Finnish Competition Authority imposes conditions on Forcit Oy to eliminate suspected abuse of dominant position
- Finland
- 03/11/2010
- Roschier, Attorneys Ltd. - Finland
On 15 February 2010 the Finnish Competition Authority (“FCA”) imposed binding commitments on Oy Forcit Ab (“Forcit”) under Section 13(3) of the Finnish Competition Act in order to eliminate Forcit’s suspected abuse of its dominant position on the market for civil explosives in Finland.
The FCA initiated its investigation after Alkupanos Oy lodged a complaint claiming that Forcit applied, e.g., exclusive purchasing agreements and abusive rebates. The FCA found that Forcit holds a very strong position in the civil explosives market in Finland. It was noted that there are no significant imports of civil explosives into Finland, which is due to several factors limiting such imports, e.g., public authority regulations affecting the transportation and storage of civil explosives, the geographic location of Finland and the related transportation costs, as well as the availability of supply of civil explosives based on significant domestic production. In addition, as a result of safety distance requirements concerning storage of civil explosives, it is difficult to establish new storage depots in Southern Finland, which hinders the entry of new operators into the market. The FCA found that Forcit, being currently the most significant producer and importer of civil explosives in Finland, has a strong market position and that a large part of the civil explosives used in Finland are either produced or imported by Forcit.
In its decision, the FCA emphasized that pricing and other customer policies of a company in a dominant position must be consistent, transparent and foreseeable. The FCA made reference to the decision of the European Commission in the Michelin case, where it was held that uncertainty of a product’s final net price due to pricing and rebate schemes is not acceptable when the company causing the uncertainty is dominant. Moreover, the FCA stressed the importance of the principle of transparency, the aim of which is to secure an objective and equal pricing policy of dominant companies.
When examining Forcit’s operations on the market for civil explosives, the FCA found that Forcit applies a rebate scheme under which it grants volume rebates on the basis of purchases during a six month reference period. The percentages for the volume rebates are product group specific and are granted from the purchase price of the corresponding product during the next reference period. The FCA considered that such a rebate scheme may constitute a prohibited loyalty rebate as defined under national and EU competition law. The FCA further stated that the rebate scheme and rebate percentages in question were non-transparent and unforeseeable, which may enable a dominant company to discriminate on prices by, e.g., granting discretionary rebates which are not based on cost savings. Considering Forcit’s strong market position and the mentioned limitations on the imports of civil explosives, the rebate scheme of Forcit could have the effect of binding customers and hindering competitors from entering the market.
In order to address the FCA’s concerns, Forcit committed to abandon the rebate scheme under which the purchases made during a certain period determine the amount of the volume rebate granted from the purchases made during the following period. Further, Forcit committed to apply transparency and consistency in all its rebate schemes. The FCA considered these commitments sufficient and therefore made the commitments binding on Forcit under Section 13(3) of the Finnish Competition Act.
In conclusion it should be noted that also a company in a dominant position has the right to meet competition and compete on prices, as well as offer rebates on its products. However, the rebate practices of a dominant company might harm competition if they have the effect of binding customers and artificially excluding competitors from entering the market. As part of effective economic competition, competing companies must have the possibility to enter the market in question. Moreover, customers must be able to enjoy the freedom to choose between available product and service alternatives according to their own preferences.
