A new provision entering into force on 1 January 2020 has been added to the Competition Act. According to this provision public entities must keep separate accounts of the economic activity they engage in a competitive market. The provision is intended to prevent problems related to competitive neutrality. It will also enhance the supervision of competitive neutrality as the Finnish Competition and Consumer Authority (FCCA) shall be provided with reliable data based on accounting and included in auditing.
Key aspects of the accounting separation obligation:
- Municipalities, joint municipal authorities, the state or entities under their control that engage in economic activity in a competitive market must keep separate accounts on such activity.
- Revenues and costs of such separated activity are to be shown as a profit and loss statement specific to a given accounting period, which should be based on the accounting carried out by the public entity.
- The profit and loss statement and its supplementary information are public and must be presented in the notes to the financial statements in order to facilitate the interpretation and inspection of the information.
- The accounting separation obligation does not apply to small-scale economic activity. The provision shall not apply in cases where the turnover of a public entity engaged in economic activity in a competitive market is less than EUR 40,000 per year.
- However, the exclusion of small-scale economic activity from the purview of the accounting separation obligation does not mean that activity this small-scale could not have negative impact on competition in a market. FCCA market impact analysis is always case-specific, and if necessary, it may also intervene in competition distortions caused by economic activity below the threshold.
- The threshold for accounting separation under the new provision in the Competition Act is lower than the threshold for preserving a status as an in-house entity in the Procurement Act. Even though municipal procurements from incorporated in-house entity fall outside the purview of the Procurement Act, the in-house entity shall nevertheless separate its accounting if the turnover in the economic activities it is engaging in a competitive market is EUR 40,000 per year or higher.
- The provision on the accounting separation obligation does not apply to economic activity subject to the derogations from competitive neutrality regulations in the Competition Act.
Further reading:
Government Proposal on amendment of the Competition Act 68/2018 (in Finnish)
Further information:
Head of Research Mia Salonen tel. +358 (0)29 505 3007
Senior Adviser Peter Karlsson tel. +358 (0)29 505 3064
forename.surname@kkv.fi