The Finnish Competition and Consumer Authority (FCCA) is actively advocating for the implementation of below-threshold merger control to address growing concerns over market concentration in Finland. Currently, a concentration must be notified to the competition authorities if the combined turnover of the parties from Finland exceeds EUR 100 million, and if each of at least two of the parties involved have a turnover from Finland exceeding EUR 10 million.

Understanding below-threshold merger control

A below-threshold merger refers to a competition authority's right to require notification even if the turnover thresholds are not exceeded. This approach has already been implemented in Sweden, Norway, Denmark, and Iceland. Implementing such a tool in Finland would empower the FCCA to investigate and intervene in acquisitions that currently fall below the set turnover thresholds for merger review and are deemed problematic.
 

FCCA's focus: small animal veterinary services market

The issue was brought to light by the FCCA through a report focusing on the small animal veterinary services market and the impact of market concentration on service prices. According to the FCCA, household spending on veterinary and other pet services has doubled over the past 10 years. A key driver of the market’s consolidation, as identified by the FCCA, has been the “buy-and-build” strategy typically employed by private equity firms. In this strategy, investors initially acquire a single platform company and subsequently expand its size and market power by acquiring smaller clinics, which do not meet the jurisdictional threshold for the obligation to notify, across Finland.

The FCCA notes that the Finnish market is dominated by two private equity-owned chains. For example, one veterinarian-led chain, originally a smaller company with €8 million in revenue in 2012, grew through acquisitions to reach €114.7 million in revenue by 2023, capturing up to 50% of the national veterinary market. Another major veterinarian-led chain has followed a similar acquisition model, capturing around 10-20% of the market. Together, these two companies now dominate the Finnish veterinary services market, particularly in the capital area.
 

The imperative of below-threshold review powers

The FCCA states that, without below-threshold review powers, it cannot oversee or intervene in all mergers and acquisitions that may lead to significant market concentration or otherwise impede effective competition. Introducing below-threshold merger control in Finland would enable the FCCA to better monitor and address concentration issues, not only in the veterinary services market but also in other sectors like digital services and private healthcare.
 

A look ahead: potential regulatory changes

Although no legislative proposals on below-threshold mergers have been issued yet, and the FCCA's last attempt to implement such control was three years ago, we anticipate that action could be taken in the near future. In 2021, the FCCA's proposal to adopt below-threshold merger control faced resistance from business and investment groups concerned about regulatory uncertainty, and was subsequently dropped. However, the FCCA believes that clear guidelines could address these concerns. Below-threshold merger control is already widely implemented in other Nordic countries and the EU, where it has proven effective in preventing excessive market dominance.

For more information, please contact Katia Duncker, Petteri Metsä-Tokila or Maria Karpathakis.

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