Stricter rules proposed for daily consumer goods retail sector - International Law Office

Background
Sector-specific threshold for dominance
Potential abuses
Comment


The Ministry of Employment and the Economy has published for comment a draft bill that would amend the Competition Act. The bill would introduce a sector-specific threshold for dominance in the consumer goods retail market, which would directly affect the two main operators in that sector.

Background

The Finnish government has a programme for promoting healthy competition in the domestic market. The Competition Authority conducted a sector inquiry into the consumer goods retail sector, which it published at the beginning of 2012. This brought to light several practices that some suppliers claim to be unreasonable and exclusionary. The issues discussed included, for instance, gratuitous marketing allowances, repurchase requirements for unsold products and questions around private labels. The study concluded that the highlighted practices were not clearly prohibited, but fell within a grey area in competition law.

Sector-specific threshold for dominance in the consumer goods retail sector

As part of the government's programme to promote competition, on September 20 the Ministry of Employment and the Economy published for comments a draft government bill designed to amend the Competition Act. It is expected that a bill will be submitted to Parliament before the end of this year.

The draft bill proposes adding a new section to the Competition Act, according to which an operator in the Finnish consumer goods retail sector will be said to hold a dominant market position if its market share exceeds 30%. The amendment is designed to improve the Competition Authority's ability to monitor and, if necessary, intervene in the daily consumer goods retail market in Finland. The draft notes that this market is very concentrated, since the two largest vertically integrated operators together hold approximately 80% of the market.

The amendment includes no structural elements. It means that above a 30% national market share, the provisions prohibiting the abuse of dominant position would apply automatically. The proposal does not aim to change the nature of practices that are generally considered abusive.

The amendment targets the 'daily consumer goods' purchase and retail markets. Such goods include food, beverages, cigarettes, techno-chemical products, household paper products, newspapers and magazines, and cosmetics. The retail market consists of self-service shops that sell daily consumer goods to consumers.

Potential abuses

The draft bill discusses several potentially abusive practices that might be relevant in the sector. These relate to price discrimination, predatory bidding, rebates, exclusive sales or purchase agreements, tying and unreasonable conditions of trade.

Comment
In contrast to the laws in several other EU member states, the Competition Act includes no legal presumption with regard to dominance. Finland has also generally been reluctant to include sector-specific rules in its competition laws. Since Finland is a small country, there are few large players in many sectors. The current proposal is therefore likely to raise concerns that the same presumption will later expand to other sectors.

The draft bill confirms that the threshold of 30% has been chosen because, given the current market shares, the largest consumer goods retail groups – K Group and S Group – would need to take into consideration the rules concerning abuse of dominant market position in their activities.

The amendment specifically states that it is not intended to change the application of competition rules to individual local retailers, even if their local market share exceeds 30%, unless their behaviour is a result of implementing group policies or guidance.

It is hoped that the proposal will make it easier for smaller suppliers to enter the distribution chain. So far, public debate was focused on whether the proposed amendment will have a positive effect on consumer prices.

For further information on this topic please contact Hanna Laurila at Dittmar & Indrenius by telephone (+358 9 68 1700), fax (+358 9 65 2406) or email (hanna.laurila@dittmar.fi).