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The Act on the amendment of the Act on Competition Restrictions (hereinafter Competition Act) became effective on 1 May 2004. These guidelines are intended to supplement the FCA’s previous guidelines on the control of concentrations and to clarify the principles applied in the interpretation of the new provisions. The turnover thresholds restricting the obligation to notify have changed as well as the definition of the connection required of a deal notified to Finland. In addition, the so-called two-year rule regarding the same industry has been removed.
It has not been possible to foresee all the potential situations where problems of interpretation may arise in these guidelines, however. In problematic situations, the parties are advised to contact the FCA.
1. Notification obligation
Turnover thresholds
Under 11a of the Competition Act, the provisions on the control of concentrations shall apply to a concentration where the combined turnover of the parties to the concentration exceeds 350 million euros and the turnover of a minimum of two parties derived from Finland exceeds 20 million euros. The concept of parties has been defined in 11(3) of the Competition Act. Whether the notification obligation shall be triggered is now determined by the turnover thresholds and no longer whether the object of acquisition conducts business in Finland. More specific instructions on the calculation of turnover are given in the Decree by the Ministry of Trade and Industry on the Calculation of Turnover of a Party to a Concentration (377/2004).
The division of powers between the national competition authorities and the European Commission shall also be determined on the basis of the turnover thresholds. The turnover thresholds of the concentrations falling within the Commission’s jurisdiction are prescribed in Article 1 of Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings.
Geographical allocation of turnover
In 11a of the Competition Act, the notification obligation of a concentration is linked, in the above-mentioned manner, to the turnover of the parties derived from Finland exceeding certain thresholds. When applicable, when allocating turnover, the FCA adheres to the principles contained in the Commission’s Notice on the calculation of turnover (OJ C 188, 4.7. 2001). This means turnover shall be attributed to the place where the customer is located at the time of the transaction. The allocation of turnover does not take into account where a good or service is enjoyed or the benefit of the good or service is derived.
There are special provisions on the allocation of turnover as regards credit and other financial institutions. See the above-mentioned notice on the calculation of turnover thereon.
Two-year rule
When the Competition Act was amended, the two-year rule of the previous 11b(5) was repealed. This means that when the turnover of concentrations concluded after 1 May 2004 is calculated, transactions made in the same line of business are no longer taken into account. However, the two-year rule on arrangements between the same buyer and seller under Article 11(4) is still in force.
2. Assessment of ancillary restraints
As part of a concentration, the FCA may approve competition restrictions which are directly related to the concentration and which are necessary for its implementation. The deadlines for the non-competition clauses in the FCA’s 1998 Merger Guidelines were in line with the notice on ancillary restraints then issued by the Commission.
The Commission’s 2001 Notice (OJ C 188, 4.7.2001)[i] and the FCA’s own case law have shortened the duration of the non-competition clauses regarded as ancillary restraints. It follows from the above that as a general rule, non-competition clauses for periods of up to three years may be regarded as ancillary restraints in concentration cases where, in addition to reputation and clientele, know-how shall also be transferred, whereas in cases where only reputation and clientele shall be transferred, non-competition clauses are justified for periods of up to two years.
The above instructions on the duration of non-competition clauses regarded as ancillary restraints shall not be mechanically applied; instead, non-competition clauses shall be assessed on a case-by-case basis.
3. Simplified notification form
The provisions on the notification obligation may, in some cases, lead to the notification of concentrations which have only a minor effect on Finland. The notification obligation covers e.g. arrangements where companies, to which turnover derives from Finland, set up joint ventures abroad. In these cases, it is warranted to employ a simplified notification form, the criteria of which is known in advance by the party obliged to notify. The purpose of the simplified procedure (hereinafter simplified notification) is, in some situations, to reduce the information supplied in the notification and the expenses of the notifying party.
The simplified notification is based on the decision by the Ministry of Trade and Industry[ii], under which the FCA may, in individual cases, grant derogations to the obligation to notify if the effects of a concentration for competition are likely to be minor or if the information prescribed to be given is unnecessary, in certain parts, for the assessment of a concentration.
As a rule, the FCA will accept the simplified notification in arrangements where companies, to which turnover derives from Finland, set up a joint venture or obtain joint control in a company which has no connection to the Finnish markets. In this context, the term joint venture is used of both the joint venture established and the object of acquisition of joint control. There is no connection to the Finnish markets if the joint venture does not engage in business in Finland and no turnover derives to it from Finland. If the joint venture imports products to Finland, the arrangement shall be notified to the FCA using the standard form, as import into Finland builds up turnover from Finland. The standard form shall also be used when the joint venture has e.g. a subsidiary, sales office, service operations, a branch office or other place of business in Finland. When the FCA assesses the connection of the joint venture to the Finnish market, it also considers the possible future plans of the company to operate in the Finnish market.
The notification obligation may be illuminated by the following example: companies A and B operating in Finland[iii] decide to establish a joint venture. Since, in the calculation of turnover, the entities establishing a joint venture are deemed parties, the notification obligation shall be triggered if the combined world-wide turnover of A and B exceeds 350 million euros and the turnover of A and B derived from Finland exceeds 20 million euros. If A and B set up a joint venture abroad, and the joint venture or the companies in its control shall not conduct business in Finland and no turnover shall derive to them from Finland, the arrangement may be notified using the simplified form. The joint venture shall be notified according to the standard form if the joint venture imports products into Finland or is founded in Finland.
The FCA shall assess on a case-by-case basis whether the arrangement may be notified according to the simplified form. The notifier may request the FCA’s permission for the use of the simplified notification e.g. in the negotiations with the office prior to submitting the notification. If there is no need for a pre-notification meeting but the notifier finds that the criteria for the simplified notification are met, the arrangement may be notified with the simplified form if permission for its use is sought at the same time. If the FCA finds that the information requested in the standard form is necessary for the assessment of the competitive effects of the arrangement, the FCA shall immediately inform the party obliged to notify thereof, and s/he shall submit to the office a notification in the requested extent.
Even if the criteria for the simplified notification are met, the FCA may always request, as before, that the notifier provide any further information which is necessary for the assessment. If the joint venture has no connection to the Finnish market and the information in the simplified notification is not substantially defective or misleading, the FCA’s 30-day deadline set for Stage I will start to run, even if the FCA requests for further information. But if the transaction should have been notified by the standard form instead of the simplified notification, the FCA may, before the 30-day deadline comes to a close, require that a complete notification be submitted. In such a case, the deadline prescribed in the law will only start to run from the completed notification.[iv] The FCA shall inform the notifier of a defective notification as soon as possible. Irrespective of whether the notifier has a connection to the Finnish market or not, the FCA may always grant exceptions to the information notified, as it has done until now. The simplified notification may be used in concentrations concluded on 1 May 2004 or thereafter.[v]
To allow the FCA to assess the competitive effects of a joint venture referred to in this notification and the applicability of a simplified notification thereto, the notification shall begin by a short account of the present and future business of the joint venture including information on the line of business of the joint venture and its location.
In addition, the notifier shall provide a minimum of the following information in the simplified notification:
1. Party obliged to notify
For each party obliged to notify:
1.1. Name;
1.2. The industries wherein the party obliged to notify operates;
1.3. Address;
1.4. Telephone and telefax number;
1.5. Liaison (name, position, telephone and telefax number);
1.6. Appointed representative (name, position, company, address, telephone and telefax number).
2. Other party to the concentration
For each object of acquisition:
2.1. Name;
2.2. Industries wherein the party operates;
2.3. Address;
2.4. Telephone and telefax number;
2.5. Liaison (name, position, telephone and telefax number);
2.6. Appointed representative (name, position, company, address, telephone and telefax number).
3. Seller
Information on the seller of each object of acquisition (insofar as this is known by the party obliged to notify):
3.1. Name;
3.2. Industries wherein the seller operates;
3.3. Address;
3.4. Telephone and telefax number;
3.5. Liaison (name, position, telephone and telefax number);
3.6. Appointed representative (name, position, company, address, telephone and telefax number).
4. Concentration
4.1. The legal form of the concentration (cf. 11(1) of the Competition Act).
4.2. A brief description of the concentration arrangement. Any business secrets contained in the description shall be clearly identified.
4.3. In case of a founding of a joint venture:
4.3.3. a description of the forthcoming business operations of the joint venture in Finland;
4.3.5. a description of the stability and operational independence of the joint venture.
5. Information on turnover
See 11a and 11b of the Competition Act and the Decree by the Ministry of Trade and Industry on the calculation of turnover of a party to the concentration (377/2004):
5.1. The combined worldwide turnover of each party to the concentration and the entities and foundations part of the same group of companies as the party.
5.2. The combined turnover accumulated from within Finland of each party to the concentration and the entities and foundations part of the same group as the party.
6. Information on ownership and control
6.1. With respect to each party to the concentration, a list of all the entities and foundations that belong to the same group of companies (as defined in the annex to the Decision of the Ministry of Trade and Industry on the Obligation to Notify a Concentration No 499/1998).
7. Affected markets
7.1. Relevant markets
7.1.1. All the relevant product markets wherein a minimum of two parties to the concentration or entities and foundations part of the same group of companies, respectively, conduct business and wherein their combined market share is a minimum of 15 per cent in Finland or a relevant part therein.
7.1.2. All the relevant product markets wherein a party to the concentration or an entity or a foundation part of the same group operates and which are upstream or downstream of the manufacturing chain or the distribution channel of a product in relation to the markets where some other party or an entity or foundation part of its group of companies operates. The information shall be given if the combined market share of the party to the concentration and the entity or foundation part of the same group in some of the markets is a minimum of 20 per cent in Finland or a relevant part therein.
7.1.3 Other relevant product markets not referred to in 7.1.1. or 7.1.2. above, but which are closely related to them irrespective of whether a party to the concentration or an entity or foundation part of the same group engages in business in these markets.
7.2. Market information
If the relevant geographical markets are wider than Finland, the information prescribed in this section shall be given for both Finland and the relevant geographic market insofar as it is known by the party obliged to notify.
7.2.2. Sales volume and value and market share
7.2.2.1. The value (euros) and volume (units) of the sales of each party and each entity or a foundation part of the same group, and an estimate of their market shares in the markets referred to in Sections 7.1.1. and 7.1.2. above. The information shall be given for the year preceding.
7.2.2.2. An estimate of the market shares of each party and the entities or foundations part of the same group of companies in the markets referred to in Section 7.1.3. above. The information shall be given for the year preceding.
7.2.3. Main competitors
7.2.3.1. Five main competitors and an estimate of their market shares for the year preceding. The name, address and telephone and telefax number of each competitor, and the name and position of a liaison.
7.2.4. Main customers
7.2.4.1. Five main customers who are not part of the same group of companies as the party to the concentration, in each relevant market referred to in Section 7.1. above. The main customers in Finland shall be notified under Article 10 of the Competition Act also in cases to which point 7.1. above does not apply. The name, address, telephone and telefax number of each customer and the name and position of a liaison. The information shall be given for the year preceding.
10. Ancillary restraints
Ancillary restraints refer to competition restrictions which are directly related and necessary to the implementation of the concentration. Ancillary restraints are examined as part of the concentration.
Competition restrictions which are considered ancillary restraints by the party obliged to notify and the grounds as to why these shall be considered ancillary shall be provided.
11. Notifications to other authorities
11.1. Foreign competition authorities to whom the parties have notified or shall notify the concentration or from whom the parties have applied for or shall apply for permission for the deal. The name, address, telephone and telefax number of each authority and the date the application was submitted or will be submitted.
12. Other relevant considerations
Other information considered necessary for the review of the case.
13. Annexes
The following annexes shall be included in the notification:
- an extract from the trade register for each party;
- documents concerning and relating to the concentration, such as agreements concerning or relating to the concentration and public bids;
- the latest annual report of each party to the concentration and each entity or foundation part of the same group of companies, and the latest profit and loss account drawn up; and
the written authorisation of appointed representatives.
The information given in the notification may be supplemented by other annexes and specified by tables and diagrams. All the annexes must be original or certified copies. The notification shall contain a list of the annexes.
14. Date and signature
The notification shall be dated and signed.
[i] In summer 2004, the Commission will issue a new notice on ancillary restraints.
[ii] The decision by the Ministry of Trade and Industry on the Obligation to Notify a Concentration (499/1998), effective from 1 October 1998, based on 11c (4) of the Competition Act.
[iii] Companies to which turnover derives from Finland.
[iv] 11e (1) of the Competition Act.
[v] 11 c of the Competition Act provides on the implementing date of a concentration and the commencement of the notification obligation.
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