Year in review – Competition highlights 2020 in Finland and Sweden

• Following the FCCA’s proposal in November 2019, the Market Court handed down its decision in February 2020, blocking the acquisition of Heinon Tukku Oyj by Kesko Oyj. Even though the FCCA has proposed prohibiting mergers a few times before, this was the very first time in the history of Finnish merger control that the Market Court accepted the FCCA’s prohibition proposal. According to the Market Court, the merger would have distorted effective competition in the market for broadline distribution of groceries to foodservice customers by significantly increasing the aggregate market share and creating a dominant position for the parties in the market. The Market Court found that as the behavioral remedies offered by Kesko would not have been capable of adequately removing the identified competition concerns, prohibiting the merger was the only way to safeguard effective competition in the relevant markets. The decision remains final as the parties did not appeal to Supreme Administrative Court.

• For the second time within a year, the FCCA submitted a proposal to the Market Court in September, this time to prohibit the acquisition of Pihlajalinna Oyj by Mehiläinen Yhtiöt Oy. Both companies operate in the health and social services market, competing in almost every sector of private healthcare services. Following a long and eventful investigation, during which the time limit for processing the merger was extended twice by the Market Court, the FCCA found that the merger would have strengthened the already concentrated structure of the healthcare markets in Finland, leading to a distortion of competition in several market segments. As the merger would likely have led to a significant increase in prices, the FCCA concluded that the competition problems could not be solved with the proposed remedies. In the course of the final weeks of the Market Court procedure, Mehiläinen announced that it was not going to carry out its original tender offer. Accordingly, in December 2020, the Market Court deemed the case dismissed as the notifying party no longer had an interest in obtaining approval for its proposed acquisition.
• The FCCA cleared the acquisition of Automatia Pankkiautomaatit Oy by Loomis AB subject to conditions. Loomis AB is a Swedish company providing cash management and transportation services for valuable goods whereas Automatia is responsible for the maintenance of cash services in Finland. Due to the vertical link between the parties’ activities, the merger would have caused competition concerns in the already concentrated markets for cash in transit and cash handling services. Further, according to the FCCA, without sufficient remedies, Loomis’ main competitor, Avarn, would have been foreclosed from the market. As a solution, the parties agreed to provide both existing and new cash management and transportation service providers with access to Automatia’s cash register and Ottonet interface for the next five years. In addition, the parties agreed to continue buying cash management and transportation services from Avarn for the next two years with the current terms and conditions, and for the following three years with a modified minimum purchase obligation. As the proposed remedies were considered sufficient to remove the identified competition concerns, the FCCA conditionally cleared the merger.

Mergers in figures

Despite the general slow down in merger activity during the past couple of years, the impact of the Covid-19 pandemic is clearly visible in the merger control statistics with nine fewer cases cleared in 2020 than the year before. Of the 24 merger decisions issued in 2020, the vast majority were cleared unconditionally in Phase I. Four cases required an in-depth investigation. Two of these were conditionally approved after a Phase II investigation and one resulted in a prohibition proposal to the Market Court. In addition, one notification was ultimately reversed by the notifying party during the Phase II investigation.

• The FCCA proposed the imposition of EUR 9 million penalty payment for Isojoen Konehalli Oy (IKH) for resale price maintenance. IHK is an importer and retailer of hardware products, selling products to both consumers and retailers. According to the FCCA, the resale price maintenance has affected all IHK’s product sales in the Finnish markets from 2010 onwards, and the restriction is partially still ongoing. This was the second time the FCCA proposed a fine for resale price maintenance, following the Iittala-case in 2010. The case is currently pending before the Market Court.
• The Market Court imposed total penalty payments of altogether EUR 20,000 on Uusimaa Driving School Association and two of its member associations, based on the penalty payment proposed by the FCCA’s in 2019 . The Market Court, however, dismissed the FCCA’s claim that there was a price cartel between three driving schools, as the Market Court considered that the FCCA had not proven the existence of prohibited price coordination between the driving schools. The decision is not final as the parties have appealed the decision to the Supreme Administrative Court.

• In the power transmission line building cartel case, the ECJ issued a long-awaited preliminary ruling concerning the question of how the duration, and in particular the ending, of an alleged cartel infringement is to be determined. In its ruling, the ECJ concluded that the end date of an alleged cartel – and the starting date for calculating the statute of limitations – is the date on which the agreement was entered into. The judgment is of particular importance for sectors where contracts are entered into for a number of years and the business is project-oriented. The case is pending before the Supreme Administrative Court (SAC), which is expected to rule on the merits of the case in the course of 2021.

• In July, the Market Court issued an exceptional judgment concerning the procurement of office furniture and interior design services within a dynamic purchasing system. Of particular interest is the fact that the Market Court effectively held that the Finnish procurement legislation is not in compliance with the provisions of the so-called Remedies Directive. In a nutshell, according to the Act on Public Procurement and Concession Contracts (Procurement Act), an automatic suspension period (i.a a prohibition on concluding a procurement contract when an appeal concerning the procurement has been filed with the Market Court), applies to situations where the contracting authority is obliged to adhere to a waiting period before concluding a procurement contract. Generally speaking, this is the case for procurements that exceed the EU threshold. In the case of procurements conducted within a dynamic purchasing system, however, the Procurement Act only provides for a voluntary waiting period, even where the EU threshold is exceeded. Thus, according to the Procurement Act, the automatic suspension period does not apply to dynamic purchasing systems. Nonetheless, based on the provisions of the Remedies Directive, the Market Court held that the automatic suspension period applies to all procurements exceeding the EU threshold, even if national procurement legislation does not provide for such an obligation. As a result of this interpretation, the Market Court was also able to impose an inefficiency sanction upon the contracting authority, which, according to the Procurement Act, would otherwise only have been available where a contracting authority had concluded a procurement contract in violation of the automatic suspension period.

• In September, the FCCA found that a Finnish government-owned betting agency, Veikkaus, which holds a monopoly in gambling services in Finland, had failed to comply with the public procurement legislation when it made changes to the procurement contract relating to its central betting system in 2018. These amendments, which the FCCA considered to be material, related to the operating model for the provision of services, the duration of the procurement agreement, and pricing. According to the FCCA, there were no legal grounds for the amendments. However, as Veikkaus had kept the procurement confidential, the six-month statutory time limit from the date of the procurement decision for the FCCA to submit a proposal to the Market Court had expired, and the FCCA was unable to impose any sanctions. Consequently, the FCCA decided to give Veikkaus administrative guidance in the form of drawing Veikkaus’s attention to compliance with procurement legislation. Nevertheless, the decision remains significant, as it is the first time the FCCA has raised concerns regarding the procurement of a state-owned company. The case also highlights issues concerning the narrow window for intervention, during which the FCCA must obtain information and investigate an alleged illegal direct investment, as well as possibly bring an action before the Market Court.
• The SAC handed down a judgment in December relating to in-house procurements and the transfer of competences between contracting authorities. Municipality B and a few other municipalities had entered into a cooperation agreement, according to which the municipalities had transferred the responsibility for organizing certain services to a responsible municipality, B. B, in turn, had procured the services in question from its fully owned in-house entity A. The main issue for the SAC to determine was whether responsible municipality B should have invited tenders for the procurement in question, rather than acquiring the services directly from in-house entity A. The SAC’s judgment was based on a preliminary ruling by the ECJ, according to which municipalities may transfer competences to a responsible municipality. Further, the ECJ had concluded that, in addition to owning shares, the necessary criterion of exercising control over an in-house entity may be met based on a contract, as long as it establishes similar control over the in-house entity as a contracting authority would exercise over its own entities. According to the SAC, the cooperation agreement between the municipalities had involved a transfer of competences, which fell outside the scope of the Procurement Act. Additionally (since based on the cooperation agreement) the other municipalities had the ability to exercise decisive influence over the strategic decisions of in-house entity A, even though they did not own any shares in it, municipality B (which was considered a contracting authority in respect to the procurement) was allowed to acquire the services in question from its in-house entity A.

• New amendments to the Finnish FDI legislation came into force in October, following the full applicability of the so-called EU Screening Regulation 2019/452, which led to both substantial and procedural amendments to the Finnish Act on the Monitoring of Foreign Corporate Acquisitions (MFCA). While the amendments did not, in principle, widen the scope of the MFCA as acquisitions of companies otherwise considered critical for vital functions in society are subject to a voluntary notification to the Ministry of Economic Affairs and Employment, the amendments did widen the scope of companies requiring prior approval by the Ministry. Whereas previously only acquisitions of so-called defense sector companies by non-Finnish buyers required prior confirmation, now acquisitions of companies active in the security sector are also subject to the Ministry’s prior approval whenever the buyer resides outside the EU/EFTA. Under the amended regime, the Ministry also has the authority to impose remedies, which may range from behavioral remedies such as an obligation to maintain the company’s headquarters in Finland, to structural remedies such as divestments. From a procedural perspective, the Ministry now has an obligation to share information and conduct a consultation process with the European Commission and other EU Member States, which may lead to extended review periods. For a more in-depth description of the amended FDI regime, please see our earlier Roschier Insights article on the topic.

• In November 2020, the Finnish Government issued a Government Bill, proposing amendments to the Competition Act, due to enter into force on 4 February 2021. The amendments are intended to implement the so-called ECN+ Directive, the objective of which is more efficient enforcement of competition law by granting the national competition authorities of the Member States new enforcement powers. The amendments to the Competition Act include changes to hearings, information requests, and the FCCA’s authority to establish the existence of a competition restriction and to order a company to terminate a competition restriction. Further, the authority of the FCCA, the  Market Court and the Supreme Administrative Court to impose sanctions will be extended, making it possible to impose a penalty payment for violating certain procedural provisions or decisions.

Despite the pandemic, there was a pretty normal year in terms of mergers notified to the SCA, but with very few in-depth investigations.

• Only one in-depth investigation (Phase II) decision was taken and it was an unconditional clearance. In 2019, the SCA requested Easypark, a company offering app-based parking payment solutions, to notify its acquisition of Inteleon, a company also offering app-based parking payment solutions. Following a Phase II investigation (which was also prolonged), the SCA cleared the acquisition in March 2020. The SCA concluded that, even though the competitive pressure might be lessened by the acquisition, barriers to entry are low, that parking suppliers could (without significant additional costs) switch suppliers of app-based parking payment solutions, and that, in the event of significant price increases, end-users could (and would, according to a survey the SCA conducted) use physical parking meters instead of app-based parking payment solutions.
• The only merger case requiring remedies was cleared without a Phase II investigation, although the first phase was a record-long one. In March, the SCA cleared Gasum’s acquisition of Lidingö Clean Gas and Nauticor KG in Phase I, subject to commitments. All three parties are suppliers of liquid natural gas to the marine industry, amongst other industries. The SCA could not rule out that the transaction would lead to negative effects on competition on the market for industrial customers in the Southeast of Sweden. To remedy the authority’s concerns, Gasum offered to guarantee that for five years actual and potential competitors would be able to use import terminals and other infrastructure in order to both deliver and purchase liquid natural gas, and that the fee charged would be fair, reasonable and non-discriminatory. Following some revisions of the commitments, such as setting a cap on the profit margins and requirements that fees must be approved by a monitoring trustee (which monitors compliance with the commitments) and that the remedies would be in effect for ten years, the SCA cleared the deal. An interesting procedural aspect of the case was that in order to avoid a Phase II investigation, the merging parties asked the SCA for and were granted a 20-working day extension of Phase I, making the Phase I lasting for a record 55 working days.

• All other cases concluded where cleared unconditionally in Phase I. One that stands out is Orifarm/Takeda. In September, the SCA cleared the merger between the pharmaceutical companies. Out of five product areas where the parties’ respective offerings overlapped, the SCA identified that Orifarm would gain a significant market share of around 60 to 80% within three of them. Nevertheless, no significant negative effects on competition were expected. For one of the products, there were no limits on parallel imports, and the market shares for this product fluctuated significantly from year to year. The other two products were covered by the Dental and Pharmaceutical Benefits Agency’s price ceiling. One product had already met the price ceiling, and thus there was no risk of any price increases for that product. There was, however, some room for price increases for the last product, but, with several competitors still active on that market and considering that the barriers to entry were low, the SCA found no concerns in relation to that product either.
• One merger was taken into Phase II in December and thus carries into 2021. On 15 December, the SCA opened an in-depth investigation of the merger between alcohol beverage suppliers Arcus and Altia. The review concerns primarily overlaps in the areas of aquavit, cognac and vodka and is at the time of writing still on-going.
• One of last years highlights was that the SCA for the first time used its then new right to block mergers in the Arla, Falköpings Mejeri and Norrmejeri case regarding cheese brands, which we wrote about in last year’s issue of Year in review. This case had an anti-climactic ending, since after the SCA decision, the seller’s decision to sell was challenged in arbitration by Skånemejerier. That arbitration resulted in the decision to divest being canceled and therefore the Patent and Market Court concluded that there no longer existed a concentration and set aside the SCA’s decision.

Mergers in figures

• In February 2020, the Patent and Market Court of Appeal repealed the lower court’s decision in the FTI case. In 2019, the Patent and Market Court had upheld the SCA’s decision in which the Packaging and Newspaper Collection Service (FTI) was ordered to continue to provide access to essential infrastructure (sites for recycling) to its competitor TMResponsibility. Although the Patent and Market Court of Appeal agreed with the lower court that FTI occupied a dominant position, it found that it would not have been impossible or unreasonably difficult for a competitor of FTI to establish a parallel infrastructure of sites for recycling for the foreseeable future at the time of FTI’s refusal to negotiate a new contract. In other words, the input which FTI ceased to supply did not meet the criterion of being a so-called “essential facility”.
• The SCA’s focus on unilateral conduct in 2020 focused on the newly deregulated gambling industry.
• The SCA investigated, but ultimately decided not to pursue, its investigation into state-controlled gambling company Svenska Spel regarding a complaint from the Swedish Online Gambling Association (Sw: Branschföreningen för onlinespel, (BOS)). The background to the complaint is the deregulation of some gambling markets, on which Svenska Spel previously held a statutory monopoly. Following the reform, Svenska Spel remained active on markets that had been opened up to competition (all but the lottery market and brick-and-mortar casinos), and made use of its pre-existing trademark on these now unregulated markets. According to the complaint, Svenska Spel’s statutory monopoly entails that Svenska Spel holds a dominant position on the lottery market, and that the use of a trademark which has been strengthened by state exclusivity in competitive markets constitutes abuse of dominance. The SCA found that it was not unlikely that the use of the trademark “Svenska Spel” in marketing in deregulated markets had a disproportionate effect in relation to the marketing and sponsoring costs, given the brand’s strong standing. Nevertheless, the SCA did not find that the trademark was a crucial factor for the consumer when choosing between gambling companies. Furthermore, Svenska Spel’s competitors are strong international operators, who have long been able to promote themselves in Sweden through mediums based outside of Sweden, and therefore have been able to circumvent the statutory monopoly.

• The gambling industry was also subject to the SCA’s review as it investigated, but ultimately decided to take no further action against, Trustly for alleged abuse of dominance. Trustly, a payment service provider, had entered into exclusivity agreements with gambling companies. The SCA found, however, that there was a wide selection of potential customers to which competing payment service providers could offer their services. Not only were there customers in the gambling sector, but also in other sectors like e-commerce and financial services. Therefore, the SCA concluded that there was not enough evidence of a risk that the exclusivity agreements between Trustly and the gambling companies would create a serious competitive problem.
• Further complaints linked to the gambling market and access issues were made to the SCA, but not further pursued.

Fines imposed for restrictive agreements continues to be a modest level in Sweden.

Two cases ended up in settlement like fines (until 1 March 2021 when the new legislation comes into force, the SCA can only impose fines on companies agreeing to pay the fine).

• Markslöjd, a small interior lighting company, agreed to pay a fine of SEK 1,780,000 for an anti-competitive agreement with Velltra, a retailer of Markslöjd products. Markslöjd made Velltra charge higher resale prices on products supplied by Markslöjd, by blocking orders that had already been placed until Velltra adjusted their prices. The SCA found that this was a breach of the prohibition on agreements that restrict or distort competition. Since this was a case of resale price maintenance, the SCA considered the violation to be particularly severe. This resulted in a fine of 4% of the annual turnover of Markslöjd, but multiplied by a factor of 0.5 since the duration of the infringement was only six months. Markslöjd accepted the fine.
• Artilleriet and Royal Design, two competing home decor companies agreed to pay a fine of SEK 75,000 and SEK 500,000 respectively for a breach of the prohibition on anti-competitive agreements. The companies had shared strategic information with each other and agreed on prices charged to customers for products of a certain brand, which also resulted in price increases. The infringement had only lasted for six months and the fine was thus multiplied with a factor of 0.5.
• The SCA sued the Swedish dairy company Arla in the Patent and Market Court for a fine of SEK 1,130,000 for violating the prohibition against anti-competitive agreements. In its claim, the SCA alleged that Arla had shared strategic information in a public procurement process with competitors concerning its intended bid, as well as the margins for a number of products included in the procurement process. The Patent and Market Court’s judgment is pending.

• The SCA opened an investigation into the fitness aggregator app BRUCE after a complaint regarding BRUCE’s use of exclusivity agreements with suppliers (such as gyms). The SCA took interim measures and ordered BRUCE to cease using exclusivity agreements during the investigation. In July 2020, the SCA decided to lift the interim measure and end the investigation, on the condition that BRUCE would undertake not to enforce the existing exclusivity agreements going forward (with the exception that BRUCE is permitted to enter into a small number of exclusivity agreements with new parties). BRUCE accepted the commitments, which will be in effect for two years. The SCA has also reviewed exclusivity agreements of competitors of BRUCE, but closed those investigations without further action.

• The Patent and Market Court rendered its judgment in the case between the SCA and Hässleholm municipality. The SCA had claimed that the municipality’s refusal to grant land to private operators seeking to sell fiber connections to the inhabitants of the municipality distorted competition on the market for the establishment and sales of fiber connections to end-consumers. According to the SCA, this constituted a violation of the prohibiting against anti-competitive sales activities by public entities. The Patent and Market Court agreed with the SCA and ruled in its favor. The judgment was appealed to the Patent and Market Court of Appeal, which in January 2020 found the lower court’s judgment to be so lacking in clarity that the case was referred back to that court. In December 2020, the Patent and Market Court rendered its new judgment. Once more, the court concluded that the municipality’s categorical refusal to grant land, without an individual assessment, to private operators seeking to sell fiber connections to the inhabitants of the municipality distorted competition. Hässleholm municipality appealed, but the Patent and Market Court of Appeal did not grant leave to appeal.

• In November 2020, the Swedish Government proposed legislative changes that would give the SCA extended decision-making powers, including the power, as a first instance, to impose fines for antitrust infringements. Under the current rules, this power lies with the Patent and Market Court. An additional power of the SCA under the proposal would be to impose fines for failure to comply with, for example, an on-site inspection. The proposal entails the implementation of the EU directive “Directive 2019/1 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market” (the ECN+ Directive). The ECN+ Directive stipulates several minimum requirements for the Member States’ enforcement of competition law. However, it does not require national competition authorities to be vested with the power to impose fines. The proposal thus surpasses the minimum requirements of the ECN+ Directive in this regard.
• The idea of extending the powers of the SCA is not new. In 2016, the Swedish Government launched an inquiry into whether the SCA should be granted the power to block mergers and impose fines for antitrust infringements. During the consultation period, a majority of the stakeholders opposed the idea and, ultimately, the legislator only granted the SCA the power to prohibit mergers. This time, the proposal was again not wholly well received either and the Council on Legislation advised against granting the SCA extended powers, querying in particular the validity of the legislator’s argument of need for harmonization with other Member States in this respect. The Council on Legislation further pointed out that the inquiry had not found that the absence of such powers has resulted in difficulties cooperating with other Member States. Despite the Council on Legislation’s opinion, the Government presented its proposal, including the extended powers for the SCA, to the parliament, which adopted the proposal in January 2021. The legislative changes enter into force on 1 March 2021.

• The SCA has been charged by the Swedish Government with reviewing and following up on the development of Swedish e-commerce. The SCA will look into issues regarding, for example, price formation, distribution chain market power, barriers to entry and start-ups, and the role of e-commerce from a competition and industrial policy perspective. In parallel, the SCA has been conducting a sector inquiry focused on competition on digital platforms in Sweden, investigating e.g. how technology has boosted efficiency on different markets, but also how such efficiency could harm competition through, for example, network effects and disparate access to data. The results of the e-commerce review will be presented by September 2021, and the results of the sector inquiry are to be presented in the first quarter of 2021. Also in the area of digitalization, the Nordic national competition authorities released a memorandum  on their collective view on how digital platforms can potentially change competition law on a European level. A takeaway from the memorandum to reflect on is the possible complements to the current EU competition law framework. The memorandum points out that the European Commission is seeking to modernize the current regulatory framework. According to the European Commission, this may be done through the introduction of an ex ante regulatory instrument for large online platforms with significant network effects acting as gatekeepers. Moreover, the European Commission has proposed a new competition tool which would significantly affect how competition law is enforced at EU level. Commenting on these proposals, the Nordic national competition authorities have stressed the importance of a harmonized approach to any regulatory efforts in order to avoid fragmentation and to safeguard the effective functioning of digital markets.  Finally, the Swedish government has also commissioned the SCA to analyze the competition in the building materials sector. The outcome of this inquiry shall be presented by December 21 2021.