Article 6 July 2022

Finland Competition & Regulatory newsletter Summer 2022

This newsletter features a look into ongoing Finnish legal reforms and recent law.

The Finnish Competition and Consumer Authority's jurisdiction in merger control to be expanded by lowering turnover thresholds

The Finnish Ministry of Economic Affairs and Employment published in June 2022 a draft government bill on lowering the Finnish merger control turnover thresholds. According to the draft bill, a transaction would be subject to a mandatory notification if the parties' combined Finnish turnover exceeds EUR 100 million and the Finnish turnover of at least two parties exceeds EUR 10 million per party. The current thresholds require at least two parties to have a Finnish turnover exceeding EUR 20 million per party and the parties to have a combined worldwide turnover exceeding EUR 350 million.

The impact assessment presented in the draft bill suggests that the application of the proposed thresholds would indirectly improve consumer welfare by around EUR 50 million per year, whereas the number of notified mergers would increase by approximately 30 per year. Reforms to the information requirements for filings are concurrently also proposed, with the aim of decreasing work in notifying transactions in which the parties have no or only minimal horizontal or vertical links.

The reform goes back to June 2021, when the Finnish Competition and Consumer Authority (FCCA) published a report addressing the need for a broadened jurisdiction, as the authority found the current merger control regime did not catch all harmful transactions. The report was followed up by a public consultation round in early 2022. In drawing up the draft government bill, the Ministry has taken into account the feedback gathered in the consultation. Most notably, the draft bill would not grant the FCCA the right to review notifications at its own motion in cases where the regular turnover thresholds are not met, as the FCCA originally suggested.

The Ministry has launched a second public consultation round and interest groups have until mid-August 2022 to provide their views on the draft bill. The Ministry's plan is that the proposed legislation would be approved by the Finnish parliament this autumn to take effect on 1 January 2023.

The Market Court rules on the acceptability of covid-related public service obligations

In a series of rulings handed down in March 2022, the Market Court addressed the question of what technical specifications may be set in a procurement procedure concerning public service obligations (PSOs) for maritime transport. The PSOs at issue were tendered by the Finnish Transport and Communications Agency (Traficom) for several routes between Finland and Sweden as well as Finland and Estonia during the covid-19 pandemic when regular commercial traffic was not feasible.

A shipowner active in freight and passenger traffic appealed many of the PSO tenderings, claiming that Traficom's technical specifications rendered participation impossible for all shipowners except those that had operated on the routes before the pandemic. According to the appellant, various requirements concerning, e.g., ports of origin and destination, timetables and vessel capacities were disproportionate and unlawful.

The Market Court held that the technical specifications used by Traficom were in line with public procurement law. As noted by the winning tenderers and Traficom, the pre-existing needs of customers using each route and the unpredictability of covid-related restrictions and recommendations had to be considered when assessing the requirements challenged by the appellant.

The Market Court also confirmed that it fell outside the Market Court's jurisdiction to assess the lawfulness of the PSOs under other regimes than public procurement law.

The March 2022 rulings show that the Market Court has been willing – at least to an extent – to put some weight on the circumstances created by the pandemic in assessing whether procurement procedures have been conducted in compliance with procurement legislation. This is in line with the certain earlier rulings concerning the direct award of contracts for covid-19 analytics services.

The Finnish FDI regime continues to develop; reforms concerning ownership of critical infrastructure expected

Finland has had its current foreign direct investment (FDI) legislation, the Act on the Screening of Foreign Corporate Acquisitions, in place since 2012. The legislation is applied on a case-by-case basis, reflecting the security situation at any given time. In line with the increased focus on foreign investment screening throughout the European Union, attention on FDI issues has increased in Finland in recent years.

The scope of the Act on the Screening of Foreign Corporate Acquisitions was broadened in 2020, when the category of security sector companies was added to the list of monitored entities. Security sector companies are companies that produce or supply critical products or services related to the statutory duties of Finnish security authorities, such as the Finnish Police and Customs. For example, a major electricity distributor as well as an IT services provider for the financial sector have been considered to fall under this category.

Submitting an FDI approval application to the Finnish Ministry of Economic Affairs and Employment is mandatory for all non-Finnish buyers when the Finnish target of an acquisition is a defence industry company and for non-EU/EFTA buyers when the Finnish target is a security sector company. In addition, acquisitions can be voluntarily notified by non-EU/EFTA buyers of Finnish companies that are in some other way, when assessed as a whole, critical for the security of supply. The Ministry of Economic Affairs and Employment may choose to review such acquisitions on its own accord.

The Act on the Screening of Foreign Corporate Acquisitions is applicable to a variety of industries. Most recently, partially due to the covid-19 pandemic, companies that supply services or products to the health care sector have in several cases been considered as critical for the security of supply.

Future developments are to be expected. In April 2022, triggered by the Russian invasion of Ukraine, the Finnish Government gave a report on changes in the security landscape to the Parliament. The report contains a section on FDI screening, stating that it has been proven necessary to follow up on issues related to the ownership of critical infrastructure. A set of principles on the ownership of critical infrastructure will be drafted in the near future.

Proposed changes in the Finnish public procurement rules emphasise quality and social responsibility

The Finnish Government has proposed amendments to the Act on Public Procurement and Concession Contracts (Public Procurement Act). A key aim of the reform is to ensure higher quality and level of social responsibility in public procurements. Further, the Government states that the amendments will clarify the current Public Procurement Act and harmonise it with EU law. The amendments concern both national procurements and procurements above EU thresholds. The proposed amendments are intended to enter into force in early 2023.

The proposal encourages contracting entities to take quality factors as well as environmental and social issues into account in the criteria for selecting the most economically advantageous tender and in the requirements for both tenderers and the target of the procurement. According to the proposed amendments, lowest price could be used as a basis for the most advantageous tender only if the tender fulfils quality-related requirements set in the call for tenders, and each procurement decision should address how quality has been taken into account in the procurement.

The Government envisions that this could increase requirements on social and environmental responsibility in calls for tenders. For example, it could be required that tenderers ensure compliance with employment regulations during the whole production chain or that tendered products fulfil certain qualifications on being recyclable, reusable, or sustainable. Further, more focus could be placed on improvements on the environmental effects of planned projects, such as the use of renewable energy.

In addition, the proposal is intended to clarify the application of mandatory exclusion grounds and self-cleaning measures to subcontractors. Self-cleaning would be available to subcontractors in addition to candidates and tenderers.

Other proposed amendments include additions to grounds for mandatory exclusion from procurements. According to the proposal, if a candidate, a tenderer, a subcontractor or a member of their management has been found guilty of certain environmental crimes, the candidate, tenderer or subcontractor would have to be excluded from the procurement. As with other mandatory exclusion grounds, exclusion could be based on a Finnish or a foreign final judgement.

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