Products, services and equal competition

Finnish Food Authority | National Supervisory Authority for Welfare and Health | Finnish Patent and Registration Office | Centre for Economic Development, Transport and the Environment 

Operations in the food business are monitored target-specifically

Source: Finnish Food Authority

Every grocery store, restaurant, café and establishment that produces foods (food business operator) is a separate target of food control. If a food business operator engages in more than one food business activity, it is registered in the category of its principal activity. The category of “food service” includes cafés, restaurants and mass caterers. Chart 1 presents the number of food control targets. There is strong annual growth in the number of primary production operators included in the statistics because the registration of this group is still incomplete.

Food control is risk-based and systematic

Risk-based food control means that high-risk food business operators are subject to greater control than low-risk operators. For instance, a food establishment that produces meat products is classified as a higher-risk food control target than, say, a kiosk that sells packaged foodstuffs.  In food control, the control targets are categorised into various risk categories, and the control frequency of each group is determined on the basis of the risk categorisation. For this reason, some control targets are inspected several times a year, whereas other control targets may go several years between inspections.  About 35–45 per cent of all control targets are inspected annually. The declining trend shown in chart 2 is interesting – a smaller group of food business operators seems to be inspected each year. Chart 3 presents the sector-specific coverage of inspections in more detail.

Results of food control are easily available online and by the doors of food establishments

Food control is carried out systematically across the country under the OIVA system. The food control authority inspects selected aspects of the control target during each inspection. The results are published as an OIVA report. There are four possible results: excellent, good, to be corrected and poor.

OIVA report

OIVA scale. Picture: oivahymy.fi

The results of OIVA inspections are published at the entrances of inspected food business operators and on their internet sites. The OIVA results of food business operators can also be found at oivahymy.fi (in Finnish and Swedish). 

Results of OIVA inspections based on a scale of A to D

On average, slightly more than 85 per cent of control targets inspected received an excellent or good result. Slightly under 15 per cent of inspected companies received a grade indicating a need for corrections or a poor result. If a food business operator’s result is poor or indicates a need for corrections, the company will be inspected again at a later date.

Chart 4 presents a breakdown of the OIVA grades of all food control targets and separate breakdowns for grocery stores and service locations.  A comparison of grocery stores and service locations (cafés, restaurants, mass caterers) shows that about 85 per cent of grocery stores achieved a result of excellent or good, while about 87 per cent of service locations achieved an excellent or good result.       

Administrative coercive measures are taken to address activities that do not comply with the law

Food control authorities are obligated to ensure that any situation that does not comply with the law is rectified.  The Food Act lays down administrative coercive measures that are to be employed when necessary. Chart 5 presents the situations in which an administrative procedure concerning coercive measures has been initiated, by the type of coercive measure required. The most commonly employed administrative coercive measure is an order. An administrative procedure concerning an order was initiated in slightly more than 250 cases on average. At present, no statistics are available on requests for pre-trial investigations made to the Police or criminal convictions involving the food sector.

It is possible that being driven into financial difficulties increases the risk of a failure to comply with statutory obligations in the food business, too. This is indicated by a report jointly drafted by the Grey Economy Information Unit and the Finnish Food Safety Authority (as from 1 January 2019: the Finnish Food Authority).


The alcohol administration combats the grey economy – further resources were targeted at enforcing the new alcohol legislation

Source: National Supervisory Authority for Welfare and Health

The new Alcohol Act that came into force in 2018 continued to make the Regional State Administrative Agencies busy in 2019. In particular, the increase in the number of liquor licences and guidance for self-monitoring by licence holders increased the authorities’ workload.

Valvira maintains an alcohol trade register of licence applicants and holders pursuant to the Alcohol Act. The alcohol trade register includes information on industry operators, alcohol licences, alcohol deliveries, serving, extended serving hours, retail sales, production, import and wholesale licences, as well as the existence of licencing criteria.

The alcohol trade register is used to produce analysed information on the supervision of serving and retail sales, the reliability of an entrepreneur, and the determination of the entrepreneur’s financial capabilities. The information also serves as the basis for the production of official statistics on alcohol, as well as information and register services related to alcohol issues. To combat the grey economy, Valvira and the Regional State Administrative Agencies disclose individualised information from the alcohol trade register to other authorities.

A total overhaul of the alcohol trade register (Allu) was started in 2019, introducing new kinds of operating models and challenges as it brings the alcohol licencing administration to the digital age. The overhaul will significantly improve the processing of information and enable obtaining a more real-time overall assessment, also in the investigation of cases related to combating the grey economy. The overhauled alcohol trade register will be deployed in 2021.

The reform of the Alcohol Act increased the workload and number of licences

Due to the implementation of the new Alcohol Act, the resources of the licencing and supervision authorities were targeted at processing licence and notification matters as well as providing guidance for entrepreneurs and other operators in 2018. The comprehensive reform of the Alcohol Act was clearly evident in the tasks of the alcohol authorities also in 2019.

In the years before the comprehensive reform of the Alcohol Act, the Regional State Administrative Agencies processed, on the average, fewer than 9,000 cases related to serving or retail sales of alcohol. Compared to an ordinary year, the Regional State Administrative Agencies processed over 45 per cent more alcohol cases in 2018. In 2019, the workload decreased, though there were still over 1,500 more processed cases than in the years prior to the law reform.

The performance of the Regional State Administrative Agencies is presented in Figure 1. With the new Alcohol Act, the requirements inherent to the performance of the Regional State Administrative Agencies have changed. In particular, the extended serving hours for outdoor areas require considerable work because as a rule during the licence processing, an opportunity to influence the decision is reserved for the immediate neighbourhood, and the disruption caused by serving alcohol during the night is assessed.

Growth in the number of serving and retail sales licences

Over the ten years preceding the reform of the Alcohol Act, the number of licences to serve alcohol remained at a reasonably steady number, at approximately 8,300 licences. In 2017, the number showed a clear uptick, and by the end of 2019, there was a total of 9,496 licences to serve alcohol valid in mainland Finland. The growth in the number of licences to serve alcohol can likely be explained by the easier requirements for obtaining a licence for serving alcohol; for example, completing an alcohol proficiency certificate is a sufficient qualification for the responsible manager. Furthermore, licences have been applied for as secondary service for other activities. (Figure 2.)

The number of alcohol retail sale licences declined rather steadily in the ten years preceding the reform of the Alcohol Act. With the reform of the Alcohol Act, the total number of alcohol retail sale licences took an upturn. At the end of 2019, alcoholic beverages could be purchased from a total of 6,029 points of sale in mainland Finland. The change can be mostly explained by the alcohol retail sale licences obtained by establishments (for the sale of alcoholic beverages no stronger than 5.5 per cent ABV between 9 a.m. and 9 p.m.). (Figure 2.)

The amount of extended serving hours increased

During the old Alcohol Act, the number of establishments granted extended service hours (service after 1.30 a.m.) in mainland Finland remained at a level of about 1,000 restaurants with extended service hours for the last ten years. Over 2018, the number kept growing (1,640), and by the end of 2019, 1,715 establishments had extended service hours (diagram 3). This growth was evenly spread throughout Mainland Finland in proportion to the number of restaurants. The approximate 70 per cent growth in the number of establishments granted extended serving hours is explained largely by the relaxed criteria for extended serving hours. The growth is mostly concentrated to pubs and bars that could not continue serving alcohol after 1.30 a.m. under the old Alcohol Act.

Establishments have also increasingly applied for extended serving hours for beer gardens and other outdoor serving areas. In 2017, outdoor areas had slightly over one hundred licences for extended serving hours, whilst the corresponding number at the end of 2019 was 571.

High demand for retail sales licences for restaurants

The new Alcohol Act provides a possibility for retail sales of alcoholic beverages for establishments. The retail sales are limited to alcoholic beverages with at most 5.5 per cent ABV between 9 a.m. and 9 p.m. At the end of 2018, 687 establishments had a retail sales licence, and by the end of 2019, the number of licences grew to 889. Their share is about 7% of all establishments. It remains to be seen how financially profitable retail sales on such licensed premises will be.

Other new licence types allowed by the Alcohol Act remain on the sidelines

The new Alcohol Act enabled obtaining a licence for the retail sales of craft beers of no more than 13 per cent ABV. In 2018, 59 places of production had a licence, and by the end of 2019, the number grew to 69 licences.

After the Act came into effect, a licence to serve alcohol could be applied for without a licensed premise for catering activities in pre-approved serving areas. In 2018, 41 operators had a licence to serve alcohol without a fixed licensed premise, whilst at the end of 2019, 73 operators had this kind of licence.

A total of 186 serving areas were approved for catering operations in 2018. In 2019, the total was 315 approved serving areas. It would appear that the operating model for arranging temporary serving enabled by the new Alcohol Act – such as in rented public festive premises – did not achieve great popularity.

Towards systematic self-monitoring and its supervision – improvement of self-monitoring was one of the focus areas of supervision by the alcohol authorities

The Regional State Administrative Agencies supervise the serving and retail sales of alcoholic beverages in their area. Valvira attends to nationwide supervision and the provision of guidance to the Regional State Administrative Agencies on supervising the serving and retail sales of alcohol.

The new Alcohol Act emphasises the importance of self-monitoring, and requires the licence holder to draw up a self-monitoring plan to support its operations for the serving and retail sales of alcoholic beverages. A good self-monitoring plan can prevent many practical problems, and it is important that the licence holders bear the responsibility of their self-monitoring obligation. In 2018, the Regional State Administrative Agencies concentrated on guiding and advising the licence holders in drawing up their plans. In 2019, the plans and their preparation still showed deficiencies, though the situation had improved from the previous year.

In 2018, the Regional State Administrative Agencies conducted 3,502 inspections of licenced premises and alcohol retail sales outlets. In 2019, a total of 3,931 establishments were inspected. In the serving and retail sales of alcohol, about one in every four inspected sales outlets was either missing a self-monitoring plan pursuant to the Alcohol Act, or had a plan that was deficient.

In 2018, the Regional State Administrative Agencies sent a total of 79 guidance letters, whilst the total for 2019 was 366. The number of administrative sanctions such as warnings, sanction fees and licence revocations increased from 2018. In 2018, the number of administrative sanctions remained under one hundred, whereas in 2019, the corresponding number was 168.

Supervision focuses on marketing

In 2019, the supervision of the alcohol authorities focused on the marketing of alcoholic beverages in addition to the improvement of self-monitoring. The supervision of a project nature performed by the Regional State Administrative Agencies and Valvira focused on the websites and social media of licence holders.

In connection with the supervisory inspections carried out by the Regional State Administrative Agencies, guidance was provided for advertising issues, in addition to which written guidance was given to 165 alcohol serving or retail sales establishments. In Valvira, the marketing supervision project concentrated on providing guidance to alcohol manufacturers and wholesalers. Guidance was given in 211 cases.

In earlier years, the supervision of the marketing of the alcoholic beverages has comprised, as a rule, the processing of reports received by the authorities, and providing guidance to licence holders based on them. In 2019, the alcohol administration strove to perform a systematic review of the marketing activities of the licence holders. Most commonly, the reason for neglect of the marketing regulations was the ignorance of the licence holders due to the complexity of the regulations.

The year 2019 was the most impactful in combating the grey economy

Valvira monitors the supervision of the serving and retail sales licences by the Regional State Administrative Agencies nationwide.  To assess the impact of measures taken to combat the grey economy, supervision focuses on issues such as measures to ensure the preconditions for business operations by licence holders.

The supervision measures against the grey economy taken by the Regional State Administrative Agencies in 2019 are presented in Compilation 1. The figure shows, by region, the number of requests for explanation sent to the licence holders, the payment plans agreed, information of the revocation of licences for the serving or retail sale of alcohol, bankruptcies, debt adjustment or restructuring measures, and the total outstanding taxes paid in euros.
 
Since 2012, Valvira has compiled statistics of measures related to combating the grey economy in a comparable way. In the previous years, an average of 171 requests for explanation were made, and as their result, an average of EUR 1.5 million in outstanding taxes were paid. As a result of the new Alcohol Act coming into effect, there was a dip in 2018, as both the number of requests for explanation and the amount of outstanding taxes paid decreased. In 2019, a total of 182 requests for explanation were made, and as a result, a record EUR 2.4 million of outstanding taxes were paid.

Combating the grey economy is but one part of the extensive responsibilities of the alcohol administration. In 2019, the measures taken by the alcohol administration to combat the grey economy can be considered to have been very successful, considering the workload required by the new Alcohol Act and the reduction in the human resources in the alcohol administration. A careful selection of targets and close co-operation between the authorities can efficiently achieve good results In particular, the co-operation between the Tax Administration's Grey Economy Information Unit and the Steering and Development Unit of Corporate Taxation has worked well in safeguarding equal opportunities for traders.


Accuracy of Trade Register records is monitored

Source: The Ministry of Economic Affairs and Employment

The National Board of Patents and Registration (PRH) is responsible for maintaining and monitoring the accuracy of information submitted to the Trade Register. The number of Trade Register offences brought to light and of Trade Register submissions investigated on a risk-basis are indicative of the possible amount of shadow economy activity.

PRH launched enhanced investigations of Trade Register submissions in March 2016, and these continued in 2017 and 2018.  This practice has helped prevent irregularities.

In 2018, a total of 24,832 notifications of changes in limited liability companies or cooperatives were received with details of a new Board of Directors, managing director or building manager. Of these notifications, 1,443 were referred to enhanced investigation to determine whether the reported decision was appropriate. In 106 of these cases, PRH requested a copy of a deed of sale or called the company to verify the accuracy of the notification.

In 2018, one notification was discovered in which there was reason to suspect a registration offence. The case is being investigated by the Police.


The residence permit for self-employed individuals is replaced by the residence permit for entrepreneurs

Source: Centre for Economic Development, Transport and the Environment

The Aliens Act was amended on 1 April 2018 to the effect that the residence permit for self-employed individuals became the residence permit for entrepreneurs. The permit is granted in two stages: the Centre for Economic Development, Transport and the Environment makes an interim decision before the final decision is made by the Finnish Immigration Service. 

The Uusimaa Centre for Economic Development, Transport and the Environment handles these permits for the whole of Finland. In the period from 1 January – 31 December 2019, the Uusimaa Centre for Economic Development, Transport and the Environment made a total of 716 interim decisions, of which 50.4 per cent were negative (Chart 1).

The 2018 statistics are not fully comparable with the 2019 figures, because the 2018 statistics have been compiled for the period 1 April 2018 – 31 December 2018, i.e. after the current Act entered into force. The 2019 statistics have been compiled for the whole year.  

It is the task of the Uusimaa Centre for Economic Development, Transport and the Environment to assess the profitability of companies and the preconditions for the livelihoods of permit applicants. Negative interim decisions have usually been based on deficiencies in complying with statutory obligations, irregularities in the payment of wages, deficient or erroneous accounting, a non-viable business idea and lack of profitability, which mean that the applicant cannot ensure their livelihood by means of their business operations.

Negative interim decisions by nationality

Applications for residence permits for entrepreneurs were received from the citizens of 46 countries. The greatest number of negative decisions concerned citizens of Russia, China and Iraq. Chart 2 presents negative interim decisions by nationality during the period 1 January – 31 December 2019. After the amendment of the Act, the number of applications from Russia in particular has risen. The companies of Chinese and Russian applicants involve larger amounts of capital than applications from other countries. The greatest number of negative decisions have been made regarding applications from citizens of these countries, as the operations in question have been deemed in practice to constitute investment activities rather than employment through corporate activity.

Negative decisions most commonly concern restaurants

Applications for residence permits for entrepreneurs include companies in a large range of sectors. The largest group comprises companies in the restaurant sector. Chart 3 presents the ten most common sectors in negative interim decisions from 1 January – 31 December 2019. Business management consulting has become the second most common field among negative interim decisions. The greatest number of irregularities detected in the restaurant sector concern the payment of wages and compliance with obligations. This information does not directly point the finger at shadow economy activities, but some of these situations may involve the shadow economy and economic crime as underlying factors.