Pentti MäkinenCentral Chamber of Commerce of Finland

Benefits of low regulation environmentBrussels 13.12.2006

Low regulation environment

▪ The idea of low regulation environment in professional services in Finland

▪ In history: heavy and extensive regulation of the whole Finnish economic system

▪ In future: improving the quality of legislation• Better regulation initiative; regulation of professional and

other services as a substantial part of Government legislative agenda

▪ Focus on the role of enforcement of competition law in professional services

Why low regulation model (1)

■ Re-thinking of Finnish enterprise policy▪ Less costs and less bureaucracy for enterprises; prefer

notification instead of licenses easing of registration formalities

■ Benefits of low legal environment▪ Improving the competitiveness of economy as whole▪ Clear advantages for consumers and other clients welfare; no extra costs for consumers or enterprises▪ Enhancing competition; combination of high quality of services and reasonable prises ▪ Significant increase of productivity in business services in 1990s

Why low regulation model (2)

▪ Improving competition on domestic market as one of the leading ideas of low regulation

▪ Low regulation model gives less reasons to justify national restrictions on freedom to provide services European-wide. Importance of liberalisation the regulation of professional services on European level

▪ Restrictions should not be justified by protection of profitability of service providers

▪ Not only low but also better regulation is needed

How reached low regulation environment

▪ From heavy and extensive regulation to low regulation environment

• Systematic liberalisation in Finland: substantial deregulation of the whole economic system in the late 1980s

• Eliminate legal barriers and other restrictions to market entry• Professional services included• New way of thinking: corporist economic model more

market oriented economic model• Strengthening the role of competition policy as a basic

element of the Finnish economy

Professional services in Finland

▪ Different variation of professional services• No exact legal definition in Finland different

variations of regulation • From heavy regulated (pharmacies, accountancy)

to services with no sectorial-spesific regulation (consultancy services, marketing services)

• Different reasons for regulation: strong public interest (security services) or consumers (real estate agents) or both (financial services)

• Different kind of clients (business, consumers)

Different types regulation of services

▪ Specific regulation: legal services, auditing, medical care, financial services, security services

▪ Non-sectoral specific regulation to service providers: book-keeping, accounting, architectural, engineering, technical and other consultancy services, logistics services, marketing services, patent and trademark registration services, translation services etc.

Ensure the quality of services (1)

▪ Control of the quality of the service provider• Predictable professional requirements for all the

service providers• Reasonable degree of regulation• Open and transparent examination• Free market access all those who has proved their

qualification• Code of conduct/ethical codes enhancing the

quality of services

Ensure the quality of the services (2)

▪ Taking care of consumers interest in individual cases

• effective consumer protection system; • free access to justice for all consumers

▪ Importance of continous supervising• Systematic follow-up of all the service providers• If necessary; immediate intervention by authorities or self-

regulated bodies• Effective tools for interventions

Succesfull deregulation

▪ Strong role of competition rules and competition authorities; Abolished anti-competition measures against naked horizontal restrains on price and market division agreed by liberal profession associations

▪ Maintaining high-level and effective consumer-protection; general system instead of sectorial spesific regulation

▪ No damage for the public interest (grey economy, corruption, access to services)

Effective consumer protection

▪ Consumer ombudsman is promoting the interests of consumers▪ Advertising and marketing

▪ Terms of contracts

▪ Price-information demanded by law

▪ Possibility for individual consumer to evaluate afterwards whether the paid price has been reasonable

Better regulation and professional services

▪ Clear link between low regulation of professional services and development of the whole legal system

▪ Vital interest to assess the impact of legislation its alternatives in a systematic manner and on basis of adequate comparative data

▪ What is the impact on business activities, productivity and competitiveness both general and sectorial spesific information is neededProblems:▪ Lack of legislative research with a focus on economic argumentation as a

background element in law drafting▪ Lack of relevant both economic and non-economic analyzes

▪ Too detailed legislation; might damage the flexibility in economic relations▪ Simplification: cost of administrative burden and need of external experts

Auditing (Finnish speciality)

▪ Auditors are already heavy regulated (Auditing Act) and new proposal will continue on the same line

▪ Auditing act contains the basic and the general regulation of the authorisation and supervisory organisation

▪ A kind of co-regulation; • Legal basis: In the Chamber of Commerce Act is stated that

Chamber of Commerce shall carry out the duties, which are prescribed in the Auditing Act)

• Proposed Auditing Act contains new task to chamber of commerce to supervise also the quality of auditors

Self-regulation (Finnish examples)

▪ Benefits: reliable, cost-effective and independent from authorities▪ Compliance with the competition law▪ No legal basis; totally voluntary systems▪ (I) Property valuation

• Property valuers are authorized and supervised by Chamber of Commerce

• Examination and complaints

▪ (II) Good inspections• Experts are professionals in their special fields and they are

authorized and supervised by Chamber of Commerce• The role chamber of commerce as an independent business

organisation is essential