The Finnish leniency system - experiences and challenges Estonian Competition Authority’s 15th Anniversary Conference Tallinn, 11 November 2008 Mika Hermas

The leniency framework - main characteristics Only administrative sanctions for infringements only against undertakings, only pecuniary sanctions Division of powers FCA: proposes fines and reductions, grants immunity Market Court: decides on fines and reductions Leniency system: Immunity to 1st to reveal a cartel only available before FCA initiated an investigation Reduction of fines subject to value-added available for cartels and other infringements The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

Other leniency-related considerations Amount of fines in serious infringements intransparent – only upper limit stipulated commentators: level also too low so far – insufficient deterrent effect Possibility for damages secured by Competition Act right limited to undertakings single damages decided in separate proceedings in a civil court Criminal charges in blatant infringements cannot be ruled out bid-rigging = possibly fraud or serious fraud The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

The FCA’s experiences on leniency to-date Experience relatively limited No Market Court decisions in leniency cases so far Less than ten applications for immunity since 5/2004 Two cases currently in market Court wood procurement, car spare parts One application for reduction of fines wood procurement A number of approaches on a hypothetical basis potential applicant mirroring availability of immunity, procedure, and pros and cons of applying cost/benefit calculation The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

The FCA’s experiences (continued) A number of immunity applications have not led to final decision, or have been rejected Conditional immunity granted but insufficient proof of infringement found after subsequent investigations Insufficient/imprecise information to fulfil conditional immunity Not a cartel at all – application rejected Procedure lapsed due to no formal application after anonymous first contact The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008 Current challenges Commentators on immunity: expected amount of fines unclear as not stipulated by law or decree at the current (low) level of fines, the risk of damages and associated bad-will act as a disincentive potential of criminal sanctions on individuals may act as further disincentive (?) this argument is rare but gaining ground among advisors personal ties in a small society also an issue perceived peer pressure may prevent blowing the whistle The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

Current challenges (continued) Commentators on reductions of fines: The current rules do not provide for transparent percentages of reduction (nor amount of fines) Division of powers between Market Court and FCA creates uncertainty The FCA’s proposal regarding the amount of fines and/or reduction thereof is not binding upon the Market Court The current rules only reward provision of value-added information but not explicitly speed nor rank (ie. the time and order of coming forward with information) may lead to investigative inefficiencies as it may pay off to wait until the FCA issues its draft decision (the ”S.O.”) The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

Conclusions and lessons learned Immunity system technically workable but may require more explicit incentives The level of expected fines are key more (and solid) cases to the Market Court policy change? The availability of immunity also post-inspection would be beneficial likely to increase the number of cartels detected/fined would align the Finnish system with the Commission’s Reduction system is challenging requires more transparency and legal certainty The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008 The way forward Work is underway to amend the Competition Act a working group chaired by the Ministry of Employment and the Economy mandate includes revisions as regards the transparency and the amount of fines aligning the leniency rules with those of the Commission and the ECN model programme Amended Act expected in force 2009/2010 Meanwhile, the FCA continues its quest to fight cartels business as usual! The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008

THANK YOU FOR YOUR ATTENTION! The Finnish leniency system, Mika Hermas, Tallinn 11.11.2008