Insights

02/11/2015

Caveat venditor!

Does your business offer products or services to consumers in Finland? In the future, you could face fines for violating certain consumer protection legislation.

Finnish consumer protection legislation is known as amongst the strictest in the world. In recent years, harmonisation on the EU level has brought about some changes towards a more lenient direction. However, in those areas that remain within the national legislature's authority ‒ such as procedural matters ‒ an opposite trend can be seen. 

Most recently, a Ministry of Justice working group proposed that the enforcement powers of the Finnish consumer authorities should be expanded significantly. 

In particular, the working group suggested that the Consumer Ombudsman should be given the right to petition the Market Court to impose fines for certain violations of consumer protection legislation. In addition, it suggested that it should be made more difficult for businesses to oppose, and thus void, injunctions issued independently by the Consumer Ombudsman. 

In other words, in the future, you could face fines, for example, by neglecting to give certain mandatory information in your marketing targeted at consumers or for communicating such information unclearly. Also, the Consumer Ombudsman could order you to refrain from the marketing in question until the Market Court has ruled on its lawfulness at your request.  

Current enforcement powers of the Consumer Ombudsman

In Finland, primary responsibility for enforcing consumer protection legislation has been assigned to the Consumer Ombudsman. By law, if the Consumer Ombudsman comes across a suspected violation of consumer protection legislation, it must, as a first step, aim to get the business in question to voluntarily discontinue its allegedly unlawful activities. 

Failing this, the Consumer Ombudsman may, subject to certain conditions being met, independently issue an injunction under penalty of a fine, or, otherwise, petition the Market Court to issue such an injunction. Moreover, in urgent matters, the Consumer Ombudsman may independently issue an interim injunction under penalty of a fine. Similarly, the Market Court may, at the request of the Consumer Ombudsman, issue an interim injunction until the Consumer Ombudsman's petition for a permanent injunction has been decided. 

Currently, an injunction issued by the Consumer Ombudsman becomes void if the party against which it has been issued opposes it (free of any formal requirements) within a set deadline, which must be at least eight days. In such a case, the Consumer Ombudsman must take matter to the Market Court if it still wishes to have the allegedly unlawful contact prohibited under penalty of a fine. An interim injunction issued by the Consumer Ombudsman, on the other hand, automatically becomes void unless the Consumer Ombudsman takes the matter to the Market Court within a deadline of three days. Currently, the Consumer Ombudsman cannot directly petition the Market Court to impose fines on a business that has breached consumer protection legislation. Instead, fines can be ordered to be paid only in cases where a business has violated an injunction that has previously been issued against it. 

Fines to be imposable on a business and its management 

If the amendments proposed by the working group are enacted, the Market Court could, at the request of the Consumer Ombudsman, impose fines on a business that has wilfully or negligently violated certain provisions of the Consumer Protection Act or similar legislation aimed at protecting consumers' interests, even if no injunction has previously been granted. 

Furthermore, fines could also be imposed on the management of the business in question or on a third party who has acted on behalf of the business in question (e.g. an advertising agency), provided that they have wilfully or negligently substantially contributed to the unlawful activities. 

The relevant provisions include, among others, those that prohibit surreptitious as well as false or misleading advertising and those that govern what information must be conveyed to consumers in advertising and sales.

The amount of fines to be imposed would be calculated based on the annual turnover of the business entity being fined. In the case of fines to be imposed on a business' management, the basis for this calculation would be the annual income of the persons in question. 

The maximum amount of fines is proposed to be set at ten per cent of the relevant turnover or income. However, in the case of fines to be imposed on a business entity, an additional cap of EUR 100,000 is suggested. No similar cap is proposed for fines to be imposed on a business' management, which is perhaps an oversight on the part of the working group. In each individual case, the nature, extent and duration of the infringement, as well as other relevant factors, would be taken into account in determining the amount of fines to be imposed.  

Opposition no longer to void an injunction 

In addition to being given the right to directly petition the Market Court to impose fines, the Consumer Ombudsman would maintain its right to independently issue injunctions and to petition the Market Court to issue injunctions. In fact, it could even apply these powers in tandem, for example, by asking the Market Court to impose fines for past unlawful activities, and to issue an injunction to prohibit the continuation or repetition of the same activities in the future. 

It is also proposed that the opposition of an injunction issued independently by the Consumer Ombudsman would no longer void that injunction. Instead, the party, against which the injunction has been issued, would have a deadline of thirty days to challenge the injunction before the Market Court. Otherwise, the injunction would become permanent. Also, even if the injunction were challenged, it would remain in force for the duration of the proceedings, unless the Market Court specifically ordered otherwise.    

Why and what next?

According to the working group's report, which is written in the form of a government bill, the purpose of the proposed amendments is to better enable the Consumer Ombudsman to quickly and effectively put an end to unlawful activities. However, the proposed amendments have received much criticism from representatives of the business community ‒ also those within the working group itself. 

In particular, it has been called into question whether new or enhanced powers of enforcement are really necessary, as the Finnish consumer authorities already have a broad range of means at their disposal ‒ some of which they neglect to use. For example, since 2007, the Consumer Ombudsman has been entitled to pursue class action lawsuits in cases where a number of consumers have similar claims against the same party. However, to date, the Consumer Ombudsman has not used this opportunity a single time. 

In addition, it has been argued that some of the proposed amendments are disproportionate and perhaps even unconstitutional, or, at the very least, that they are in conflict with the government's current deregulation policy.  

Perhaps for to the last-mentioned reason, it is currently unclear when and to what extent the proposed amendments will be enacted. However, what is clear is that, despite ongoing harmonisation on the EU level, businesses offering products or services to consumers in Finland will need to familiarise themselves with the particularities of Finnish consumer protection legislation also in the future. Otherwise, they could face substantial sanctions in the form of injunctions and fines.  

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