Increasingly smaller acquisitions are being investigated by the Finnish Competition and Consumer Authority (FCCA)
Corporations have to prepare for co-operation with the FCCA with increasingly smaller acquisitions. This will lead to slower M&A processes and increasing costs, says attorney Lotta Uusitalo.
The amendment of the Competition Act entered into force on 1 January 2023. A concentration has to be notified to the FCCA in case the combined turnover of the parties in Finland exceeds 100 million euros and at least two of the parties each have a turnover of more than 10 million euros in Finland.
The lowering of the notification thresholds is significant: Previously, an acquisition had to be notified to the FCCA if the parties’ combined global turnover exceeded 350 million euros and at least two of the parties each had a turnover of more than 20 million euros in Finland.
In the FCCA’s study, the amendment was justified on the grounds that the turnover thresholds were too high for Finland’s small markets.
“Due to high turnover thresholds, the FCCA did not have a chance to intervene in an acquisition that fell below the thresholds even if it would lead to a monopoly”, the study states.
Companies will have to be prepared for the notification process
Companies will have to acknowledge in an early stage whether a transaction will be investigated by the FCCA. If so, the work must be resourced correctly. Filing a notification to the FCCA may take months of work.
“The FCCA expects the filed notifications to be perfect, they will not do the paperwork for the companies”, says Lotta Uusitalo, attorney specialised in competition law.
The large workload is due to the large amount of data that needs to be collected for the authority. Before gathering data, one must carefully ascertain what information is required by the authority. If one begins gathering data without carefully thinking of what is required, one might end up doing weeks of unnecessary work that will only have to be started over once the real need for data becomes clear.
This is a big task for companies with a turnover of just over 10 million euros, one that inevitably requires external consulting. Of course, there are simple acquisitions where the information requirements are not that high. The evaluation is case-specific.
“A couple of years ago, the FCCA taught the companies to do their notifications with care. They sent back a few incomplete notifications asking for the information to be completed. This will lead to a fresh start of the deadline”, Uusitalo emphasizes.
The markets must be evaluated realistically
The approval of the acquisition is influenced among others by how the authority defines the company’s markets. The company might see itself operating in the Baltic Sea market. The authority, however, might have the view that the company’s market share in the Tampere region would become too large.
“A company has to understand that it cannot embellish the size of the markets. Authorities test the markets: They ask the market participants, competitors and clients”, says Uusitalo.
Companies should also be prepared for the possibility that the Competition Authority may demand the company to divest some of its activities before the actual transaction can be approved. Therefore, it pays off to evaluate the markets in a way that most businesses are not used to. In some unclear cases companies can consult economists to evaluate the markets.
“Consequently, it is important to think about how possible competition law problems would be solved in case the FCCA requires action.” says Uusitalo.
It is estimated that the new legislation means that the FCCA investigates 80 acquisitions a year, when the number so far has been 30-40 a year.