The lack of uniformity among authorities in licensing and supervision practices make it more difficult for companies to enter the field and expand their operations, according to a report released today by the Finnish Competition and Consumer Authority. Uncertainty in the interpretation of rules does not encourage investment, enterprise, or the creation of something new. Non-uniform practices also distort competition conditions, weakening the possibilities of companies to lower costs by using the same business model in different parts of the country.
The report tells about differing practices in interpretation, especially in construction and zoning, social and health care services, and in the restaurant and taxi businesses. The existence of similar problems has been observed in perishable goods and in the energy sector.
The report focuses on the activities of the Regional State Administrative Agencies and the Centres for Economic Development, Transport and the Environment (ELY Centres), but it also includes examples of practices of municipal supervision of construction and Valvira, the National Supervisory Authority for Welfare and Health. However, the goal is not to place blame on officials, who naturally operate within the discretion that they have been given under the law. The problems are related more to regulation.
Heavy regulation is difficult to keep under control
For the study, FCCA interviewed organisations of several trade associations and different licensing authorities. The main reason for lack of uniformity in practices was seen to be the large amount of regulation and unofficial instruction at different levels, which were difficult to manage.
For instance, in the social and health care sector, instructions change quickly, and managing them is difficult, especially for small players. As a result of constant changes and a lack of uniformity in application practices, there are currently service units in the field that were approved on the basis several different criteria. The differing practices are connected with matters such as supervisory programmes, construction requirements, and regulations applying to locations.
As individual cases, the examples in the report from different sectors are generally small, but as a whole they have a big impact on the operational preconditions of companies. According to a survey conducted for this report by the Federation of Finnish Enterprises in 2013, more than 40 percent of companies felt that discrepancies in official interpretations had hurt their business activities.
Increased costs ultimately covered by consumers
A key drawback that emerged in the report is connected with the different ways in which a company can succeed on the market. As a starting point, success should come to those whose products or services are, from the point of view of price, quality, and availability, the kind that customers and consumers want to buy. Heavy and complicated regulation and a lack of uniformity in its implementation can lead to a situation in which successful companies are those that are most capable of handling the varying interpretations of regulations, and of cooperating with the authorities.
Another key point of view is connected with investment decisions, in which it is important to be able to evaluate future earnings expectations, at least with a moderate degree of accuracy. The possibility to anticipate future income and spending can be made significantly more difficult by non-uniform official practices.
A third problem is connected with the goal that companies have of pruning costs by duplicating their business models in different parts of the country. Non-uniform application practices can lead to unfounded increases in costs, if a model is accepted in one community and not in another. The increase in costs is ultimately shouldered by the consumers.
Viranomaiskäytännön yhtenäisyys ja kilpailun edistäminen -report (pdf, 67 pages, in finnish)
Counsellor Seppo Reimavuo, tel. +358 29 505 3602