TerraLex Cross-Border Guide to Pre-Merger Notification Guide

Yes. The merger control provisions are included in the Finnish Competition Act (948/2011, as amended).

N/A

The Finnish merger control regime applies to all concentrations, which exceed the relevant turnover thresholds (please refer to question 4 below). A concentration is defined as:

• the acquisition of control of an undertaking.
• the acquisition of the whole or part of the business operations of an undertaking.
• a merger.
• the setting up of a full function joint venture, i.e. a joint venture performing on a lasting basis all the functions of an independent undertaking.

The concept of a “concentration” under the Competition Act is in line with the definition of a concentration under the European Commission’s Consolidated Jurisdictional Notice under the EU merger control regime, which can be used for guidance.

“Control” means the possibility to exercise decisive influence over the actions and competitive behavior of another undertaking. “Control” is not tied to any specific legal form.

A concentration is subject to mandatory notification where: - the combined worldwide turnover of the parties to the concentration exceeds €350 million; and

• the turnover generated in Finland of each of at least two parties to the concentration exceeds €20 million.

Parties to the concentration include:

• the acquirer of control;
• the acquirer of the whole or part of the business operations;
• the undertaking where control is being acquired;
• the business operation (or part of the business operation), which is being acquired; and
• the merging parties.
• The founders of a full-function joint venture.

There are specific provisions concerning the calculation of the turnover. In general, the turnover of the acquirer's entire group is relevant. As regards the object of acquisition, only the turnover attributable to the target company, including any companies over which the target company exercises control, or to the business operations that are being acquired is taken into account.

Turnover is, as a rule, allocated geographically according to the customer's location at the time of the transaction. Therefore, turnover that is generated from the sale of products or services to Finnish customers qualifies as turnover generated in Finland for the purposes of the thresholds.

There are special provisions regarding the allocation of the turnover of credit and other financial institutions. The calculation of the turnover under the Competition Act is in line with the European Commission’s Notice on calculation of turnover under the EU merger control regime which can be used for guidance.

Only full function joint ventures fall within the scope of the mandatory notification system. The creation of a joint venture that takes permanent control over all of the functions of an independent undertaking constitutes a concentration. A joint venture is subject to merger control if it is intended to operate on a lasting or permanent basis and if it has sufficient resources to operate independently of the founding members. Joint ventures that do not have control over all of the functions of an autonomous economic entity are not notifiable. The obligation to notify falls on the undertakings forming the joint venture if the threshold tests (please refer to question 4 above) are met. Moreover, the dissolution of joint ventures can also create an obligation to notify.

Each of at least two parties to the concentration must generate turnover in Finland in excess of €20 million (please refer to question 4 above). No other nexus to Finland is required.

The notification must comply with the requirements of the Decree by the State Council on the Obligation to Notify a Concentration (1012/2011, Notification Decree), and include information on (among other matters):

• the parties to the transaction;
• the transaction and its impact on competition;
• affected markets;
• important customers; and
• suppliers and competitors.

The information required is rather detailed and also historical market share data must be submitted. Usually, it takes some two to three weeks to compile the information but it is advisable to start collecting the information even earlier, if possible.

The notification must comply with the requirements of the Notification The FCCA can grant waivers over the extent of information to be submitted in the notification if:

• the effects of the concentration on competition are likely to be minor; or
• the requested information is unnecessary to assess the concentration.

The FCCA has introduced a simplified notification form that reduces the amount of information to be submitted which can be used where the notifiable concentration only has minor effects in Finland. However, it may be used only in cases where the concentration has only minor effects in Finland. This is usually the case in the setting up of a full-function joint venture outside of Finland.

It is advisable to discuss the exact scope of the information required in connection with pre-notification negotiations with the FCCA. It is also advisable for the notifying party to submit a draft notification to the FCCA in connection with the preliminary discussions in relation to the concentration and notification.

There is no filing fee.

The notification must be submitted to the FCCA after entering into a binding acquisition agreement, acquiring control of an undertaking or announcing a public bid, and before the implementation of the concentration. However, the notification can also be submitted before the entry into a binding acquisition agreement, if it is sufficiently certain that the parties will enter into an agreement or arrangement giving rise to the notification obligation, but the FCCA does not have an obligation to investigate a non-public concentration (and the notification in such a case does not trigger the initial investigation period either).

The concentration cannot generally be implemented before it has been approved. The obligation to suspend does not prevent, in certain cases, the implementation of a public bid or the redemption of shares.

The parties can also apply to the FCCA or the Market Court to allow them to take actions to implement the concentration, on the basis of the potential harm suspending implementation may have on the concentration.

Where the FCCA has proposed the prohibition of a concentration or where its decision to clear the concentration has been appealed, the obligation to suspend lapses within one month from the proposal or appeal, unless the Market Court orders otherwise.

The FCCA must immediately examine a notification received. During an initial investigation period of 23 working days (Phase I), which starts to run from the submission of a complete notification, the FCCA can:

• decide that the concentration does not fall within the scope of the Competition Act;
• clear the concentration unconditionally or conditionally; or
• decide that further proceedings are required.

If the FCCA does not decide to start further proceedings within the time limit, the concentration is considered approved. Usually, the FCCA issues a written decision before the end of Phase 1.

If the FCCA decides to start further proceedings it must, within 69 working days (Phase II), either:

• clear the concentration unconditionally or conditionally; or
• ask the Market Court to prohibit the concentration (which the FCCA cannot do).

If the FCCA makes no decision the concentration is considered approved. The Market Court can extend the period of 69 working days with a maximum of 46 working days. Furthermore, where information requested by the FCCA has not been submitted in time or the information provided in inadequate (whether materially incomplete or erroneous), the FCCA may decide to extend the above processing time limits with any number of days corresponding to the delay in submitting the adequate information.

If the FCCA asks the Market Court to prohibit the concentration, it must issue its decision within three months of the FCCA's request. If the Market Court fails to issues its decision within the prescribed time period, the concentration is considered approved. The Market Court can also decide to:

• approve the concentration conditionally or unconditionally;
• prohibit the concentration or order the concentration to be dissolved; or
• refer the concentration back to the FCCA.

An undertaking that fails to comply with the obligation to notify can receive an administrative fine of up to 10% of its total annual turnover. The fine is imposed by the Market Court on the proposal of the FCCA. A fine is, however, not imposed if the failure is considered minor or a fine is otherwise unjustified to safeguard competition. This can be the case where the notification deadline has been only slightly exceeded, the notification obligation is subject to interpretation or the notification does not include all requested information.

Correspondingly, an undertaking that implements a concentration before the expiry of the waiting period can receive an administrative fine of up to 10% of its total annual turnover. A fine is, however, not imposed if the failure is minor or it is otherwise unjustified.

The Market Court can also, based on the FCCA's proposal, order a concentration that has been implemented in breach of the Competition Act to be dissolved, or attach conditions to its implementation.

Should the parties have submitted incorrect or misleading information that has had a material effect on the decision, the Market Court may, on the proposal of the FCCA, prohibit the concentration, order the concentration to be dissolved or impose conditions post-closing. The FCCA's proposal must be submitted to the parties within one year from the completion of the concentration or from the date when the decision became final.

The best way to protect a transaction from post-closing challenge is to submit complete and correct information to the FCCA in connection with the notification.

The FCCA is an authority operating under the Ministry of Economic Affairs and Employment. The FCCA provides a first instance review of the concentration. It can clear the concentration (either unconditionally or conditionally) or propose to the Market Court that it be prohibited. The Market Court is a special court hearing market law, competition and public procurement cases. The Market Court hears first appeals from decisions of the FCCA.

Pre-notification negotiations with the FCCA are generally conducted on a confidential basis. Once the notification is made, information on the parties to the concentration and the notification date is published on the FCCA's website (www.kkv.fi).

The general principle, however, under Finnish administrative law is publicity and, thus unless there are statutory grounds for confidentiality, the information is publicly available. The FCCA decides on the confidentiality in accordance with the Act on the Openness of Government Activities (621/1999, as amended). The Act on the Publicity of Administrative Court Proceedings (381/2007, as amended) governs how much of the procedure in the Market Court is publicly available. The parties involved have more extensive rights to information than third parties. The parties have access to all documents that may influence the determination of the matter concerned expect for business secrets.

The FCCA also gives the parties' main competitors, suppliers and customers an opportunity to comment on the concentration, which entails the releasing of a summary of the notified concentration to those parties. In addition, interested parties often request a public version of the notification submitted to the FCCA. The FCCA's final decision is published on its website, except for business secrets or other confidential information that it may exclude from the public version based on the notifying party’s request. Public versions of the Market Court's decisions are generally published on the Market Court's website and in a publicly available database (www.finlex.fi).

The substantive test is the SIEC-test (also applied by the European Commission), i.e. a concentration may be prohibited if it significantly impedes effective competition in the Finnish market, or a substantial part of the Finnish market, particularly as a result of the creation or strengthening of a dominant position.

There are no rules of thumb in the form of market shares or otherwise which may be used as guidance. Each case is subject to individual assessment based on its specific circumstances.

Pre-notification negotiations with the FCCA are advisable, as they usually facilitate the completion of the notification and contribute to expeditious processing by the FCCA.

The focus of investment control has shifted from the control of foreign investments per se to the control of investments in certain industries. Moreover, for example, credit institutions, investment service companies and insurance companies are subject to sector specific control (not elaborated on herein).

According to the Act on the Monitoring of Foreigners’ Corporate Acquisitions in Finland (172/2012 as amended), a foreigner or a foreign entity, which intends to acquire 1/10, 1/3 or 1/2 of the votes attaching to the shares or corresponding actual control in a Finnish undertaking operating in the defense or security industry, must apply for prior approval of the Ministry of Economic Affairs and Employment. Furthermore, the Act on the Monitoring of Foreigners’ Corporate Acquisitions in Finland governs acquisitions of Finnish undertakings that can be considered critical for upholding the vital functions within society.

However, the Act on the Monitoring of Foreigners’ Corporate Acquisitions is, generally (depending on the ownership of the investor), not applicable to investors resident in a country belonging to the European Union or in a country belonging to the European Free Trade Association. This exception does not, however, concern investments in companies operating in the Finnish defense and security industries. There are, furthermore, a few other exceptions where the acquirer does not need the approval of the Ministry of Economic Affairs and Employment.