In this issue:

  • The Supreme Court Precedent on Transfer of Undertaking and Termination of Employment Relationship
  • The Court of Justice of the European Communities Judgment on the Nature and Transferability of a Social Benefit
  • An Outlook on the Effects of the Global Financial Crisis on the Finnish Markets
  • Stockholm District Court dismisses action brought by Swedish Competition Authority to block the merger between Copiax AB and Assa Abloy AB
  • Revised Rules on Marketing to Consumers Enter into Force

CORPORATE

The Supreme Court Precedent on Transfer of Undertaking and Termination of Employment Relationship

The Finnish Supreme Court has rendered a decision (KKO:2008:88, 17 September 2008) concerning employer's liability for termination of employment in connection with a transfer of undertaking. According to Chapter 1 section 10 of the Finnish Employment Contracts Act, all employment relationships in force at the time of the transfer shall automatically transfer to the transferee.

This matter concerned a situation where the provider of municipality day-care services changed on account of a public procurement procedure. The new service provider had not employed two of the six employees whose employment relationships were terminated by the previous service provider. The Supreme Court found that since day-care services is a labor-intensive branch, the conditions of a transfer of undertaking were fulfilled only after the new service provider had employed majority of the previous service provider's employees. The transfer of undertaking had thus occurred after the new service provider had already commenced its operations and therefore the previous service provider had had justified reasons to terminate employments when its operations had ended.

The Court of Justice of the European Communities Judgment on the Nature and Transferability of a Social Benefit

The Court of Justice of the European Communities has rendered a judgment (C-228/07, 11 September 2008) concerning the nature of a social benefit and its transferability within the Community. According to the Court a benefit that is granted from unemployment insurance for a person who has applied for a disability benefit until the application has been decided on, must be regarded as an "unemployment benefit" within the meaning of the Social Protection Co-ordination Regulation (EEC) No 1408/71, as amended. The Court found that Article 39 EC must be interpreted as preventing a Member State from making the grant of the said benefit subject to a condition that the recipient is resident in the territory of that State.

An Outlook on the Effects of the Global Financial Crisis on the Finnish Markets

The global financial crisis recently took a further downturn when Lehman Brothers' bankruptcy was announced on 14 September 2008. The Finnish Financial Supervision Authority (the FFSA) considered in its recent analysis published on 25 September 2008 the effects of the global financial crisis on the Finnish markets.

In respect of banks, the FFSA concluded in its analysis that despite decreasing profits, the confidence in and solidity of Finnish banks is still good and the banks have sufficient buffers to handle even surprising losses. Although the FFSA expects the direct effects of the global financial crisis in Finland to be fewer, one of the indirect effects is the slow down of the Finnish economy and a weakened quality of the banks' loan portfolio and the banks' increased financing expenses. According to the FFSA, Finnish banks have for many years focused on developing their risk management and are today better equipped to encounter market turmoil than during the Finnish banking crisis of the early 1990s. In respect of Finnish investment funds, the FFSA concluded that investments by these funds in debt and equity securities issued by Lehman Brothers amounted to 0.06 per cent of the funds' assets. Due to the uncertainty on the markets, the FFSA has also examined the valuation of corporate loans in investment funds and has required that certain investment funds take measures in order to clarify their rules for valuation of corporate loans.

Recently, many regulators in Europe and elsewhere have decided to partly ban short-selling of securities. There have also been discussions among regulators in other countries, including Finland, as to the necessity of such measures. The FFSA has, however, concluded that, at least for the time being, it does not consider similar regulations or emergency measures necessary in Finland.

More recently, on 6 October the FFSA stated that it has intensified the supervision of any potential short-selling of shares in the financial sector and co-operates with other supervisory authorities on the capital markets. The FFSA will, as usual, analyse any major changes in trading prices of individual securities and will also, if needed, investigate any suspected market manipulation.

EU & COMPETITION

Stockholm District Court dismisses action brought by Swedish Competition Authority to block the merger between Copiax AB and Assa Abloy AB

On 19 September 2008, the Stockholm District Court ("District Court") dismissed an action brought by the Swedish Competition Authority ("SCA") to block the acquisition of Copiax AB ("Copiax") by Assa Abloy AB ("Assa Abloy") (together the "Parties").

The SCA had filed an application for summons with the District Court seeking an order to block the merger between Copiax and Assa Abloy, both active in the wholesale market for locks. According to the SCA, the merger would lead to anti-competitive effects, as it would lead to the creation of a monopoly in the wholesale market for locks, and Assa Abloy, as a monopolist, would be in a position to dictate less favorable terms to the detriment of both locksmiths and consumers. However, the District Court dismissed the SCA's action as it was brought too late.

The original merger notification was filed on 28 March 2008 and was declared "complete" on 8 April 2008. However, during an in-depth investigation of the concentration, the SCA claimed that the companies had not submitted sufficient information, and requested Assa Abloy to provide the missing information under a penalty of a fine – the first time this has ever been done in a Swedish merger case. After Assa Abloy had provided the requested information, the SCA annulled its decision of 8 April 2008 declaring the notification complete, declared the notification complete as of 15 July 2008, the date of the provision of the requested documents, and launched a new in-depth investigation.

In the District Court, the SCA claimed that its action was to be considered to constitute an exceptional measure as the SCA had never before requested documentation in a merger case under a penalty of a fine. Therefore, the SCA claimed that was within its rights to annul its first decision declaring the notification complete and postpone the merger review deadlines. However, the District Court ruled that pursuant to the Swedish Competition Act, an action to block the concentration before the District Court must be brought within three months from the decision to carry out an in-depth investigation. The District Court found that the time limit started to run from the first decision to carry out an in-depth investigation and, thus, the SCA's action was not brought within the stipulated time limit. According to the District Court, the SCA's action did not constitute such an exceptional circumstance that would justify the extension of the deadline for bringing action, and dismissed the case.

The SCA has decided not to appeal the decision of the District Court to the Market Court, the final appeal instance in competition cases in Sweden. Thus, the decision of the District Court will stand and the Parties may go ahead with the merger.

IP & TECHNOLOGY

Revised Rules on Marketing to Consumers Enter into Force

As was reported in our 19 June 2008 newsletter, Government Bill 32/2008 concerning implementation of the Unfair Commercial Practices Directive 2005/29/EC was passed by the Finnish Government in June. The implementation required amendments mainly to Chapter 2 of the Consumer Protection Act (38/1978, as amended) concerning marketing to consumers. The revised provisions have entered into force on 1 October 2008.

The amendments extend the applicability of Chapter 2 of the Consumer Protection Act to cover also commercial practices taking place after a commercial transaction has been made, such as after-sales services. The underlying principles of business-to-consumer marketing regulation have not been changed as such, but the amended provisions are written in significantly more detail than before.

The amended Chapter 2 of the Consumer Protection Act contains, inter alia, specific provisions detailing marketing or practices contrary to good practice, as well as specifying when marketing shall be considered inappropriate. Also an express prohibition on the use of aggressive commercial practices is among the amended provisions.

The regulation on inappropriate commercial practices is purely domestic in nature. As a main rule, marketing is considered inappropriate if it is in clear conflict with commonly accepted social values. Typical inappropriate marketing practices include such that insult human dignity or religious or political convictions. Also marketing that is discriminatory towards gender, ethnic origin or sexual orientation or that encourages activities that threaten health, public security or the environment without any proper relation to the marketed product are generally inappropriate. The amendments concerning inappropriate conduct also contain special provisions regulating commercial practices directed at minors or practices that commonly attract minors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.