Notice pursuant to Article 19 (3) of Chapter II of Protocol 4 to the Agreement between the EFTA States on the establishment of a Surveillance Authority and Court of Justice concerning Case No COM 0006 - Metsäteollisuus Ry - Skogsindustrin Rf and Case No COM 0105 - Maa- ja metsätaloustuottajain Keskusliitto MTK ry (94/C 337/05)

A. THE APPLICATIONS AND NOTIFICATIONS

1. On 28 April 1994, Metsäteollisuus ry, Skogsindustrin rf (the Finnish Forest Industries Federation, hereinafter referred to as 'the Federation`) notified to the EFTA Surveillance Authority an agreement entered into on 18 March 1994, between the Federation and Maa- ja metsätaloustuottajain Keskusliitto MTK ry (the Finnish Central Union of Agricultural and Forestry Producers, hereinafter referred to as 'MTK`), applying for negative clearance based on Article 2 of Chapter II of Protocol 4 to the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (SAC-A) and also an individual exemption under Article 53 (3) of the EEA Agreement should negative clearance not be granted.

2. On 27 September 1994, the EFTA Surveillance Authority received an application for negative clearance and, in the alternative, a notification to obtain an individual exemption from MTK for the same agreement. By decision of the EFTA Surveillance Authority and in agreement with the parties the cases will be dealt with jointly.

B. THE PARTIES

3. The Federation is an association of Finnish companies and their member associations operating in the forest industry and related activities, handling matters related to industrial and employer policy. It is a voluntary association which can accept as members companies that operate in the industry or related operations. At the time of the notification the Federation totalled 115 members.

4. MTK is a national, economic trade organization and interest organization for farmers, forest owners and other entrepreneurs in rural areas working in connection with agriculture and forestry in Finland. It may accept as members Unions of Forestry Societies and Unions of Agricultural Producers. The Forest Delegation of MTK represents forest owners, i.e., wood sellers, in negotiations of wood trade.

C. PROCEDURAL STEPS

5. On 20 July 1994 the EFTA Surveillance Authority initiated a procedure in accordance with Article 53 of the EAA Agreement in respect of the first notification, based on a preliminary examination which indicated that the notified agreement formed a price cartel and a regional market sharing arrangement, prohibited explicitly under Article 53 (1) of the EEA Agreement, and that, on the basis of the information then presently available to the EFTA Surveillance Authority, an exemption could not be granted. The Federation was formally informed about these objections and of the intention of the EFTA Surveillance Authority to revoke the immunity from fines under Article 15 (6) of Chapter 2, Protocol 4 of the SAC Agreement

D. THE AGREEMENTS

6. After the notification by MTK and after consultations with the EFTA Surveillance Authority, the parties have concluded a new agreement dated 21 November 1994 on long term development of elements of competition in trade in round wood. Enclosed to the agreement is a Letter of intent, signed by the parties on the same date, on improving the functioning of the round wood market and increasing competition gradually. Both documents have been submitted to the EFTA Surveillance Authority.

7. By this new agreement the parties cancel the agreement originally notified and other decisions taken in connection with that agreement, except that the principles as to determining average price level and the regional bonus prices will remain in force until 28 February 1995.

8. The aim of the new agreement is to create long-term foundations for competitive trade in the round wood market, which would secure a sound development of the national economy by enabling an optimal use of forest resources, by maintaining sufficient supply of round wood to the industry, by securing competitivity of round wood prices, by securing a profitable management of forests by private forest owners on the basis of sustainable development, by enhancing technical and economic development, by taking into account the interests of consumers and in compliance with the provisions of competition laws and regulations. In order to achieve this objective, the parties intend to create a balance between demand and supply in the market at any given time and any given market conditions.

9. In order to secure a proper functioning of the round wood market, the parties intend to make available to each other reliable information on the development of the price levels on a real time basis in order to acquire the necessary market transparency. To make such information available equally to suppliers and purchasers, standardization of qualities is provided for in the agreement, and the parties will endeavour to make available such market information to each other. Standards for basic measurements and qualities are not binding on undertakings or suppliers who can freely agree on quality and its effect on price in each transaction.

10. The market price levels in various regions and for various timber assortments shall be established separately in negotiations between representatives of purchasers and suppliers. However, the prices used in any actual trading transactions shall at all times be set separately by the parties thereto.

11. To prevent a crisis in the supply of round wood, and to avoid that such situations develop further, and to promote the competitive functioning of the trade, the parties shall meet, at the request of each other, to negotiate a joint understanding of the development of the price level of round wood and means to maintain sufficient supply. Such joint understanding shall be expressed in a manner to be agreed upon separately for log wood and pulp wood, without making any distinction between different timber assortments, and shall apply for a limited period only, and is not binding in individual transactions.

12. In order to secure sufficient supply, the Federation will disclose the volumes needed from private forests, and MTK shall contribute to the market being supplied with such volumes from private forests as is necessary to meet the demand of the various timber assortments by the industry.

13. The parties shall in no way whatsoever attempt to restrict or control importation or exportation of round wood.

14. By the letter of intent the parties establish a development working group to investigate and develop new methods and means to render trade in round wood more competitive and to safeguard the proper functioning of the market in the long term. The working group shall inter alia develop statistics, various forms of contracts, examine and analyse the possibilities of implementing to the Finnish wood market a stock exchange system, develop auctions for round wood, regional forms of producer cooperation, as well as utilization of long term selling and purchasing options for sale of round wood and stock exchange quotations. The working group shall give regular reports on the progress made and shall submit by 28 February 1995 at the latest, first proposals for concrete action to be taken.

E. THE MARKET

15. There are 430 000 persons in Finland who own forest land. These persons own 63 % of the total forest area in Finland. Thirty two per cent, of those are members of MTK. The remaining forest land is owned 24 % by the State, 9 % by the industry itself and 4 % by others. The industry is dependent on round wood supply from private forests. It is estimated that in 1993 some 144 000 000 cubic meters of wood was harvested in Europe. In that same year the members of the Federation purchased from private forests approximately 21 million cubic meters of wood and imported approximately 7 million cubic meters. The whole of the Finnish forest industry purchased in 1993 approximately 5 million cubic meters of wood from State owned forests and approximately the same volume from forest owned by the industry itself. The whole industry processed approximately 51 milion cubic meters of wood in 1993. On average, some 150 000 wood transactions are made in Finland each year. The average transaction involves 350 to 450 cubic meters of wood. The value of the domestic purchases in 1993 was Fnk 4 000 to 6 000 million and the value of the imports was approximately Fnk 1 200 million.

F. THE INTENTIONS OF THE EFTA SURVEILLANCE AUTHORITY

16. The EFTA Surveillance Authority intends to take a favourable view on the agreement summarized above. Before doing so it invites interested parties to send their comments within a month from the date of publication of this notice, quoting the reference numbers, to the address below:

EFTA Surveillance Authority,

Competition Directorate,

1-3 rue Marie-Thérèse,

B-1040 Brussels.