Year in Review – Competition Law Highlights 2019 in Finland and Sweden
In the field of competition law, last year was an interesting one, with several important decisions and developments. We summarize the key legal developments in Finland and Sweden during 2019 below.
Key highlights in Finland include the ruling of the Supreme Court in the long-running asphalt cartel case, and the Competition and Consumer Authority’s (FCCA) proposal to block the acquisition of Heinon Tukku by Kesko.
Highlights in Sweden include the decision by the Competition Authority (SCA) to block the deal concluded between Arla, Falköpings Mejeri and Norrmejerier and the surprising conclusion of the case in the Patent and Market Court, as well as the criticism of the Competition Authority by the Swedish National Audit Office for lacking effective tools for the prioritization of different enforcement actions.
- For only the fourth time in its history, in November 2019, the Finnish Competition and Consumer Authority submitted a proposal to the Market Court to prohibit a merger between Kesko Oyj and Heinon Tukku Oyj. According to the proposal for prohibition, the contemplated merger would create a dominant market position and thus significantly diminish competition on the market for the wholesale of daily consumer goods to food service customers. The case is now pending before the Market Court with a ruling due within three months from the date of the proposal for prohibition.
- In an equally rare vertical effects based decision, MB Funds V Ky’s acquisition of A-Katsastus Group was conditionally approved by the FCCA in October 2019. The FCCA’s investigation identified alleged vertical competition concerns stemming from the fact that MB Funds, the proposed acquirer of A-Katsastus’ vehicle inspection activities, already owned a software company which, amongst other services, produced software widely used in vehicle inspections. Following a detailed Phase II investigation, the authority ultimately approved the transaction subject to MB Funds’ commitment that the vehicle inspection software continues to be offered to A-Katsastus’ competitors on the currently applicable terms for a period of 24 months from the date of the FCCA’s decision.
- The FCCA conditionally approved the merger between Caverion Industria Oy and Maintpartner Group Oy in November 2019. The approval, which was granted after an extended Phase II investigation by the FCCA, is subject to Caverion selling part of its industrial maintenance business to address the authority’s concern that competition will be substantially reduced on the market for the outsourcing of industrial maintenance services.
Mergers in figures
Even though merger activity in Finland has slowed down since 2018 with 33 mergers cleared in 2019, the complexity and length of the cases have increased. Of the 33 mergers, the vast majority were cleared unconditionally in Phase I and four required an in-depth investigation and were conditionally approved only after a Phase II investigation. Furthermore, two of these Phase II investigations were prolonged, even several times in the same case. In addition, the FCCA submitted one proposal for prohibition, which is now pending before the Market Court.
- In the long-running power transmission line building cartel case, the Supreme Administrative Court (SAC) made a preliminary reference request to the Court of Justice of the European Union (CJEU) in June 2019. The question referred to the CJEU relates to the determination of the duration of a cartel infringement in the context of long-lasting project works, and, more specifically, the point in time when the infringement can be considered to have ended. The case is now pending before the CJEU (C-450/19) and has generated considerable interest across the EU. Following the preliminary ruling from the CJEU, the SAC will still rule on the merits of the case.
- In a long-awaited judgment in the Bus Cartel case (KHO:2019:98), the SAC imposed fines totaling EUR 8.9 million on the cartel companies in August 2019. This was an increase in the fines set by the Market Court (EUR 0.1 million for each company individually), but considerably less than originally proposed by the FCCA (approximately EUR 35 million for all companies combined). In its decision, the SAC also opined on the scope of the principle of Legal Professional Privilege (LPP). The SAC found that by attaching Matkahuolto’s internal email, which included a reference to a recommendation made by a law firm to its penalty payment proposal, the FCCA had violated LPP. Although the email had later been forwarded to the other cartel members, the SAC held that in an ambiguous situation, LPP is to be interpreted broadly in order to guarantee the alleged infringer’s rights of defense. The SAC’s approach can be claimed to go further than that adopted by the European Courts in the Akzo Nobel case.
- Whilst the SAC has stayed busy, the FCCA’s enforcement activities concerning restrictive agreements has remained slow-paced. In the only proposed cartel-related fine of 2019, the FCCA submitted a proposal to the Market Court in November for the imposition of fines totaling around EUR 300,000 on Uudenmaan Autokouluyhdistys ry (the Uusimaa Driving School Association, “UAY”) and eight driving schools for an alleged price cartel and price recommendation. According to the FCCA, the UAY, together with six driving schools represented on the UAY’s board, had encouraged driving schools to raise their prices for category B licenses. Additionally, three driving schools in the city of Porvoo had allegedly participated in the price cartel during 2013-2014.
- In February 2019, the FCCA issued a long-awaited decision and decided to bring an end to its investigation of the alleged abuse of dominance by OP Financial Group. The FCCA found that OP’s customer bonus scheme did not restrict competition but nonetheless urged a reconsideration of taxation practices related thereto.
- The Supreme Court issued a ruling in October 2019 in the long-running Finnish asphalt cartel case (KKO:2019:90) concerning the application of the principle of economic succession in private enforcement of competition law. Following the CJEU’s preliminary ruling, which was handed down in March 2019 (C-724/17), the Supreme Court held that economic successors of cartel companies are liable for the damages caused by the competition infringement, confirming that the doctrine of economic continuity applies in both public and private enforcement of EU competition law. Please also see our earlier Roschier Insights article for further details and an assessment of the implications of the judgment.
- In March 2019, in accordance with the FCCA’s proposal, the Market Court imposed a penalty payment of EUR 200,000 on the town of Parainen for an illegal direct award. In its judgment (MAO:141/19), the Market Court focused, in particular, on the nature of an in-house entity, which presupposes the exercise of control by the contracting entity. This was the third time the FCCA proposed penalty payment for an illegal direct award was accepted by the Market Court since 2017, when the FCCA was given the authority to supervise compliance with the Finnish Procurement Act. With the exception of the proposed penalty payment concerning the town of Naantali, the Market Court has so far confirmed all of the FCCA’s proposed penalty payments.
- The FCCA submitted a total of four proposed penalty payments totaling EUR 160,000 to the Market Court in November 2019, all addressed to the Hospital District of Helsinki and Uusimaa (HUS) for illegal direct awards. According to the FCCA, and based on an ex-officio investigation, HUS had illegally directly procured DNA analysis services, negative-pressure wound therapy, tissue paper and garbage bag products worth millions of euros. Some of the procurements subject to the proposal had never been put out to tender in the first place, while others had initially been tendered, but the procurements had been continued from the same suppliers without new requests for tenders after the expiry of the earlier contracts.
- The FCCA announced, during the Competition Law Day of 2019, that its focus areas when it comes to the opening of regulated markets have been and continue to be drug distribution, taxi services and coach transport services. The Bus Cartel case mentioned above is a good example of the FCCA’s activities in the area of coach transport services. The drug distribution market, on the other hand, has been investigated several times historically by the FCCA and again seems to be under scrutiny.
- As to the taxi industry, it has become a focus area for the FCCA in the wake of the liberalization of the taxi market in mid-2018. In late 2018, the FCCA watched with increasing interest the interplay of individual taxi entrepreneurs and dispatch service centers on the taxi market and, as a result, initiated an inquiry to examine, in particular, the conduct and market position of dispatch service centers. Based on its investigation, the FCCA took further action in March 2019, issuing detailed requests for information to several dispatch centers, which the FCCA suspects may be acting in breach of the Finnish Competition Act. Further, in July, the FCCA announced that it had carried out dawn raids at the premises of some of the taxi companies subject to the investigation.
- In May 2019, the FCCA hosted a seminar directed to private practitioners and other stakeholders working in the area of competition law on current issues in competition enforcement. The directors of the different enforcement areas of the FCCA spoke about their specialist areas and the main points of which they considered important for the competition community to be aware. The areas covered were merger control, economic analysis, competition neutrality and public procurement, EU and international issues, and competition procedures. The FCCA’s presentations from the day have been published on the FCCA’s website.
- 2019 also saw amendments to the Finnish Competition Act (948/2011) entering into force on 17 June. The proposed amendments include, most notably, changes to the FCCA’s dawn raid practices, information exchange practices between national authorities and the calculation of merger control deadlines, which are now calculated in working days, rather than calendar days.
- The SCA was granted the right to block a merger in 2018, and used this power for the first time in April 2019. The blocked transaction was arranged so that the three dairy companies Arla, Falköpings Mejeri and Norrmejerier would jointly control an entity holding the rights to three well-known and popular Swedish hard cheese brands.The brands had previously been held by an entity jointly owned by the three acquirers, in addition to Gäsene mejeriförening and Skånemejerier (but Arla was considered by the SCA to hold sole negative control prior to the transaction). The transaction was thus one whereby the brands went from being solely controlled by Arla, to being jointly controlled by three dairy companies.The SCA blocked the merger based predominantly on the projection that the acquirers would raise the licensing fees for the brands (which was also in line with the parties’ planned actions). The parties have appealed the decision. The Patent and Market Court did not, however, rule on the substance of the case. In parallel with the proceedings in court, the seller’s decision to sell was challenged in arbitration, initiated by Skånemejerier. That arbitration resulted in the decision to divest being canceled on the grounds that it was in conflict with certain principles of economic associations, namely the principal of equal treatment of an association’s members (the divesting entity was such an association). Following the arbitral award, the Patent and Market Court concluded that there no longer existed a concentration and therefore set aside the SCA’s decision.
- The SCA cleared grocery chain Coop’s acquisition of its competitor Netto in June 2019. The authority found serious issues on two local markets, but as the turnover on the two local markets represented only 0.09% of the turnover on the national market, the authority seemingly found that those markets could not be considered a substantial part of Sweden.
- The SCA cleared Alumeco’s acquisition of Metallservice i Göteborg in August 2019, following a Phase II investigation. Both parties act as wholesalers of various metals, and Alumeco also sells products to other wholesalers. Following third party input, e.g. that Alumeco would be dominant within wholesale of aluminum products, and that the parties’ market shares would be significantly higher than the estimates provided in the notification, the SCA initiated a Phase II investigation. Alumeco had provided market share estimates based on figures including both sales made on wholesale level, as well as direct sales to end customers, but the SCA’s investigation implied that a distinction should be made between the two. Without ruling on the exact market definition, the SCA concluded that even on a national market (there were factors suggesting that the geographic market should be wider) for wholesale supply of aluminum, the combined market share would be around 21%. Based on the relatively low market shares, the SCA did not foresee any significant impediment to competition, and cleared the merger.
- The SCA cleared Karo Pharma’s acquisition of Trimb Holding in September 2019, subject to commitments. The authority found that Karo Pharma and Trimb’s businesses overlapped on the national market for the sale of certain pharmaceutical products, and that the deal would give the new entity a very strong position on the market for products for the treatment of mild eczema/rashes. Karo Pharma offered to remedy the authority’s concerns by divesting one of its trademarks (Hydrokortison Trimb), which the authority accepted.
- In October 2019, the SCA requested that EasyPark notify its already closed acquisition of Inteleon (the SCA can do so even if a merger does not meet the individual turnover thresholds). The authority gave several reasons for its request, including that Inteleon appeared to be EasyPark’s largest competitor on the market for the provision of digital services for parking services, and that several competitors and customers had complained to the authority. In December, the authority took the deal to Phase II.
- The SCA cleared NEP Sweden’s acquisition of HDR Sweden in October 2019, after having taking it to Phase II. Both parties offer technical production services for TV shows, hence the transaction gave rise to horizontal overlaps. The SCA concluded that the parties’ combined market share would be significant, and that the parties are each other’s closest competitor. Despite the high market share post-merger and the parties being close competitors, the SCA cleared the merger. The decision is seemingly based primarily on the existence of countervailing factors, namely the threat of market entry from foreign companies and the fact that buyers (large buyers in particular) would turn to foreign suppliers as alternative Swedish suppliers would become limited post-transaction.
Mergers in figures
Merger activity in Sweden in 2019 continues the trend from recent years of around 80 notifications concluded per year. Of the 79 merger cases concluded by the SCA in 2019, 75 transactions were approved unconditionally in Phase I and, in one case, the SCA cleared the transaction in Phase I subject to commitments. Three transactions went to Phase II, two of which were approved unconditionally, and the third blocked.
- Visita lost its private enforcement case against Booking in the Patent and Market Court of Appeal. This case was a continuation of the settlement Booking entered into with the competition authorities in Sweden, France and Italy in 2015. Visita had argued inter alia that Booking’s use of clauses allowed under the settlement that prohibit hotels from offering better prices or conditions on their own websites (so-called narrow MFN clauses) had as their object and effect the restriction of competition. Booking did not agree, and argued inter alia that the clauses were necessary to prevent hotels from free-riding on Booking’s investments. In 2018, the Patent and Market Court found that the company’s clauses led to a deterioration in price competition and that they were anti-competitive, but the Patent and Market Court of Appeal concluded in its judgment in May 2019 that it could not state with sufficient certainty that the clauses had as their object the restriction of competition, and that Visita had failed to show that the clauses restricted competition by effect.
- The SCA closed its investigation into whether NCC Industry, Peab Asfalt and Skanska Industrial Solutions had breached the prohibition against anti-competitive cooperation, by exchanging information regarding production volumes biannually since 2007. The authority closed its investigation in November 2019 after the companies offered to cease the information exchange.
- The SCA opened an investigation in October 2019 into fitness aggregator app BRUCE after a complaint by competitor Swiftr. Swiftr argued that BRUCE’s use of exclusivity agreements with suppliers, i.e. the fitness studios, meant that Swiftr was being excluded from the market. Swiftr requested that the authority take interim measures, and the authority did so in December 2019 by ordering BRUCE to cease using exclusivity agreements. The authority simultaneously opened investigations into BRUCE’s competitors’ use of exclusivity agreements (with respect to both the prohibition against abuse of dominance and against restrictive agreements), among them the company that had submitted the complaint against BRUCE, Swiftr. The authority is seemingly basing its investigation into BRUCE’s competitors on the doctrine of cumulative effects.
- The Patent and Market Court upheld a decision by the SCA, in which the Packaging and Newspaper Collection Service (FTI) was ordered to provide access to essential infrastructure (sites for recycling) to its competitor TMResponsibility. FTI has appealed the ruling.
- The Patent and Market Court of Appeal confirmed in June 2019 the lower instance ruling that Nasdaq had not abused its dominant position. The SCA claimed that Nasdaq had abused its dominant position by putting pressure on Verizon in order to prevent Verizon from providing Nasdaq’s competitor Burgundy with access to a vital data center. The court found that Burgundy was not an “as-efficient competitor”, and that, consequently, Nasdaq’s conduct could not limit competition.
- Net at Once lost its private enforcement case against GothNet in the Patent and Market Court of Appeal. GothNet was inter alia active on the upstream market for the wholesale supply of fiber connections in Gothenburg. When the city of Gothenburg sought to procure data communication services on the retail level, both Net at Once and GothNet submitted bids. In court, Net at Once argued that GothNet had abused its dominant position on the wholesale market for fiber connections in relation to the specific public procurement process, which took place on the downstream retail market, by applying prices and conditions on the wholesale level that made it impossible for Net at Once to compete in the procurement. The Patent and Market Court of Appeal concluded in November 2019 that it had not been shown that GothNet was dominant and dismissed the case.
- In March 2019, the Patent and Market Court rendered its judgment in the SCA’s case against Hässleholm municipality. The court concluded that the municipality’s refusal to grant land to private operators seeking to sell fiber connection to the inhabitants of the municipality distorted competition on the market for the establishment and sales of fiber connections to end-consumers. The judgment relies on the Swedish rules that prohibit anti-competitive sales activities by public entities. The municipality has appealed the judgment.
- The Swedish National Audit Office published its audit of the SCA’s supervision of competition and procurement in October 2019. The report concludes that the SCA lacks effective tools for prioritizing between different enforcement actions, and that its internal system for checks and balances is lacking. The SCA has subsequently published a draft new policy for prioritization, requesting stakeholders’ input.
- The SCA launched a study into competition on the markets for digital platforms in November 2019. Initially, the study will focus on the markets for digital advertising, mobile app stores, food delivery, audiobooks, digital payment services, and digital marketplaces.