From club payments to fines reaching millions – FCCA report sheds light on the history of Finnish competition policy

The latest report by the Finnish Competition and Consumer Authority (FCCA) Kilpailuvirasto kilpailupolitiikan suunnannäyttäjänä (The Finnish Competition Authority Points the Way in Competition Policy) describes how Finnish competition policy has been shaped and under what conditions. The main focus of the report is the Finnish Competition Authority between 1988 and 2012. At the beginning of 2013, the Finnish Competition Authority and the Finnish Consumer Authority merged to become the Finnish Competition and Consumer Authority (FCCA).

One feature of Finnish competition policy has been the gradual tightening of competition legislation, the approach to its application and penalties. Before 1988, the Finnish economy was characterised by monopolies, cartels and general price regulation. Companies were required to notify the competition authority of any restraints on competition, which it then registered. Numerous competition restrictions remained beyond the scope of legal regulation. There were very few convictions, although a sentence of as much as a year prison could have been imposed. Competition fines remained lenient for long afterwards and were generally referred to as “club payments.”

Horizontal cartels dismantled

Immediately after its establishment in 1988, the Finnish Competition Authority initiated a cartel project aimed at eliminating price cooperation between competitors within trade associations. Although the legislation did not directly prohibit cartels, they were nevertheless regarded as being against the public interest in principle.

The cartel project is regarded as a key milestone in the activities of the Finnish Competition Authority since over a hundred trade associations had dispensed with price recommendations by 1993. The Authority was ahead of its time by international standards, too, as many EU member states only began to end trade association price recommendations in the 2000s, when urged to do so by the European Commission.

Merger control improves

Kesko´s acquisition of Tuko is regarded as a key turning point in the history of Finnish competition policy. In 1996, Kesko reported that it had purchased a majority shareholding in Tuko Oy and, through later transactions, had gained control of one of its key competitors.  According to the Act on Competition Restrictions in force at that time, the Finnish Competition Authority did not have the power to intervene in the reported acquisitions. The Authority nevertheless requested that the European Commission examine the acceptability of the merger from the viewpoint of EU competition law.

In its related decision, the European Commission stated that the acquisition would create a dominant market position of a kind that would impede effective competition in the retail and cash and carry markets for daily consumer goods in Finland. In February 1997, the Commission ordered Kesko to divest itself of Tuko´s daily consumer goods business.

The general climate changed in the wake of the case and companies began to take competition issues more seriously. Companies also approached the Finnish Competition Authority more frequently than before to obtain advice on various arrangements. In 1998, provisions concerning merger control were added to the Act on Competition Restrictions.

Huge penalties as a deterrent

The fines imposed for competition law violations have not always been in the same range as those of recent years. In 2009, the Supreme Administrative Court ordered asphalt companies to pay a total of EUR 82 million in penalty payments for operating a nationwide asphalt cartel. Similarly, in 2009, the Market Court imposed EUR 51 million in penalty payments on forest companies for operating a raw wood procurement cartel.

The adoption of European policy gradually rendered cartels unprofitable in Finland as well as elsewhere. A new phase began in Finnish cartel policy, with heavy fines playing a key role in combating cartels and acting as a deterrent for the benefit of consumers.

Kilpailuvirasto kilpailupolitiikan suunnannäyttäjänä, Kilpailu- ja kuluttajaviraston selvityksiä (The Finnish Competition Authority Points the Way in Competition Policy, Reports of the Finnish Competition and Consumer Authority) 4/2015 (in Finnish).