The FCCA proposes that nearly EUR 1,9 million in penalty payments be imposed on six companies operating in Turku subregion public transport services and their joint venture for severe restrictions on competition

Based on investigations of the Finnish Competition and Consumer Authority (FCCA), six companies operating in Turku subregion public transport services had, through their joint ventures, submitted three joint tenders that were in breach of the Competition Act in the competitive tendering process for public transport services in this area (Föli). The joint tenders eliminated competition between the companies, which was a serious violation of the Competition Act.

On 27 September 2021, FCCA proposed that the Market Court impose penalties totalling EUR 1 894 844 on Jalon Liikenne Oy, Lehtisen Linja Oy, Linjaliikenne Muurinen Oy, Linjaliikenne Nyholm Oy, Savonlinja Oy, Turun Citybus Oy and the joint venture owned by some of these companies, LS-Liikennelinjat Oy. See the end of this press release for the penalty payments proposed for each company.

The companies had submitted joint tenders in breach of the Competition Act in three tendering processes for Föli public transport services in 2013, 2014 and 2016. Föli operates local and subregional public transport services in the areas of Turku, Kaarina, Raisio, Naantali, Lieto and Rusko municipalities. The annual value of these services amounts to around EUR 50 million.

Through their cooperation, the companies have eliminated all competition between them in these tendering processes. In practice, there was no price competition between the companies participating in the joint tender in these tendering processes, and they divided the operation of the transport services for which a contract was awarded to them among themselves following a pre-agreed plan. The FCCA finds that, assessed as a whole, this involved serious restrictions on competition.

“The basic premise always is that all companies make independent decisions on their competitive behaviour in the market. This has not been the case here, and the companies’ behaviour has had characteristics of a cartel”, explains Valtteri Virtanen, Director at FCCA.

The violations took place during a period in which the public transport market was being opened up for competition. As a result, it is likely that the contracting entity has received fewer competing tenders in the tendering processes in question than it would otherwise have done. Lack of competition in competitive tendering harms the contracting entity and end customers, as this means that the companies have less incentive to offer lower prices and better products and service.

“While the companies have claimed that this cooperation would in reality have benefited the contracting entity and consumers, they have been unable to provide evidence of any benefits gained or passed on to consumers”, notes Virtanen.

A joint tender agreed between competitors is prohibited as a basic premise

When assessing if joint tenders are compliant with the Competition Act, the essential question is whether the companies compete with each other, in other words whether they could submit tenders independently.

“Each company intending to submit a tender must itself assess if it has sufficient resources for submitting independently a full or partial tender requested in the call for tenders. In case of companies competing against each other that could have submitted their tenders independently, the joint tender is highly likely to have reduced the number of potential tenders and thus restricted competition. Consequently, the essential issue is not if the company is willing to submit an independent tender, but rather if it is able to do so”, says Antti Norkela, Head of Cartel Detection at FCCA.

In some situations, however, a joint tender that restricts competition may produce efficiency gains that outweigh the negative impacts of restriction on competition and that also benefit the contracting entity. In these situations, a joint tender that otherwise breaches the Competition Act may be acceptable. The burden of proof regarding the efficiency gains rests with the company making appeal to such gains.

Further information on the subject:
Read the blog Ajankohtaista kilpailusta (Current competition issues) for more information about when joint tenders may be in breach of law and when not (in Finnish).

Additional information:
Director Valtteri Virtanen, tel. +358 29 505 3621
Head of Research Samuli Muotka, tel. +358 29 505 3680
Senior Specialist Vilhelmiina Ihamäki, tel. +358 29 505 3811
Antti Norkela, Head of Cartel Detection, tel. +358 29 505 3345 (more information about joint tenders)
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