The Market Court held, in accordance with the proposal of the Finnish Competition and Consumer Authority, that the Vantaa and Kerava Wellbeing Services County did not have the control over Sarastia required by the Act on Public Procurement and Concession Contracts. Therefore, services could not be procured from Sarastia without competitive tendering on the basis of status as an in-house entity. The Market Court ordered the procurement to end 12 months after the Market Court decision became final.
In 2022, the wellbeing services county purchased human resources services and related systems directly from Sarastia. The acquisition, worth approximately EUR 9.3 million, was made as procurement from an in-house entity without a competitive tender. The wellbeing services county owns 0.04% of Sarastia’s share capital.
Under the Act on Public Procurement and Concession Contracts, contracting entities are not required to put their purchases from in-house entities out to tender. For a company to be an in-house entity within the meaning of the Act on Public Procurement and Concession Contracts, the contracting entity must exercise control over it, alone or jointly with other contracting entities.
In spring 2023, the FCCA took the direct award by the wellbeing services county to the Market Court because, according to the authority’s assessment, the decision-making structures created in Sarastia did not meet the conditions for control under the Act on Public Procurement and Concession Contracts.
In its ruling, the Market Court found that the wellbeing services county did not exercise effective control over Sarastia alone or even jointly with the other owners. According to the Market Court’s assessment, the possibility for the wellbeing services county to influence Sarastia’s activities through the shareholding or through any of Sarastia’s governing bodies was very limited.
“We are pleased with the decision of the Market Court. The solution and its comprehensive reasoning clarify the interpretation of the status of an in-house entity. Formal control does not meet the conditions set out in the Act on Public Procurement and Concession Contracts. With Sarastia’s current ownership structure and governance model, minority shareholders such as the Vantaa and Kerava Wellbeing Service County cannot actually exercise control over the company. We hope that the solution will also be taken into account more widely by contracting entities, as misinterpretation of the regulation has been a common phenomenon in recent years,” says specialist Heikki Puttonen.
In its decision, the Market Court also assessed whether the direct award could have been made on the grounds of extreme urgency. The Market Court found that there was as an unforeseeable reason for the award of the contract and the circumstances were beyond the control of the contracting entity, but that the contracting entity acted unlawfully by awarding the contracts for an indefinite period, i.e. longer than necessary.
In addition to the termination of the contract, the FCCA proposed a penalty payment of EUR 1,000 to the wellbeing services county, which was imposed by the Market Court. In proposing the amount of the penalty, the FCCA noted that several contracting entities were uncertain how to interpret the conditions for the status of in-house entity and the criterion of control.
The decision by the Market Court is not yet legally binding.