Finland – Veikkhaus broke Finnish law in not putting central game server contract out to tenderBy Phil - 29 September 2020
The Finnish Competition and Consumer Authority has ruled that Finnish state-owned gambling operator Veikkaus broke the law in how it bought a central game server off International Game Technology.
The problem was that happy with the existing system, Veikkhaus decided to renew the contract for the central gaming system with IGT without a tender.
According to the decision issued by the Finnish Competition and Consumer Authority (KKV) on September 28 2020, Veikkaus did not comply with the Procurement Act when making material changes to the central game system procurement contract.
KKV began investigating the acquisition of Veikkaus’ central game system at the same time as it entered the public debate in January 2020. In 2004, Veikkaus and IGT had originally entered into an agreement on the development and acquisition of the central game system. In 2018, the parties changed the operating model, pricing and validity period of the service agreement, among other things.
In its reports, KKV stated that substantial changes had been made to the procurement contract for which there was no exception under the Procurement Act. There was also no legal basis for direct procurement. According to KKV, the acquisition of Veikkaus’ central game system was therefore illegal.
Veikkaus justified the changes made to the agreements, among other things, by the need to fragment and reform the system in a controlled manner.
Elisa Aalto , a specialist with KKV, said: “Veikkaus’ goal of reducing supplier dependence and bidding for subassemblies is in itself to be supported, but the implementation method now chosen has not complied with the Procurement Act.”
KKV ended up giving Veikkaus administrative guidance on compliance with procurement legislation. The Agency could not consider a proposal to the Market Court to impose sanctions because the time limit for the Market Court proposal had expired. According to the Procurement Act, the SME must initiate liquidation measures within six months of the conclusion of an illegal direct procurement contract in order for a market law proposal to be possible.
Max Jansson, Research Manager for Procurement Control, said: “There are problems with the six-month deadline for effective procurement control. In practice, the deadline means that the agency must find information about the suspected illegal direct procurement within six months of concluding the contract. Finding a direct procurement or contract change in time is not possible in practice, for example in situations where, after contract changes in violation of the Procurement Act, we wait six months before the actual implementation of the procurement begins.”
In 2017, KKV was given the task of supervising public procurement. This is the first time that KKV has intervened in the public procurement of a state-owned company.
Hanna Kyrki, Veikkaus’ Director of Law and Responsibility, added: “Veikkaus has been informed of KKV’s recent solution and we take it seriously. We will learn from the lessons and strive to act in such a way that KKV does not have to point us out of our operations. This case is a good example of the fact that the Procurement Act is very open to interpretation.
In the spring of 2020, the state’s corporate governance commissioned its own report. In its own report, the law firm Bird & Bird, an external and independent legal advisor, assessed the legality of Veikkaus’ decision from the perspective of the Procurement Act.
According to Bird & Bird’s interpretation, Veikkaus applied the justification for additional works or services in the Procurement Act. Its applicability was possible on the basis of an external assessment. According to Bird & Bird, Veikkaus could therefore have relied on that interpretation in reaching its decision. Veikkaus said its solution was based on thorough studies, the aspects of which were carefully considered in the company.