The amended Competition Act takes a strong stance on associations of undertakings
Fines for breaching competition rules will increase as the amended competition act tightens its grip on association of undertakings. In addition, members of the association of undertakings might face fines. Amongst others, when nominated to the board of any association, it is worth questioning on policies of the association from a competition law perspective, states Lotta Uusitalo who is specialized in competition matters.
The recent amendment to the Competition Act (24/06/2021) tightens its grip especially on association of undertakings. What types of associations does the amended Act concern?
”In the front line are trade associations, which have in fact been the subject of much public discussion. In addition, the act can concern a group formed of various limited liability companies and also less structured joint ventures. For example, this could be a commonly owned company with minority owners and where the jointly-owned company does not belong to any group of companies.”
What are the most notable practical changes, which the new Act brings about as concerns such association of undertakings?
”The fines following from breaching the Act can grow exponentially. From now on, the fine can be calculated on the basis of the aggregate turnover of the member undertakings, whereas until now the fine has been calculated only on the basis of the turnover of the association.
For example, when the fines for a trade association have been calculated on the basis of membership fees, the fines have inevitably been low. In the future, when the fines are calculated on the basis of the turnovers of the members, in addition to the association’s turnover from membership fees, the fines can easily grow a hundredfold.
Another major change is that from now on, liability for the fines is also incurred by the members in addition to the association itself. For example, if a trade association cannot pay the fines, the competition authority may claim the fines from a member of the board of the association. If such members are unable to pay, liability may be incurred by any member of the association.”
Can this happen even if the member undertaking was not aware of the breach?
”Yes. The burden of proof is reversed on the member undertakings. In general, the Act operates on the presumption of innocence whereby a prosecutor must prove the breach. However, the new Competition Act requires the member undertaking of the association to prove its unawareness of any illegal decisions or that it actively renounced the illegal decision and did not act in accordance with it.”
Does this not reduce the willingness of undertakings to partake in the activity of such associations?
”Certainly. Undertakings already undertake assessments on what memberships in what type of association it may have in the future. For anyone wondering about joining as a member of board of any association, it is worth questioning whether the organization in question has audited its policies, trained its members in competition matters and provided instructions on compliance with competition law.”
Does the Competition Act contain any provisions on what authorities must factor in as concerns the member’s liability to pay the fines?
”Yes. However, these provisions are quite open to interpretation. The authorities must consider the requirement of equality and proportionality. The fine will not be levied, among other things, in a situation which would lead to failing of the firm. The Act also contains criteria for a situation where EU competition law has not been breached and the infringement is therefore based solely on a violation of national law. In such a situation, the amount imposed on the member shall be affected by the fact whether the member has contributed to the breach of the association and also the duration which the member has been represented in the decision-making body of the association.”
Many may have already grasped quite well that for example prices and pricing should not be discussed in trade associations. What other aspects apart from prices and pricing can cause problems in terms of competition law?
”The exchange of information can be risky. Such problematic areas may be member surveys and the publication of member surveys as well as cooperating to collect statistics. It is crucial to audit communication and the activity on communications platforms and to provide clear instructions on prohibited content on these media. The competition authority may take into account that the policies have been audited and amended as appropriate.”
The competition authority may seek structural measures. What does this mean in practice?
”In principle, in competition infringements the competition authority may, for example, require an undertaking to sell part of its activities. This is a significant amendment, but in practice it will probably be an extremely rare action. The EU Commission has been able to impose such arrangements since 2004, but it has not yet exercised that right. However, this kind of competence has been made in the law so that it can also be exercised.”
The competition authority’s rights to access information are expanded. In what way?
”The competition authority has the right to obtain more information. Anyone who may be in possession of relevant information may be invited to a hearing – with the exception of lawyers, of course! Likewise, the competition authority’s inspection rights are strengthened. Heretofore, the competition authority has had the right to inspect homes of trader’s management if the authority suspected a serious restriction of competition. In the future this is no longer a requirement. The inspection may be carried out if the authority suspects that business records of the company are kept on the premises.”
Fines can be imposed on a larger scale. In what way?
”Failure to provide information may be subject to a fine in the future. This has not been possible so far. A fine may also be imposed for a procedural breach. For example, breaches during an inspection or a hearing may be subject to a fine.”