Cooperation between Finnish ports in offshore wind logistics

A review of competition law aspects

As Finland intensifies its efforts to transition towards a greener economy, the offshore wind market is emerging as a critical component of its renewable energy strategy. Offshore wind farms are set to play a significant role in achieving Finland's carbon neutrality goals by 2035. Finnish ports serve as essential hubs for the logistics and assembly of offshore wind infrastructure.

While Finnish ports are well-positioned to support this industry due to their strategic locations and extensive experience in logistics, substantial investments in port facilities are required. The significant size of projects and large-scale infrastructure demand deep berths, vast storage areas and port facilities capable of handling heavy loads. Given the high costs and various technical requirements involved, Finnish ports are interested in cooperation to pool resources and strengthen their competitiveness in the offshore wind market. Cooperation may also be a way to ensure the implementation of the required investments by facilitating access to financing and the allocation of risks.

Cooperation could take various forms, including joint ventures, shared use of infrastructure, coordinated investment strategies, and collaborative marketing efforts. As these ports consider cooperation to optimise their operations and resources, they must navigate the complex landscape of competition law.

Competition law prohibits restrictions on competition

The legal framework governing competition in Finland is primarily based on the Competition Act (948/2011, kilpailulaki), which aligns with European Union competition law, particularly Articles 101 and 102 of the Treaty on the Functioning of the European Union. Under competition law, agreements or practices that restrict competition are prohibited. This includes collusion between competitors, abuse of dominant market positions, and mergers that could significantly impede effective competition.

However, certain forms of cooperation between competitors may be permitted if they meet specific criteria, such as contributing to economic efficiency, benefiting consumers, and not eliminating competition. The Finnish Competition and Consumer Authority (FCCA) is the national authority responsible for supervising the market practices and enforcing competition law.

Conduct between competing entities

Various practices or agreements that restrict competition may be deemed prohibited. When considering cooperation between ports aiming to pool resources and implement investments, allocation of markets or exchange of sensitive information could be taken as examples of prohibited activities. Even informal agreements or understandings leading to coordinated behaviour causes risks of collusion.

For restrictions of competition to be prohibited, they must have significant effects. Some restrictions of competition may be deemed insignificant and therefore permitted if the parties’ market shares do not exceed certain thresholds established under competition law. Generally, the effects of the cooperation are likely not insignificant if the combined market share of the competitors cooperating exceeds 10% in any relevant market. However, the most severe restrictions, such as market sharing, are prohibited even with a lower aggregate market share.

Under the EU’s guidelines on horizontal agreements (C/2023/4752), cooperation between competing companies is not typically considered a prohibited restriction of competition if the companies involved would not be able to carry out the project or activity on their own. This is a significant consideration in the cooperation between Finnish ports, where cooperation may be crucial for making the necessary investments.

Lastly, certain forms of collaboration restricting competition may be justified under competition law if they contribute to economic efficiency and do not eliminate competition. For example, cooperation that leads to significant efficiency gains, such as cost reductions, improved service quality, or faster deployment of offshore wind infrastructure, could be considered pro-competitive. The benefits from the cooperation need to be passed on to consumers including clients of the ports in the offshore wind business. Efficiency gains are compared with the harms caused by restricting competition, and the benefits must outweigh the harms for this exception to apply.

Abuse of a dominant position

All in all, anti-competition risks are more likely to emerge if the ports have a strong position in the offshore wind market. If the ports cooperating in the offshore wind market collectively hold a dominant position, they must avoid practices that could be considered abusive. This includes imposing unfair trading conditions, limiting production or supply, and discriminating between customers. Practices resulting in exclusion or foreclosure of competitors are also problematic.

Relevant markets

Defining the relevant markets is essential for assessing the impact on competition. The calculation of market share requires the definition of the relevant geographic and product markets. This is not a trivial task, as the relevant market can be vastly different for different types of activity. For many port activities the relevant geographical market may be as large as the whole of the Baltic Sea or at least the Gulf of Bothnia. However, some of the port logistics involved in the development of offshore wind project are highly time critical, with increasing distances to port locations quickly leading to prohibitive costs. In such cases, the geographic area in which ports can potentially compete with each other may be considerably small, with only a small number of ports being able to compete. In such cases, those ports coordinating their market behaviour can quickly become a problem.

Cooperation through a joint venture

The ports may also decide to set up a joint venture to handle the offshore wind business. Separating the offshore wind business into a joint venture, distinct from the individual operations of each port, reduces anti-competitive risks related to collusion or market sharing. This separation ensures that the joint venture operates independently from the ports' other activities, reducing the likelihood of coordinated actions that could harm competition.

Setting up a joint venture as well as mergers and acquisitions in general may be subject to merger control review if the transaction meets certain turnover thresholds: 1) the parties’ combined aggregate turnover resulting from Finland exceeds EUR 100 million and 2) of at least two of the parties, the aggregate turnover resulting from Finland exceeds EUR 10 million for each of them. If both thresholds are met, the transaction needs to be notified to the FCCA for analysing whether the transaction could lead to a significant impediment to competition.

Documenting risk assessments

The impact on competition must always be assessed on a case-by-case basis. The assessment must take into account, inter alia, the characteristics of the cooperation, relevant markets, market shares of the parties, and efficiency gains. The ports themselves are responsible for the legality of their conduct. Before engaging in cooperation with competitors, the port needs to carefully assess the situation. Documenting the assessment in writing is crucial.

Conclusions

As Finnish ports explore opportunities to cooperate in the offshore wind market, understanding the key legal considerations and implementing risk mitigation strategies are essential. Each situation relating to cooperation needs to be evaluated individually. Through effective and compliant cooperation, Finnish ports can significantly contribute to the growth of the Finnish offshore wind market.