D&I Competition and Life Sciences & Healthcare Alert 15 June 2017 (in English)

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Temporary Obligation to Notify Concentrations to the FCCA on Social and Health Care Sector

On 15 June 2017, the Council of State put forward amendments to the Competition Act concerning a wider obligation to notify concentrations to the Finnish Competition and Consumer Authority (the FCCA) for companies providing social and health care services. The amendment would have a fixed term and be implemented by adding a temporary provision, Article 22(a), to the Competition Act. The proposal relates to the reform of the social and health care legislation and is processed in Parliament in connection with other legislation relating to the reform.

According to the government's proposal, the aim of the reform is to ensure the functioning of the market and the customers' freedom of choice by limiting the concentration of the social and health care sector before the social and health care reform becomes effective.

According to the proposed Article, the merger control rules in the Competition Act would be applicable to concentrations – regardless of the turnover thresholds in the Competition Act normally determining the notification obligation – where at least one party to the concentration provides its customers in Finland with social or health care services, or laboratory or imaging services relating to health care services. The notification obligation would therefore arise if only one of the parties to the concentration operates on the social and health care sector as defined above. This means that different vertical and conglomerate concentrations where only one of the parties operates in the field of social and health care services would as a rule fall within the scope of application of the new notification obligation. According to the government's proposal, the aim of the proposal is not to prohibit a significant number of concentrations but to ensure access to information and the possibility to intervene in those probably relatively few cases where the effects on competition would be considered significant.

There are four exceptions to the scope of application of the proposed Article.

  • First, the proposed widened notification obligation would not apply to concentrations between self-employed persons.
  • Second, the provision would not apply to concentrations between undertakings (e.g. a company of a single doctor) selling their services within and in the name of the same company or group of companies providing social and health care services (e.g. a big medical center).
  • Third, the notification obligation would not apply to concentrations between two parties where one of them is an undertaking selling the services of at most five social and health care professionals.
  • Fourth, the notification obligation would not apply to concentrations where the target, the merging undertaking/foundation or the joint venture to be established does not operate in the market for social and health care services, or in the market for laboratory or imaging services relating to the health care services, or in the markets closely related to these markets, in Finland.

The last exception mentioned above would exclude from the scope of application e.g. investments by private equity firms in undertakings in other sectors. The proposal also contains several specifications regarding the scope of application; for example, so-called employee leasing companies, i.e. companies that only provide personnel for social and health care services, would fall outside the scope of the proposed Article.

The proposed widening of the scope of application of the merger control rules would only concern the notification obligation. The proposal would not change the conditions for interfering with or prohibiting concentrations, and thus the conditions for prohibiting or imposing conditions on a concentration would still require that the concentration may significantly impede effective competition in the Finnish markets or a substantial part thereof, in particular as a result of the creation or strengthening of a dominant position (the so-called SIEC test, Significant Impediment to Effective Competition).

The proposal would not affect the so-called one-stop shop principle according to which the merger control rules of the Competition Act are not applied if the concentration falls within the scope of the EU Merger Regulation and is therefore as a rule handled by the European Commission.

The proposal also includes the introduction of a simpler notification form. This aims at decreasing the administrative burden of the new rules. At the same time, however, the time period for the FCCA to review the case in Phase I of the proceeding would be increased from one month to 45 working days. Therefore, the proposed provision would mean that in practice the time period would increase by approximately four weeks from the present state. The underlying idea is that in this way the FCCA would be in a better position to ask for more specific information of the concentration if need be. In its press release on 15 June 2017, the Ministry of Economic Affairs and Employment estimated that in most cases the additional information is not needed and thus the review would not take all of the time period.

It is important to note that the proposed time limit of 45 working days would also apply to concentrations where the merger control turnover thresholds in the Competition Act are exceeded, provided that at least one of the parties to the concentration provides social or health care services, or laboratory or imaging services relating to health care services.

In addition, the proposed Article contains a longer time period compared to the current one-month period regarding the prohibition to implement a concentration: The prohibition to implement a concentration will expire unless the Market Court orders otherwise within 45 working days of the FCCA's proposal to prohibit the concentration.

The proposed Article would be applicable to concentrations concluded on or after the date the Article entered into force, but, however, before 1 January 2019. A concentration is concluded when control, the entire business operations or a part thereof is acquired in accordance with Article 23(1) of the Competition Act, or a public bid referred to in Chapter 6, Article 3 of the Securities Market Act (495/1989) is announced, or a merger has been resolved upon in the undertakings that are parties to the merger, or it has been decided to establish a joint venture in a constitutive meeting. The proposed Article is intended to enter into force as soon as possible in fall 2017. In the government's proposal, it is estimated that remarkably many merger control cases will be brought to the FCCA in 2018.

The government's proposal (HE 76/2017 vp) is available on the website of the Finnish Parliament (in Finnish).

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