Finland has long operated state-run monopoly systems in key sectors, including alcohol, gambling, railways, and postal services. However, in recent years, these monopolies have come under increasing scrutiny and pressure to adapt to changing market dynamics and European Union (EU) regulations. As a result, Finland is undergoing significant reforms to liberalise and modernise the remaining restrictive markets.

Finnish state-run monopolies and their justification under EU law

A monopoly system exists when a single entity dominates a market and barriers prevent other players from entering. These barriers may be legal, such as government regulations, or practical, such as technological limitations that make market entry impossible. 

While the EU emphasizes the principles of free movement of goods and services and freedom of establishment, Member States may impose restrictions on specific markets under certain conditions. In general, quantitative restrictions on imports and exports, as well as measures having equivalent effects, are prohibited. However, monopolies—despite being restrictive—can be justified under EU law if they serve objectives related to public order, security, or public health.

Finland currently operates two state-run monopolies: alcohol and gambling. These monopolies are justified under EU law because of their role in reducing harm, ensuring legal oversight and aligning with EU principles. However, both systems are undergoing significant changes as legislative reforms aim, at least in part, to liberalise these markets.

Gambling monopoly

The state-owned gambling operator, Veikkaus, holds the exclusive right to provide gambling services in Finland. This monopoly is justified under EU law in order to protect players, prevent misuse and criminal activities, and mitigate the economic, social, and health-related harms associated with gambling. However, such justification requires strict and effective supervision of gambling activities to ensure alignment with these objectives. Without robust enforcement, the legitimacy of the monopoly could be called into question.

Alcohol monopoly

Similarly, Finland's state-run alcohol monopoly follows a Nordic tradition of governing alcohol sales to minimise alcohol-related harm. The state-owned company Alko holds the exclusive right to retail alcoholic beverages exceeding a specific alcohol volume percentage. This system seeks to reduce the consumption of alcohol by controlling related business activities, thereby preventing harm to individuals and society.

Previous challenges to Finnish alcohol and gambling monopolies

Finland’s state-run alcohol and gambling monopolies have faced significant scrutiny over the years. While both systems were initially upheld under EU law, their effectiveness and compliance with European standards have been questioned, leading to reforms.

Although restrictions on the alcohol market constitute barriers to trade, alcohol monopolies can be justified if they effectively reduce alcohol-related harm. When Finland joined the EU, its alcohol monopoly underwent review by the European Commission and the European Court of Justice. Both institutions concluded that the monopoly was compatible with EU law, as Finland successfully demonstrated its effectiveness in addressing alcohol-related societal and health issues.

In 2006 as well as in 2015, the European Court of Justice confirmed that the Finnish alcohol legislation aimed at controlling alcohol consumption to prevent harm reflects valid public health and policy concerns under EU law. However, the Court emphasised that such restrictive measures must be proportionate to their objectives and must not amount to arbitrary discrimination or a disguised restriction on trade between Member States.

Similarly, the Finnish gambling monopoly has been challenged as to its compliance with EU law and its ability to mitigate gambling-related harm. In 2006, the European Commission initiated proceedings against Finland, criticising the gambling monopoly for inadequate consumer protection measures. In response, Finland amended its Lotteries Act in 2010 and 2012 to better align with EU standards.

Despite these amendments, the Finnish Competition and Consumer Authority (FCCA) reported in 2021 that the monopoly still failed to sufficiently address gambling-related harm. As a result, further reforms were enacted in 2022, introducing measures such as mandatory identification for players, payment blocks, and expanded regulatory powers for the authorities.

Recent reforms in the Finnish alcohol and gambling regimes

Finland is making significant changes to its long-standing state monopoly systems for alcohol and gambling. While these monopolies were originally designed to mitigate societal harm, recent reforms aim to align Finnish policy with broader European practices and adapt to evolving market demands.

In particular, the gambling monopoly has faced challenges due to a declining channelisation rate—its ability to attract players away from unregulated markets. This problem, combined with financial concerns, prompted Finland to reconsider its approach. Instead of reinforcing the monopoly, the state decided to partially dismantle it, aiming to secure revenue through taxation in a liberalised market rather than losing income to unregulated gambling services. This marked the beginning of Finland's gambling reform, which is set to liberalise the online gambling market by 2027. 

Finnish gambling reform

The Finnish gambling market is undergoing a significant change, with proposed legislation marking a shift away from the state-run monopoly model. The reforms will allow private operators to apply for business-to-consumer (B2C) and business-to-business (B2B) licences, fostering a more competitive environment. While the monopoly operator will retain exclusive rights for on-site gambling and lotteries, private operators will be allowed to seek non-exclusive licences for specific types of betting. The reform will also introduce B2B licences to regulate software used in gambling services. 

The licensing system will be introduced in stages:

• B2C licences will be available from 2026, with licensed gambling activities commencing between July 2026 and January 2027.
• B2B licences can be applied for from January 2027, with operations under these licences expected to begin in 2028.

Finnish alcohol reform

In contrast to the partial dismantling of the gambling monopoly, Finland's alcohol monopoly is undergoing more gradual changes, that point toward the liberalisation of the retail alcohol market. While Finland's alcohol policies are considered stricter than in many other European countries, recent reforms aim to bring them more in line with European norms.

Recent reforms include allowing licensed retailers to sell stronger fermented alcoholic beverages with an alcohol content of up to 8.0% ABV. In addition, Finland is currently considering allowing domestic retailers to sell alcohol remotely and offer home deliveries.

However, these reforms raise questions about whether the monopoly system still effectively prevents alcohol-related harm and whether it remains justified under EU law. The proposed changes will reduce Alko's exclusive rights, leading to a more liberalised retail alcohol market. The Finnish Institute for Health and Welfare has noted that these significant changes could challenge the validity of the monopoly's justification under EU law. Both EU law and the Finnish constitution require that restrictions on consumer goods sales be consistent and justified. This could make it more difficult to legally defend a system where most alcohol sales are liberalised, but a small part remains restricted for public health reasons.

Other monopoly systems in Finland

Over the past few decades, Finland has gradually dismantled its railway and postal monopolies through liberalisation and market reforms. The state-owned railway operator, VR, gradually lost its exclusivity over rail services, with the freight market opening in 2007 and passenger services becoming competitive in 2021. Since then, competitors have had free access to the rail network and the opportunity to compete in Finland. While VR has faced competition in the freight market, it has remained the sole operator in the passenger rail sector. However, this is anticipated to change, as a new railway operator has announced its plans to offer commuter train services in the coming years.

Posti, the monopoly postal operator, lost its exclusivity in 1994 when certain postal services were opened to competition. Finland was one of the first EU countries to adopt an open postal market. The liberalisation of the postal market has taken place gradually, with more services being opened to competition and brought under regulation.

If you would like more information or further guidance on this topic, please contact Maria Karpathakis. 

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