Pre-Merger Notification Guide FINLAND Roschier, Attorneys Ltd. CONTACT INFORMATION Christian Wik Roschier, Attorneys Ltd. Keskuskatu 7 A 00100 Helsinki, Finland 358.20.506.6000 christian.wik@roschier.com www.roschier.com 1. Is there a regulatory regime applicable to mergers and similar transactions? Yes, merger control in Finland is regulated in Chapter 4 of the Competition Act (948/2011) (hereinafter the Competition Act ), which entered into force on 1 November 2011. 2. Identify Applicable National Regulatory Agency/Agencies. The relevant authority responsible for merger control is the Finnish Competition Authority (hereinafter the FCA ). 3. Is there a supranational regulatory agency (e. g., the European Commission) that has, or may have exclusive competence? If so, indicate. Yes, the European Commission may have exclusive competence to review a concentration by virtue of the Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (hereinafter the EUMR ). 4. Are there pre-merger filing requirements; if so, where are they published? Yes, concentrations falling within the scope of the Competition Act must be notified to the FCA. The notification of a concentration shall be made by using the ordinary notification form as presented in a Decree issued by the Council of State on the obligation to notify a concentration (1012/2011), or the so-called short form notification form. The short form notification form is annexed to the FCA s
Guidelines on Merger Control, issued in connection with the adoption of the Competition Act. The notification forms as well as other relevant information are published, inter alia, on the website of the FCA (www.kilpailuvirasto.fi). 5. What kinds of transactions are "caught" by the national rules? (Identify any notable exceptions) The Competition Act applies to the following types of concentrations, provided that the jurisdictional thresholds are met (see answer to question 7 below): the acquisition of control of another undertaking; the acquisition of the entire business operations of an undertaking or a part thereof; a merger; or the setting up of a joint venture to perform, on a continuing basis, all the functions of an autonomous economic unit (a full-function joint venture). In case these turnover thresholds are met, there are no exceptions from the mandatory filing obligation e.g. as regards foreign-to-foreign transactions. 6. Is there a "size of transaction" threshold? No, there is not. 7. Is there a "size or turnover of the parties" test; if so, what is it and how are size and turnover to be calculated? A concentration must be notified to the FCA if: the combined aggregate worldwide turnover of the parties exceeds EUR 350 million; and the aggregate turnover in Finland (including e.g. imports into Finland) of each of at least two of the parties exceeds EUR 20 million. In the calculation of the relevant turnover, the turnover of the whole buyer group will be taken into account, whereas of the seller s turnover, only the amount relating to the target of the acquisition is relevant. The rules concerning the parties whose turnover will be taken into account, as well as the manner of calculating the turnover, correspond for the most part to the provisions of the EUMR. In case the target undertaking is acquired in stages, all the acquisitions from the same seller (group) over a period of two preceding years are taken into account in the turnover calculation as forming part of the turnover of the target of the acquisition. Turnover refers to the worldwide gross sales revenues generated from the ordinary activities of the relevant entity, based on the most recent financial statements, of
which the sales rebates granted, as well as value-added taxes and other taxes directly related to the turnover, have been deducted. In determining the amount of the relevant Finnish turnover, the location of the customer is decisive. As a general rule, the turnover will be allocated to the country in which the customer was situated at the time of the sale in question, not,e.g., on the basis of where the good or service was used. 8. Is geographic scope/national market effect of transaction an issue with respect to filing or approval requirements? If so, specify. With respect to filing requirements geographic scope or national market effects do not matter; the transaction is notifiable when the turnover thresholds (identified in answer to question 7 above) are met. With respect to approval requirements geographic scope and/or national market effect plays a larger role. The FCA is authorized to intervene in concentrations which it deems would significantly prevent effective competition in the Finnish markets or in a substantial part thereof, in particular due to the fact that a dominant position is created or strengthened (so-called SIEC-test, significant impediment to effective competition). The SIEC-test replaced, as of the entry into force of the Competition Act, the dominance test as the applicable intervention test for concentrations. Certain specific supplementary rules apply to concentrations in the electricity markets. 9. Is the filing voluntary or mandatory? What are the penalties for noncompliance? The filing of a notification with the FCA is mandatory if the above described jurisdictional thresholds regarding turnover of the parties, are exceeded. The sanctions resulting from non-compliance are addressed in detail in the answer to question 17 below. 10. Time in which a filing must be made. There is no deadline for filing. By virtue of the entry into force of the Competition Act, the set time limit for filing a notification with the FCA was abolished. According to the Competition Act, a notification must be filed upon the conclusion of an acquisition agreement or the acquisition of control. A transaction may also be notified as soon as the parties can show with sufficient certainty that they will conclude a notifiable transaction. No implementation of the concentration before obtaining clearance is allowed. 11. Form and Content of Initial Filing. The basic notification form is broadly similar to the Form CO of the EUMR. Various types of information must be submitted depending on the details of each case. Such information includes information regarding the parties, the transaction structure, relevant markets, competitors, customers, suppliers, market conditions, etc. The
notification form must be completed in Finnish or Swedish, appendices to notifications are also accepted in English. In certain circumstances, the notification may be filed with the FCA by using the socalled short form notification. Basically, the short form notification is approved by the FCA where the joint venture to be created or the undertaking in which joint control is acquired has no connections to the Finnish markets. Such a situation may be deemed to exist where the joint venture or the jointly controlled undertaking, as the case may be doesn t have business activities in Finland and doesn t generate any turnover from Finland (the turnovers of the jointly controlling companies triggering the obligation to notify). In individual cases the FCA may grant waivers in respect of the information to be given in a notification. The granting of such waivers depends on the assessment of the FCA of its appropriateness with regard to the assessment of the transaction in question, or where the concentration to be reviewed could be considered to affect competition only to an insignificant extent. 12. Are filing fees required? No, there are no filing fees. 13. Is There An Automatic Waiting Period? If so, specify. Yes, according to the Competition Act, the concentration may not be implemented prior to clearance by the FCA or the Market Court, as the case may be. As will be elaborated upon below in the answer to question 14, the FCA has, in the first phase, one month to issue its decision or decide to move into a more detailed, second phase, investigation. A second phase investigation can last up to 3 months from the decision to initiate it. Moreover, the Market Court can, at the request of the FCA, extend this second phase investigation period by a further 2 months. However, when the Market Court is investigating a concentration upon a referral by the FCA, the prohibition to implement the transaction will cease to be in effect after a one-month period from the commencement of the court proceedings, unless the Market Court orders the prohibition to be extended. 14. Are There Time Limits Within Which The Regulatory Agency Must Act? Can they be shortened by the parties or be extended by the regulatory agency? During the first phase investigation, the FCA has a period of one month during which it must either clear the concentration as it stands or with conditions, conclude that the concentration will not be caught by the Competition Act, or decide to initiate a second phase investigation. If the FCA does not adopt any decision within this period, the concentration is considered cleared (in practice, however, the FCA always issues a decision). If the FCA decides to initiate a second phase investigation, it must, within three months (or five months with the permission of the Market Court) of such decision, either clear the concentration as such or with conditions, or request the
Market Court to prohibit it. Having received the FCA s request, the Market Court must make its decision to clear or prohibit the concentration within three months. The time limits mentioned above may not be shortened by the parties. In practice, the investigation of the FCA may be expedited with pre-notification discussions, to which the parties are encouraged by the FCA. 15. What is the substantive test for clearance? Following the entry into force of the Competition Act, the FCA is able to intervene in arrangements that significantly impede effective competition (the so called SIEC-test) in the Finnish markets or a substantial part thereof, in particular due to the fact that a dominant position is created or strengthened. Certain specific supplementary rules apply to concentrations in the electricity markets. Please see also answer to question 8 above. 16. What are the common Post-Filing Procedures: Requests for further information, etc? Upon receiving the notification the FCA will, as a general rule, send a market inquiry to the competitors, customers, and suppliers of the parties to the concentration. The aim of the procedure is to establish the competitive situation on the affected market(s) and the possible specific market features, as well as to afford the relevant market players the possibility to be heard on the proposed concentration. In case it is evident that the proposed concentration will not give rise to any competition concerns and will be cleared without any material investigations, market inquiries may be omitted. Should the FCA decide to initiate a second phase investigation, it may send more detailed questions to the relevant market players. The statements as well as other issues pertinent to the case will be discussed with the parties and, where necessary, formal hearings will be held. 17. Describe the sanctions for not filing or filing and incorrect/incomplete notification. Failure to comply with the filing obligation may lead to the imposition of administrative fines amounting to 10 percent of the total turnover of the relevant undertaking in the year during which the infringment was committed. The fine is imposed by the Market Court on the basis of a proposal by the FCA and its amount is determined in view of the nature, extent, reproachfulness, and duration of the infringement. The fine will be imposed, unless the infringement is considered minor, or the imposition of the fine otherwise is held unnecessary in view of safeguarding competition. In addition, the FCA may impose a conditional fine on the party which has failed to comply with the obligation to notify. The conditional fine is imposed by the Market Court on the basis of a proposal by the FCA.
With regard to filing an incomplete notification, the Competition Act contains a stop-the-clock provision, according to which, if the parties fail to respond to the FCA s request for additional information within the set time limit or provide essentially insufficient or incorrect information, the FCA may extend the time limits for decision-making by the corresponding number of days during which the requested information was outstanding. 18. Describe the procedures if the agency wants to challenge the transaction? Having investigated the concentration, the FCA may clear it with or without imposing conditions or request the Market Court to prohibit it. As indicated in the answer to question 15 above, the concentration may be opposed to by the FCA if it significantly impedes effective competition in the Finnish markets or a substantial part thereof, in particular due to the fact that a dominant position is created or strengthened. If the impediment to competition resulting from the concentration could be avoided by imposing conditions on its implementation, the FCA shall primarily negotiate and impose such conditions. The FCA cannot impose conditions to the concentration which the notifying party does not accept. Therefore, if the conditions are not deemed acceptable by the notifying party, the FCA may make a proposal to the Market Court to prohibit the concentration. The time limits within which the relevant authorities are obliged to act are addressed in detail in the answer to question 14 above. By virtue of a reform brought on by the Competition Act, the notifying party is no longer able to appeal the imposed conditions to the Market Court. 19. Describe the penalties applicable to the implementation of a merger before clearance or of a prohibited merger? Under the main rule, no steps may be taken to implement the transaction prior to clearance of the concentration by the FCA. However, when the Market Court is investigating a transaction on the basis of the FCA s request to prohibit it, the prohibition on the implementation ceases within one month of such request, unless the Market Court orders the suspension to continue. The FCA and the Market Court may, upon request, permit certain implementing measures to be taken during the investigation period. Should the transaction be implemented prior to obtaining clearance or against a prohibition decision, a fine of up to 10 percent of the total turnover of the relevant undertaking may be imposed. It is possible to apply for an exemption to implement the transaction before clearance. In addition, the Market Court may - at the proposal of the FCA - order a concentration to be dissolved/annulled, e.g. by requiring the undertakings concerned or the assets brought together to be separated in order to restore the conditions of effective competition. It is required, however, that the proposal of the FCA to the Market Court regarding the dissolution/annulment shall be notified to the parties within one year from the implementation of the transaction.
20. Describe, briefly, your assessment of the regulatory agency's current attitudes/activities. With regard to merger control, the FCA is a well-functioning authority and has high level of know-how in both procedural and substantive terms. In general, the FCA is willing to discuss with parties to a concentration and to provide advice in problematic issues. The FCA is also reliable with regard to confidentiality issues pertinent to merger control procedures. 21. Other Important Information: As indicated above, the new Competition Act has recently entered into force. With regard to merger control, the principal reform of the new act is the introduction of the SIEC-test, also applied by the European Commission, as the substantive intervention test for concentrations. In theory, the intervention test enables the FCA to intervene in certain arrangements between competitors on markets that can be considered as oligopolistic. As a simple example, the FCA may now, under certain circumstances, intervene in a merger of two important competitors that does not create a market leader, such intervention not having been possible under the dominance test. On the other hand, it is expressly stated in the travaux préparatoires of the Competition Act, that the purpose of the replacement of the dominance test heretofore applied in Finland, with the SIEC-test, does not imply a dramatic change in the FCA s enforcement policy. By applying the SIEC-test to notified acquisitions, the FCA aims to direct attention to post-merger competition effects as a whole, instead of only examining the structure of the concerned market(s). Further noteworthy reforms of the Competition Act with regard to merger control include the abolishment of the deadline for notifying a concentration within a week of signing a binding agreement, as well as the FCA s authority, under certain circumstances to stop the clock after the initiation of proceedings if the parties do not provide information requested by the FCA within the set time limit, or provide substantially insufficient or incomplete information. An additional interesting amendment prohibits the notifying party from appealing against the FCA s decision to clear a transaction subject to conditions.