lower fine than originally proposed by the FCCA. The FCCA has appealed the Market Court’s judgment to the Supreme Administrative Court.
- Dominance – closed investigations The FCCA also continued to focus on abuse of dominance investigations in 2017. Although no major decisions were made, the FCCA brought to an end several long-standing investigations without any findings of abuse. These cases included, among others, the FCCA’s investigations into the pricing practices of Digita Oy on the market for terrestrial television broadcasting services, the rebate and support system applied by Yara Suomi Oy on the market for fertilizers, and the pricing and other practices of the Finnish railway operator VR on the market for connecting transport and related terminal operations, which were closed because no evidence of restriction of competition was found. At the end of the year, the FCCA also decided to take no action in its investigation concerning the pricing model of audiovisual contents of Teosto ry, a nonprofit performance rights organization that collects royalties on behalf of songwriters and composers in Finland.
- Private enforcement – new twists in long-running asphalt cartel and raw wood procurement cartel damages cases One of the most notable developments occurred in December 2017, when the Finnish Supreme Court sought a preliminary ruling from the Court of Justice of the European Union (“CJEU”) concerning the award of damages in the asphalt cartel damages case. The question concerned the situation where a company has acquired all of the shares in a company that has participated in cartel activities, liquidated that company, and subsequently continued the business previously conducted by the liquidated company. The Supreme Court is seeking to ascertain, inter alia, whether in such circumstances it is a requirement under EU law that the company continuing the business of the liquidated company be held liable for paying the cartel damages for which the liquidated company was liable in a way which would be akin to the principle of successor liability as applied under EU competition law.The Helsinki District Court (“District Court”) dismissed actions for damages brought by eight private forest owners against Metsäliitto Cooperative, Stora Enso Plc and UPM-Kymmene Plc as unsubstantiated. The actions were based on the Market Court’s decision in 2009 in which fines totaling EUR 51 million were imposed on Metsäliitto and Stora Enso for illegal price cooperation and information exchange in the procurement of raw wood between 1997 and 2004. The claimants alleged that the infringement had caused raw wood they had sold to the defendants to be significantly underpriced, thus causing them harm. Having assessed the level of information exchanged between the defendants, the District Court concluded that it was unlikely to have influenced the price of raw wood, and this conclusion was also supported by economic evidence. The saga will continue as Metsähallitus has appealed the District Court’s judgment and there are still hundreds of claims by private forest owners pending before the District Court.
- First year of the FCCA’s procurement enforcement On 1 January 2017, the FCCA was granted the authority to supervise compliance with the public procurement rules, particularly as concerns direct awards of contracts. The FCCA’s supervision consists of three main elements: (i) a complaints procedure (guidance to the procurement unit), (ii) the prohibition of illegal direct awards of contracts and the submission of proposed sanctions to the Market Court (inefficiency, fines, reduction of the contract term, cancellation of the procurement decision), and (iii) reporting any illegal or harmful practices discovered during the supervision process and associated with the effectiveness of the system to the Finnish Ministry of Employment and Economy (“MEE”). Several investigations are understood to have been launched and the FCCA also issued two decisions whereby it did not propose any sanctions but provided guidance to the procurement units on how the procurements should have been carried out.
- Legislative developments the reform of the Competition Act, which was initiated in 2015, reached an important juncture on 14 March 2017 when a working group appointed by the Finnish Ministry of Employment and Economy (“MEE”) published its final report (“Final Report”). In the Final Report, the working group proposed a full spectrum of changes to the Competition Act concerning inspections, sanctions and information exchange between competition authorities, among others. The reform of the Competition Act is now understood to be taking place in two phases. The first phase was initiated in December 2017 when the MEE submitted a draft government bill based on the Final Report for public consultation. The first set of legislative amendments is expected to enter into force in the course of 2018. The second phase concerns the European Commission’s proposal for a directive to empower the competition authorities of Member States to be more effective enforcers and to ensure the proper functioning of the internal market COM(2017) 142. It is expected to proceed further once the proposed directive is in its final form.Another notable legislative development includes a government bill concerning the inclusion of sector-specific merger control rules for the social and healthcare sector in the Competition Act for a fixed term, which was submitted by the MEE on 15 June 2017. The proposal is related to the ongoing overall reform of the Finnish social and health care system, and the government bill is pending further to developments with respect to the reform.
- Other developments On 8 September 2017, Finland joined the Nordic competition authorities’ new cross-border cooperation agreement, which also replaces the previous agreement between Denmark, Norway, Iceland and Sweden. According to the FCCA, the agreement will strengthen the FCCA’s cooperation with other national competition authorities and the handling of cross-border competition cases.In October 2017, the FCCA published dawn raid guidelines describing the procedure and practices of the FCCA during an inspection as well as the powers of the FCCA and the rights and responsibilities of the undertakings. The guidelines describe a typical inspection, but do not describe in detail the inspection practices of the FCCA. The purpose of the guidelines is to give undertakings, their employees and legal advisors practical guidance in the event of an inspection.
Sweden: Detailed review
- Collusion – closed investigations and lost cases for the SCA As regards cases regarding prohibition against anti-competitive agreements, several dawn raids were carried out in 2017 relating to the construction and insurance sectors. Furthermore, the SCA closed a number of investigations related to anti-competitive agreements, e.g. one regarding K-Rauta and Bauhaus, and one regarding the Swedish Bar Association. The SCA also suffered two losses in the court of appeal.The first case concerned a number of companies in the healthcare sector (Aleris, Capio, and Hjärtkärlgruppen), which the SCA alleged had entered into an anti-competitive agreement in connection with a procurement process relating to medical services. The SCA had concerns as to the fact that the parties had entered into sub-contracting arrangements whereby parties that failed to win the contract would still be able to perform some of the services that were subject to procurement. The SCA argued that this constituted a by object infringement since the parties had engaged in illegal volume sharing and exchange of information. However, the Patent and Market Court of Appeal did not find that the object of the arrangement was to restrict competition and dismissed the SCA’s claims. The parties had argued that, in the absence of any sub-contracting arrangements, unsuccessful tenderers would be forced to exit the market, leaving fewer companies to participate in future procurements. The court stated that since some forms of cooperation in procurement processes can be beneficial to tenderers, such actions cannot be restrictive by object.The second case concerned non-compete clauses in share purchase agreements entered into by three companies in the moving industry (Alfa Quality Moving, NFB, and Vänrun). The question for the court was whether contractual provisions prohibiting an undertaking from competing for five years could be regarded as a by object infringement. The Patent and Market Court of Appeal concluded that, even in cases where a non-compete clause is in force for a period of over two or three years (i.e. the safe harbor indicated in the Commission’s notice on ancillary restraints), this does not necessarily mean that the provision is restrictive of competition. A non-compete clause cannot become restrictive of competition by object from one day to the next. In general, an assessment must therefore be made of the restrictive effects of a non-compete clause, irrespective of its duration. Since the SCA had not provided any findings proving such effects, the appeal court dismissed the SCA’s claims.
- Dominance – closed investigations and two court cases The SCA brought two cases before the courts concerning abuse of a dominant position, resulting in one win and one loss.In the case against Swedish Match, the SCA claimed that the company had abused its dominant position by implementing a labelling system for shelves in coolers for snus tobacco, which meant that its competitors had to use a certain template designed by Swedish Match when labelling their products. If a competitor failed to follow the instructions and use of the template, Swedish Match replaced the competitor’s labels with generic grey and white labels, often without any price details. The Patent and Market Court concluded that the labels are important means of competition for the purpose of communicating prices and promoting brand awareness, in particular as there are significant statutory restrictions on the marketing of snus. The court found that the labelling system constituted a prohibition on marketing which could not be sufficiently compensated by other means. The court also found that the strategy devised by Swedish Match in implementing the labelling system was anti-competitive and ruled that Swedish Match had abused its dominant position on the market for sales of snus to retailers in Sweden. Swedish Match was ordered to pay almost SEK 38 million in administrative fines. The judgment has been appealed.The ruling in the second case was delivered in early 2018 and concerned Nasdaq’s alleged abuse of dominance. The SCA claimed that Nasdaq had abused its dominant position by preventing trading platform Burgundy from using a vital data center. Burgundy wanted to install its servers in physical proximity to the trading equipment of its trading customers, which was located in a data center where the matching equipment of Nasdaq OMX’s Nordic marketplace was located. By, for example, informing telecom operator Verizon that Nasdaq would move its equipment to another data center if Verizon allowed Burgundy to place its equipment in the data center, Nasdaq persuaded Verizon not to comply with Burgundy’s request. The SCA argued that physical proximity to a customer’s trading equipment was essential to enable Burgundy to compete effectively, as this made the connection (through Nasdaq’s co-location service) as fast as possible. As Burgundy was compelled to place its equipment in another data center, Burgundy suffered a competitive disadvantage. The Patent and Market Court assessed the agreements entered into between Nasdaq and its customers, and the agreement between Nasdaq and Verizon, and concluded that, even though Burgundy would have placed its equipment on the premises, Nasdaq was entitled to prevent its co-location service being used to connect to Burgundy. Consequently, Nasdaq was within its contractual rights to refuse to supply its competitor and had not abused its dominant position on the Swedish, Danish and Finnish stock exchanges.In 2017, the SCA also closed several long-running investigations regarding abuse of dominance, e.g. against Assa Abloy, Novamedia, and Arla.
- Private enforcement – new turns in the Telia margin squeeze saga The Svea Court of Appeal delivered two separate judgments that form part of a quite remarkable story, as the courts have been completely at odds with each other on fundamentally the same legal issue. The cases are follow-on damages actions concerning an infringement case brought by the SCA against Telia for abuse of dominance by way of margin squeeze. Request for a preliminary ruling was made in the infringement case (C-52/09, TeliaSonera Sverige).Contrary to all previous rulings of the national courts, the Court of Appeal, in one of the two follow-on cases (brought by Yarp), concluded that Telia had not abused its dominant position. In the second case (brought by Tele2), the court instead found that Telia had abused its dominant position. However, as regards the claims for the actual damages, the court found that the claimant failed to prove a causal link between the conduct and the damages and dismissed the claims.In essence, the same conduct has been labelled by the same court (although by different judges) as abusive and not abusive. Both the Yarp and the Tele2 case have been appealed to the Supreme Court (leave to appeal pending). Thus, the saga continues.
- Administration of the SCA Rikard Jermsten, a former senior judge and ministry civil servant, has been appointed as the new General Director. Furthermore, since 1 January 2018, the SCA now has the power to block concentrations. It was initially suggested that the SCA should be granted the power to determine also infringement cases and even though this never materialized the new GD has made it clear that his aim is for the SCA to be granted such powers.It can be assumed that the way in which the SCA exercises its newly acquired powers may dictate whether or not it is granted new powers. Perhaps the number of closed investigations in 2017 may be seen as a cautious approach in this regard.Throughout the year, the antitrust process has also been under scrutiny. The Parliamentary Ombudsman criticized the SCA for its tedious handling of an abuse of dominance investigation, as well as its faulty handling in relation to access to file.
- Administration of the SCA Rikard Jermsten, a former senior judge and ministry civil servant, has been appointed as the new General Director. Furthermore, since 1 January 2018, the SCA now has the power to block concentrations. It was initially suggested that the SCA should be granted the power to determine also infringement cases and even though this never materialized the new GD has made it clear that his aim is for the SCA to be granted such powers.It can be assumed that the way in which the SCA exercises its newly acquired powers may dictate whether or not it is granted new powers. Perhaps the number of closed investigations in 2017 may be seen as a cautious approach in this regard.Throughout the year, the antitrust process has also been under scrutiny. The Parliamentary Ombudsman criticized the SCA for its tedious handling of an abuse of dominance investigation, as well as its faulty handling in relation to access to file.Finally, the SCA’s decision to copy 13,000 documents during a dawn raid was challenged by the company subject to the raid. The Patent and Market Court of Appeal dismissed the case on the grounds that the SCA’s decision was not appealable. However, the court noted that the SCA should have sought judicial assistance before copying, resulting in an appealable decision. The consequences of this procedural error remain to be seen. The case has been appealed to the Supreme Court.
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