The new Act on Certain Competencies of the Consumer Protection Authorities was ratified in Finland on 9 July 2020. The new legislation, which entered into force on 15 July 2020, greatly enhances the national authorities’ powers, such as investigative powers and the power to impose administrative sanctions in the area of consumer protection.
The EU Consumer Protection Cooperation (CPC) Regulation (EU 2017/2394) entered into force on 17 January 2020. The main objective of the regulation is to enhance the national authorities’ procedural capabilities for enforcing consumer protection across the European Union. Although the regulation is directly applicable, it also requires EU Member States to provide their authorities with a set of minimum investigative and enforcement powers that are considered to be necessary for the application of the Regulation.
The new Finnish Act on Certain Competencies of the Consumer Protection Authorities (in Finnish, Laki kuluttajansuojaviranomaisten eräistä toimivaltuuksista) implements the requirements arising from the CPC Regulation into national law. The new legislation, which was ratified on 9 July 2020 and entered into force on 15 July 2020, greatly enhances the national authorities’ powers, such as investigative powers and the power to impose administrative sanctions in the area of consumer protection.
Enhanced sanctions for traders infringing consumer protection provisions
The European Commission’s “New Deal for Consumers” initiative has been the spearhead of the Commission’s drive to make consumer protection more effective across the European Union. As part of these efforts, several legislative reforms have already taken place, including the European Commission’s Enforcement and Modernisation Directive (EU) 2019/2161, also unofficially known as the Omnibus Directive, which entered into force on 7 January 2020, as well as the revised CPC Regulation that entered into force on 17 January 2020. While the new Act on Certain Competencies of the Consumer Protection Authorities primarily implements the requirements of the CPC Regulation into Finnish law, it simultaneously introduces sanctions in accordance with the requirements of the Omnibus Directive.
According to the Act on Certain Competencies of the Consumer Protection Authorities, the relevant Finnish authorities have extended investigative powers, such as access to relevant documents, data and information related to a breach of consumer protection provisions, the power to carry out necessary on-site inspections, and the power to conduct test purchases. Such powers may be exercised when necessary to establish the details of a possible breach or to perform a supervisory action in matters subject to the CPC Regulation, and the exercise of these powers has to be proportionate and take into account the nature and overall actual or potential harm of the breach. While the main competent authority is the Consumer Ombudsman, the investigative powers are also granted to certain other authorities in their respective fields of competence. These include the Finnish Competition and Consumer Authority, the Data Protection Authority, the Financial Supervisory Authority, the Transport and Communications Agency (Traficom), the Medicines Agency (Fimea), the Regional State Administrative Agencies and the National Supervisory Authority for Welfare and Health (Valvira).
In line with the requirements stemming from the CPC Regulation, it will now be possible to impose sanctions for a willful or negligent breach of various provisions of the Consumer Protection Act regarding e.g. marketing actions, distance selling, consumer credit, the duty to provide information, and the right for consumers to withdraw from a contract. The sanctions are imposed by the Finnish Market Court based on the Consumer Ombudsman’s claims. In financial matters, the sanctions are directly imposed by the Finnish Financial Supervisory Authority.
During the implementation process, the Finnish legislator decided to follow the approach introduced in the Omnibus Directive (the implementation of which is still under progress). Thus, while the amount of a sanction is determined on a case-by-case basis depending on e.g. the nature, gravity, scale, and duration of the breach, the maximum amount is set at 4 percent of the company’s annual turnover in the Member State or Member States concerned. Moreover, it will be possible to impose sanctions on a natural person who is part of the management of the business or exercises control thereover and, in this position, intentionally or negligently significantly contributes to the breach. In such case, the sanction is capped at 4 percent of the person’s annual taxable income. The amount of the fine imposed on a natural person may not, however, exceed the amount of 40,000 euros.
It is worth noting that, while the new legislation provides the authorities with a hefty tool for enforcement, the possibility to impose sanctions does not necessarily take the primary role among the enforcement methods. Namely, in accordance with the relevant provisions of the Act on the Competition and Consumer Authority – that remain unamended – the primary way to supervise the Consumer Ombudsman continues to be negotiations with the relevant company.
In addition to the sanctions, the Act on Certain Competencies of the Consumer Protection Authorities introduces certain procedural changes as to how the prohibitions issued by the Consumer Ombudsman are handled. Previously, any prohibition would have ceased to be in effect if the company objected to it. For the prohibition to become efficient again, the Consumer Ombudsman would have had to refer the matter to the Market Court. However, after the newly enacted legislation, it is the company who has to specifically appeal the prohibition to the Market Court, or it will otherwise remain in effect.
Furthermore, the procedure concerning the above-mentioned sanctions was debated during the enactment of the new legislation. In the original proposal, the sanctions for breaches were suggested to be subject to civil procedure in the Market Court. However, as the Committee for Constitutional law considered that civil procedure would have been problematic due to the legal protection of companies, the sanctions are handled under administrative procedural rules instead. In practice, this means that the authorities are subject to a higher threshold for evidence when arguing their case.
More efficient consumer protection both nationally and across the EU
It is interesting that, while the CPC Regulation requires Member States to provide their national authorities with the necessary competencies to address widespread breaches with an EU-wide dimension, by the new legislation the Finnish legislator has provided the competent Finnish authorities with the corresponding competencies for enforcing breaches with a national dimension only. Therefore, as of 1 July 2020 and the entry into force of the new legislation, companies operating on the Finnish market must pay due attention to compliance with consumer protection legislation even in matters that are only of significance domestically in Finland.