Antitrust: restrictive agreements and dominance
Sections 5 and 7 of the Competition Act set out the prohibited restraints on competition and abuse of dominant positions respectively. The sections have been harmonised with Articles 101 and 102 TFEU.
The FCCA has made only a handful of penalty payment proposals to the Market Court in dominance cases. In most of the few cases brought to the Market Court, the level of fines has been modest. Typical Section 7 investigations of the FCCA have lasted a long time and have ended with the FCCA closing the case without further measures. The experiences have been equally frustrating to both the targeted undertaking and the complainant.
However, the FCCA has made one significant fine proposal in a dominance case to the Market Court in recent years. In December 2012, the FCCA proposed that the Market Court impose a fine of €70 million on Valio. The Market Court rendered its decision in the case in summer 2014, and it is summarised below. The decision of the Market Court became final when the SAC dismissed Valio's appeal in December 2016.
In 2018, the FCCA concluded three investigations regarding suspected restraints on competition. In two of the cases, the companies involved changed their suspected market behaviour on their own initiative, and in one case the FCCA found that there was no evidence of anticompetitive behaviour.i Significant casesRestraints on competitionFCCA's commitment decision concerning bus ticket pricing
In March 2018, the FCCA issued a commitment decision concerning Matkahuolto's pricing and rate tables. Matkahuolto sells its own ticket products. Matkahuolto's single ticket pricing was based on a rate table published on its website. In addition, the rate table was included in agreements between Matkahuolto and individual coach companies. According to the FCCA's preliminary assessment, the individual coach companies had widely used the rate table as the basis for their ticket pricing, which led to significant anticompetitive effects, as it restricted price competition and limited consumers' choice.
As a result, Matkahuolto committed to refraining from confirming and publishing rate tables on its website or as a part of its agreements with the individual coach companies. In addition, Matkahuolto committed to stop selling its own single tickets, the price of which was based on the rate table, to consumers. Matkahuolto may continue selling single tickets, but the independent transport providers must set the retail price.FCCA's commitment decision concerning copyrights
The FCCA issued a commitment decision in December 2018 concerning the terms and conditions of Teosto ry's affiliation agreements. The FCCA had started its investigations in 2014. Teosto is the sole Finnish copyright organisation for composers, lyricists, arrangers and companies that publish music.
The membership agreement between Teosto and the composers, lyricists, arrangers and music publishers that it represents included an exclusivity clause according to which the economic rights of the clients' works were assigned to Teosto. In 2017, Teosto divided the economic rights under its administration into five categories. Clients were given the right to withdraw categories of rights, but not rights to individual works, from Teosto's administration. In addition, clients were only allowed to grant licences of use to their works in specific situations. According to the FCCA, the exclusivity clause was not necessary for protecting the rights of Teosto's clients with regard to the users of their works. Furthermore, the categorisation of rights encouraged the holders of those rights to concentrate the administration of all their works to Teosto.
Teosto committed to amending the membership agreements. The amendments will allow for clients to withdraw their individual works from Teosto's administration and, in addition, to grant licences of use to their works on a case-by-case basis without having to remove entire categories of rights or terminating their membership agreements in order to be able to do so.Abuse of dominancePredatory pricing
In June 2014, the Market Court handed down a decision in a case in which national dairy products champion Valio was accused by the FCCA of having abused its dominant position on the Finnish market for fresh milk. Valio had allegedly engaged in predatory pricing with the aim of driving out its main competitor Arla Oy (Arla, formerly Arla Ingman Oy Ab).
The Market Court upheld the FCCA decision of December 2012, in which the FCCA had ordered Valio to cease its conduct. The Court found that Valio had sold fresh milk below average variable costs in order to drive out competition and eventually raise prices. Additionally, the Court imposed a fine amounting to €70 million on Valio as proposed by the FCCA. Valio appealed the Market Court's decision to the SAC. As previously mentioned, the SAC upheld the Market Court's ruling in December 2016. This is the highest single fine ever imposed in Finland for any competition law infringement.
The Market Court applied both Finnish competition law and Article 102 TFEU. The question of Valio's dominance had been established in previous decisions, and despite Valio's objections, the Market Court held that Valio was in a dominant position on the Finnish market for fresh milk. The FCCA had argued that based on EU case law, the relevant test for predatory pricing is selling below average variable costs, which is in itself an indication of abuse of dominance. According to the FCCA, the cost of raw milk was a variable cost. On the basis of such a calculation, Valio had sold fresh milk at a loss during the relevant period.
The Market Court agreed with the FCCA that pricing below average variable costs is an indication of abuse, and noted that case law did not require evidence of intent in such a case. The FCCA had in any case invoked evidence that Valio had the intent of driving out its competitor, Arla, from the market. The Market Court agreed that emails by Valio's management showed that Valio had the intent of foreclosing the market and regaining a higher market share. In addition, the rebates given to specific customers had the effect of amplifying the foreclosing effect of the predatory pricing. Arla was forced to offer even lower prices than Valio in order to keep its customers from switching to Valio. The Market Court viewed this as a clear indication of the intent to foreclose Arla from the market. This behaviour could not be objectively justified. Valio had previously been sanctioned for abusing its dominant position, which increased the fine. In addition, the Market Court found Valio's unwillingness to cease the conduct during the administrative proceedings to be an aggravating factor.
Arla lodged a damages claim of €58 million against Valio before the Helsinki District Court, but the parties settled the matter in September 2018. Other claims have also been lodged. Although Valio has settled with a number of other claimants as well, several claims are currently pending before the court.ii Outlook
As noted above, the Competition Act contains a provision on prioritisation of the FCCA's activities. Even before the entry into force of the prioritisation provision in Section 32 of the Competition Act, the FCCA closed a majority of its dominance investigations without further measures noting, inter alia, that its role is not to solve individual contractual disputes between parties but to ensure the functioning of the market and healthy competition. Section 32 codifies the practice and grants the FCCA a right to remove cases that have only a minor impact on the economy more quickly.
The FCCA has applied the prioritisation provision regularly, and is expected to continue to do so in the future. As a result of the provision, the FCCA is able to focus on the more serious restraints on competition. This has had a positive effect on the processing times as well, as these have tended to be long. The FCCA has internally set a target that no case would be under investigation for longer than three years.