21/08/2020

New Consumer Protection Tools: Penalty Payment for Consumer Protection Violations Possible as of 15 July 2020

The EU’s Regulation on cooperation between national authorities responsible for the enforcement of consumer protection laws (EU 2017/2394) has been implemented in Finland through new national provisions that entered into force in mid-July. Among other things, the new provisions expand the Finnish Consumer Ombudsman’s toolkit for intervening in various violations of consumer protection legislation.

The most relevant change is a new administrative sanction, a penalty payment, that can be imposed by the Market Court based on a proposal of the Consumer Ombudsman. In cases within the jurisdiction of the Finnish Financial Supervisory Authority, the FIN-FSA can impose the penalty payments itself.

The adoption of penalty payments gives the Consumer Ombudsman more robust means to intervene in consumer protection violations. The Consumer Ombudsman was previously not able to impose administrative financial sanctions on undertakings for violations of consumer protection provisions.

In addition to penalty payments, the Consumer Ombudsman now also has the power, for example, to order content on websites to be removed or block or restrict access to websites.

Penalty Payments Possible for, e.g. Hidden Advertising or False Advertising

Under the new Act on Certain Powers of Consumer Protection Authorities (566/2020), the authorities can now impose penalty payments for violations of numerous different consumer protection provisions.

A penalty payment can be imposed, for example, if the requirement for the identifiability of marketing is not complied with, i.e. if marketing does not clearly indicate its commercial purpose or on whose behalf the marketing is taking place. We wrote about the requirement for the identifiability of marketing in a previous blog.

It is also now possible to impose a penalty payment if marketing provides false or misleading or aggressive practices are used in a customer relationship. Aggressive practices include harassment, coercion and other compulsion of consumers that is liable to lead to the customer making a purchase or other decision relating to consumer goods that they would not have made without the compulsion.

In addition, penalty payments can be imposed, for example, for violations of or failure to comply with certain disclosure obligations under the Consumer Protection Act.  However, there is a higher threshold for imposing a penalty payment in certain situations relating to the disclosure obligation, i.e. a penalty payment can be imposed when the violation is likely to clearly undermine a consumer’s ability to make a considered purchase or other decision relating to consumer goods or to hinder a consumer’s ability to exercise their rights.

Penalty Payments up to Four Per Cent of Turnover

The amount of a penalty payment is always based on an overall assessment. The following factors are taken into consideration when imposing a penalty payment:

  • the nature, scope, gravity and duration of the violation,
  • any benefit that may have been gained through the violation if this information is available,
  • the undertaking’s actions to mitigate or rectify the damage and
  • any prior consumer protection violations that the undertaking may have committed.

A penalty payment imposed on an undertaking can be a maximum of four per cent of the undertaking’s turnover for the year preceding the end of the violation in question.

Penalty Payments May Also Be Imposed on Management or Persons Exercising De Facto Control

In certain situations, a penalty payment can be imposed on natural persons working as management or exercising de facto control in a legal person. In that case, the penalty payment can be a maximum of four per cent of the person’s taxed income for the year preceding the end of the violation in question, but no more than EUR 40,000.

However, no penalty payment will be proposed or imposed under certain conditions. This may be the case if the violation is minor, if imposing a penalty payment must be deemed clearly unreasonable or if the undertaking has taken sufficient measures to rectify the violation immediately upon having become aware of it and the violation is not serious or repeated. A penalty payment need not be proposed or imposed if a conditional fine has been ordered to be paid or a petition for the payment of a conditional fine is pending with respect to the same violation.