In a free market economy, effective competition ensures that society's resources are allocated efficiently, allowing citizens to enjoy its benefits. Competition encourages companies to intensify their activities and offer products that meet customer expectations. However, competition is not always effective, for example, due to structural or legal barriers to market entry. It is also possible that making agreements with competitors is too tempting. As a result, competition may be restricted, and the incentive for companies to produce goods and services in a customer-oriented and efficient manner decreases. Competition law is a tool to ensure the efficient allocation of society's resources.
There are situations in which almost everyone’s sense of justice agrees that the activities of a company are prohibited. Such practices include price-fixing cartels, in which competitors agree on product prices. At the opposite extreme, there may be a coffee break of an official and legal meeting of a trade association, during which a representative of the company hears a competitor revealing their future market behaviour. If a company does not behave according to the requirements set forth in the legal praxis in the latter situation, it is likely infringing competition laws.
At worst, the consequences could be
- Competition law fines, which could amount up to 10% of the company's global turnover,
- Private law damages,
- Exclusion from public procurement,
- Lower scores in sustainability assessments,
- Reputational damage, or
- Decrease in revenue.
Therefore, it is crucial for a company to ensure the training of its personnel in competition law and to take immediate action if there are reasons to suspect any anticompetitive behaviour.
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Competition compliance
Competition compliance is a part of economic responsibility and risk management that companies and organisations bear. It is important to be aware of both the legal requirements and the expectations of customers and other stakeholders regarding the company’s responsibility, as well as the risks to the organisations caused by competition law infringements. As a part of risk management, the probability of the risks should be assessed and minimised.
Additionally, competition law compliance is part of good governance and is among the minimum requirements of the EU taxonomy for a company to classify its investments as environmentally sustainable. Therefore, every financially responsible entity should have a systematic competition law compliance program aimed at minimising competition law risks.
We help our clients create a competition compliance program and a process by which the risks related to competition law can be identified in advance and significantly decreased. Together with our clients, we build a program and a process that explicitly take the client’s level of risk and the size of the organization into consideration. In some cases, mere in-house training every few years is enough, but for a larger company, the sustainability requirements of the customers alone demand a systematic program that the company is able to verify in sustainability audits, starting from the policy level.
- Cartels
- Information Exchange
- Abuse of Dominant Market Position
- Distribution Agreements
Cartels
A cartel generally refers to prohibited cooperation or coordination between two or more competing companies. Such activities are prohibited even if not explicitly agreed upon. Cartels are the most serious competition restraints, causing economic harm to customers, markets, and society. The most typical cartels involve price-fixing and bid-rigging. We provide assistance with all matters related to prohibited cooperation between competitors. We offer advice both to prevent violations and to plan strategies for suspected violation situations.
Information Exchange
Information exchange between competing companies is always legally risky, as it can easily lead to concerted practices that are considered cartel behaviour. The competition law risks associated with information exchange can easily materialise, for example, in negotiations between competitors in corporate acquisitions and due diligence processes. In addition to providing advice on information exchange as part of other processes, we assist in planning strategies for information exchange in permissible cooperation arrangements between competitors. Additionally, we offer training on information exchange rules.
Abuse of Dominant Market Position
A company operating in a dominant market position has a special competition law-based obligation to refrain from certain activities in the market. Prohibited actions include, for example, unfair pricing, unequal treatment of contracting parties, and preventing competitors from entering the market. When assessing abuse of a dominant market position, a comprehensive approach must be emphasised. It is essential to consider the effects of the activities of a company with a dominant market position on effective competition. We provide advice on all compliance issues related to dominant market position and help identify specific obligations and competition law risks associated with it.
Distribution Agreements
Supply and distribution agreements can, in certain situations, lead to restrictions on competition, for example, by hindering the entry of new players into the market. Such vertical agreements that lead to significant restrictions on competition are prohibited. However, vertical agreements may, in some cases, benefit from protection under the relevant block exemption regulation and be entirely permissible. Our services include evaluating companies' vertical agreements, developing best practices, and ensuring compliance.
Competition authorities' proceedings
Competition authorities’ proceedings pose a risk to the reputation and resources of the company. Disclosure of a company's potential competition infringement undermines customer confidence and commitment, decreases brand value, and negatively affects corporate responsibility assessments.
Processes that last several years can:
- Freeze the development of the company, as the focus of the management and the board partly shifts to considering past events,
- Use economical resources which would have otherwise been utilized in developing new business, and
- Prevent companies from participating in public procurement tendering procedures.
We assist companies under investigations as well as other companies involved in the proceedings throughout the entire process. It is important that a client has a realistic understanding of the process, different scenarios that may arise, and the economic impacts of the processes.
Merger control
Complex transactions require the coordination of experts in a number of different areas to succeed. We assist companies that grow through mergers, joint ventures, and restructuring. With regard to competition law, we take care of the entire process, from assessing the competitive risks of potential transactions to notifying a concentration and with possible commitment negotiations with competition authorities.
We also assist in international business transactions, as PwC already has competition law services in more than 130 countries. We can efficiently assess the notification requirements of business transactions and, if necessary, notify local authorities of the business transaction through PwC's global Antitrust Network.
Growing scrutiny and tightening regulations particularly affect cross-border Foreign Direct Investments (FDI) made in sectors critical to the national interests of the European Union and its member states. In Finland, a foreign owner must seek prior confirmation from the Ministry of Economic Affairs and Employment for an acquisition if the target company operates in the defence industry or provides products or services vital to societal security for Finnish authorities in their statutory duties.
The foreign owner may also make a voluntary notification if, based on the target's sector, business, or commitments, it is considered critical for safeguarding vital societal functions.
As part of our M&A advisory services, we assess whether it is necessary to seek confirmation from the Ministry of Economic Affairs and Employment for the acquisition or make a voluntary notification, and we assist in the notification and FDI process. If the acquisition requires approval from the Ministry of Economic Affairs and Employment, it is important to be aware that the processing of the notification may take several months. This often comes as a surprise, especially if the acquisition already has a tight schedule and the matter has not been assessed well in advance.
Public procurement
We help both the contracting authorities that organise competitive tenders and companies participating in the tenders to create the best conditions for a successful competitive tender.
We assist with:
- Stakeholder and procurement unit assessments,
- Timely completion of the entire procurement process, including Drafting, editing, correcting, and reviewing tender documents,
- Drafting procurement decisions, and
- Writing opinions to the Market Court in procurement appeals.
State aid
Rules on State aid are one of the fastest-evolving areas of law worldwide. In certain circumstances, State aid may distort competition and is prohibited. State aid may also have far-reaching consequences for governments and companies. This impact has become even more apparent during COVID-19 pandemic as State aid programs have been extended to moderate the economic effects of the pandemic.
We assist our clients in compliance with State aid legislation, for example, in matters related to partnership between the public and private sector and in applying for subsidies.
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