Dutch Cartel Law

Esther Glerum-van Aalst, Marleen de Putter and Andre Reznitchenko

Kneppelhout & Korthals

This article briefly describes the relevant legal framework of Dutch cartel law. We also highlight some of the recent activities of the Dutch Competition Authority – Nederlandse Mededingingsautoriteit, NMa – with regard to cartels and will discuss the latest developments in administrative and civil proceedings.

Legal framework

The cartel prohibition

The prohibition of cartels contained in the Dutch Competition Act (DCA) can be considered the national equivalent of article 81 EC Treaty. It stipulates:
Agreements between undertakings, decisions by associations of undertakings and concerted practices by undertakings which have as their object or effect the prevention, restriction or distortion of competition within the Dutch market, or a part thereof, are prohibited.
Such agreements or decisions are legally null and void.

Exemptions to the cartel prohibition

There are several exemptions to the Dutch prohibition of cartels. First of all, the DCA explicitly provides that the European exemptions as to vertical agreements, specialisation agreements, research and development agreements and technology transfer agreements also apply to national situations. Furthermore, the ‘bagatelle provision’ exempts agreements, concerted practices and decisions by associations of undertakings that are considered of minor importance.
This bagatelle provision applies if:
• no more than eight undertakings are involved whose combined turnover does not exceed €5.5 million (when the core activity of the involved undertakings is the supply of goods) or €1.1 million (in all other cases); or
• in case of horizontal agreements, the combined market share of the involved undertakings on all markets concerned does not exceed 5 per cent and the combined turnover obtained for the total duration of the infringement through the sale of goods and the delivery of services to which the infringement relates does not exceed €40 million.

Contrary to the European Commission Notice on agreements of minor importance, the Dutch bagatelle provision even exempts hardcore restrictions on the Dutch market.
The NMa may, however, always declare the cartel prohibition nonetheless applicable if, in view of market relationships on the relevant market, agreements, decisions or practices have a significant detrimental effect on competition. The NMa may only do so if competition is prevented, restricted or distorted to an appreciable extent.
Another exemption – which is similar to article 81(3) EC Treaty – entails that the cartel prohibition shall not apply to agreements, decisions and concerted practices that contribute to the improvement of the production or distribution or to the promotion of technical or economic progress while allowing consumers a fair share of the resulting benefit. Such agreements should not impose restrictions that are not indispensable to the attainment of these objectives on the undertakings concerned, nor should such agreements afford the involved undertakings the possibility of eliminating competition in respect of a substantial part of the products and services in question. Until 2004, undertakings could apply for an individual exemption given by the NMa on these grounds. This possibility has since been withdrawn. At present, undertakings must assess themselves if they fulfil these exemption conditions.
The NMa issued three rulings exempting the following categories of agreements from the cartel prohibition:
• certain syndication agreements for the purpose of tenders;
• certain retail exclusivity agreements between the owner or manager of a shopping centre and retailers located there; and
• certain cooperation agreements in the retail sector with respect to advertising campaigns and purchase obligations.

The validity of these rulings will in principle last until 1 January 2009. It is possible that this validity period will be extended.

The status and powers of the NMa

The NMa is an autonomous administrative authority and independent from the Ministry of Economic Affairs. It is responsible for the monitoring and enforcement of the DCA and has extensive powers to trace and intervene in cartels. For example, it may search premises and computers in order to find proof of illegal cartel activities and take far-ranging measures to prevent cartel activities. In October 2007 a legislative modification has further extended these powers. The most remarkable new powers of the NMa include the possibility to impose fines on natural persons and to search private homes without the permission of the occupant in the context of national investigations. It should be mentioned here that the NMa already had the power to search private homes while assisting the European Commission.

Sanctioning in case of infringements

In the event of an infringement of the DCA the NMa is empowered to:
• impose an order for incremental penalty payments;
• impose a fine; and
• impose a binding order to comply with the DCA without imposing a penalty.

The latter is a novel element in the range of powers of the NMa. It entails a milder form of enforcement in the form of a binding instruction. When the order is violated, the NMa is still entitled to impose a fine or an order for incremental penalty payments. A binding order may be imposed by the NMa ex officio or on request.
Fines imposed on legal entities in case of an infringement of the cartel prohibition may be up to €450,000 or, if that is higher, up to 10 per cent of the total net annual turnover of the undertakings involved. Fines imposed on natural persons may be up to €450,000. A natural person can only be fined when he or she directed the prohibited action or omitted to take measures to prevent the prohibited behaviour although he or she was empowered and reasonably bound to do so. To deliberately promote prohibited behaviour is also fineable behaviour. Fines for neglecting procedural obligations (like the obligation to cooperate with the NMa) may be up to €450,000 and can be imposed on legal entities as well as natural persons.
The NMa may also impose fines on members of associations of undertakings (eg, trade associations) if the relevant association has violated competition rules but is unable to pay the fine within the specified term. The provision does not require the members to be aware of the violation of the competition rules. The amount that can be claimed of the individual members cannot be higher than 10 per cent of their net annual turnover. Members will not be fined if they are able to demonstrate that they did not carry out the decision of the association of undertakings and that they were not aware of that decision or that they proactively distanced themselves from that decision prior to the start of the investigations.
The Dutch 2007 Fining Code provides insight into the way fines are calculated by the NMa. The fining methodology is largely the same as the methodology used by the European Commission. This means that the starting point for the calculation is the ‘basic amount’, which varies from case to case. The basic amount of the fine is firstly related to the value of all transactions obtained by the offender for the total duration of the infringement through the sale of goods and the delivery of services to which the infringement relates, after deducting turnover taxes. Subsequently, the NMa will multiply this amount with a factor representing the seriousness and duration of the infringement. The outcome of this multiplication equals the ‘basic amount’. Aggravating circumstances (for instance, hindrance of an NMa investigation) and mitigating circumstances (for instance, cooperation with the NMa) may adjust the fine. In any event the NMa is obliged to observe the aforementioned statutory maximum.
At present, natural persons responsible for cartel activities cannot be criminally prosecuted. The desire to do this does however exist: the NMa has repeatedly stated that the criminal enforcement of competition law should be an available option.

Sector-specific monitoring and enforcement

The Office of Energy Regulation, an organisation that forms part of the NMa, supervises compliance with the Electricity Act and the Gas Act. The Office of Transport Regulation, another division of the NMa, is responsible for supervising (competition in) the transportation sector.

Leniency programme

There is an extensive system of fine reduction for those who are prepared to cooperate with the NMa’s investigations. The bottom line is that legal entities and persons who provide information about a cartel can obtain a reduction of, or even a complete dispensation from, fines. Important requirements are that the information is of substantial additional value (as opposed to the information already available to the NMa) and that all cooperation will be provided on request.

Negotiated settlements

Negotiated settlements between the NMa and the offenders are becoming more and more common. It entails that the NMa will discontinue its investigation into, or proceedings against, the involved (association of) undertakings or persons in exchange for appropriate measures or commitments. In case of a negotiated settlement no decision is issued as to the lawfulness of the conduct. This can be an advantage to the offender if it fears civil actions, as the probability of success of a civil action is higher if the NMa has already decided that the defendant participated in a cartel (follow on actions).

Civil claims

According to Dutch law a company, another entity or a natural person who suffered losses due to a cartel can initiate a civil lawsuit in attempt to recover these losses. A claim submitted to the civil courts can be based on wrongful act, unjustifiable enrichment and undue payment. In theory it should also be possible to recover ‘scattered losses’ (many individual small losses caused by a single cartel) through the civil courts. Perhaps the Dutch Class Action Act that went into effect on 1 January 1995 offers a solution. However, up until now, no proceedings have been initiated on behalf of aggrieved groups on the basis of that Act. Research shows that the probable reason for this is the cost of the proceedings and the fact that the burden of proof is placed on the claimant. At the moment the kind of follow up that will be given on the Commission’s White Paper on Damages Actions for Breach of the EC antitrust rules in the Netherlands is being examined.

Recent developments

Several of the NMa’s supervision and enforcement activities are described next. Furthermore, we will give an insight into some recent decisions of civil and administrative courts in connection to cartels. Some of these are currently subject to appeal and they should not be regarded definite yet.

Plantage sector: fines to companies and a natural person

The NMa imposed fines up to e1 million on seven competitors and a natural person in the plantage sector as the relevant companies violated the cartel prohibition in the period January 1998 to February 2004. The competitors exchanged information they applied to tender procedures. The discussions between the competitors were comprehensive and the cartel covered the entire territory of the Netherlands. The cartel focused on dividing contracting agreements within the group of companies and jointly determining the amounts of the tender offerings. This conduct, which started long before 1998 (thus before the entering into force of the Dutch Competition Act), was common practice in this sector in recent years. The NMa considered this conduct bid-rigging.
This case is remarkable as not only undertakings were fined but also a natural person, a former employee of one of the involved undertakings. The NMa stated that the former employee not only violated the DCA for leading the conduct of his employer and the other undertaking involved by initiating meetings, but also because he refused to cooperate with the NMa’s investigations. This decision of the NMa has been criticised as the employee refused to cooperate with the NMa for what seemed to be valid reasons. He feared that the facts he was requested to declare on would be used against him in criminal and tax proceedings in which he was also involved and in which he had a right to remain silent. Furthermore, he argued that he should not be forced to cooperate as he was also involved in a legal dispute with his former employer. The NMa, however, was of the opinion that as the former employee was warned several times that not cooperating could lead to a fine, he chose not to cooperate being fully aware of the possible consequences. The decision of the NMa is furthermore remarkable as the former employee involved was the one who informed the NMa about the existence of the cartel. The NMa nevertheless imposed a fine, but limited it to €10,000, because of the financial position of the employee.

District Court of Rotterdam decides on discretionary power with regard to applying leniency

The history of this case lies in several decisions the NMa took in connection with construction fraud in recent years. In the Dutch construction sector bid-rigging was widespread. This mainly came to light in 2001. In reply to this the NMa requested all potential infringers to voluntarily report possible violations in return for leniency. Eventually 481 undertakings reported infringements to the NMa, the majority of which qualified for leniency. Fines were imposed in line with a leniency programme specifically drawn up for the construction sector. One of the publications was the Sanctions Publication concerning Restrictive Trade Practices in the Installation Sector (the Installation Sector Publication). This publication was especially drawn up for the installation sector, but unlike publications for other sectors in the construction industry, which provided for a 50 per cent leniency maximum, the Installation Sector Publication provided for a fixed leniency maximum of only 40 per cent.
In this case the NMa imposed fines to undertakings in the installation sector applying the 40 per cent leniency maximum. The undertakings appealed this decision in court stating that the NMa action constituted a discriminatory treatment and a breach of principles of legitimate expectations. The offenders stated that they assumed they would be treated equally to other undertakings in the construction sector and would therefore qualify for a reduction of their fines of 50 per cent. The court however ruled that the NMa has a discretionary power with regard to leniency schemes and the (possible) reductions of fines. This means that the NMa is entitled to a certain freedom of decision, which the court has to honour. In the opinion of the court the NMa did not violate the principle of equality by applying a leniency maximum different from other (comparable) sectors in the construction industry. The court concluded that the NMa had acted within the limits of the power conferred upon it. A relevant factor in this decision was that the NMa started the investigation into the installation sector long before the reports from the undertakings in that sector came in.

District Court of Rotterdam decides on the scope of the investigation of the NMa (administrative law)

Two undertakings, both active in the concrete construction sector, entered into a cooperation agreement that included exclusive notification and consultation commitments with respect to tenders. In response to a complaint from a client the NMa opened an inquiry, which showed that the undertakings were each other’s (potential) competitors and that the agreement led to the prevention, restriction or distortion of competition on the relevant market. For that reason the NMa imposed fines in total of €50,000. The undertakings disputed that they were (potential) competitors. In such a case their behaviour would have been permissible. The court ruled that the answer to the question of whether undertakings can be considered as each other’s competitors depends not only on the qualification of the undertaking as such, but also on their position in the relevant market. In the opinion of the court the NMa had failed to take into consideration that the undertakings operated in different areas of the sector. Because the NMa had not investigated the position of the undertakings in the relevant market the results of the investigation could not support its conclusion that these undertakings were (potential) competitors. Therefore, the court nullified the challenged decision of the NMa.

District Court of Rotterdam decides on the freedom of the NMa not to investigate possible infringement

Another remarkable case was the appeal of a third party against the NMa decision regarding the community of Castricum (a Dutch village in North-Holland). The community of Castricum allowed the tennis association Akersloot and the tennis association Vinkenbaan to rent real estate for a symbolic price. The third party (also the claimant) wished to exploit its real estate as a commercial tennis park. As it could not compete with the low prices the other associations could offer due to their very low rent, it complained to the NMa that no fair competition was possible. It stated the rental price was disturbing competition in the market of outdoor tennis in the community of Castricum. Furthermore, it claimed that the community abused its dominant position. The NMa indicated that it would not act upon this complaint as it had no resources available and felt the matter was not of that much importance. The third party objected to this decision but the NMa maintained that it was not obliged to investigate the matter, thus forcing the third party to start proceedings against the NMa.
The court of Rotterdam ruled in favour of the undertaking and ordered the NMa to take actions and investigate the situation in Castricum. The NMa, probably fearing the case would lead to other proceedings against its decisions not to investigate matters, decided to start appeal proceedings with the Trade and Industry Appeals Tribunal. The Trade and Industry Appeals Tribunal ruled in favour of the NMa in early 2008. It stated that the community did not abuse a dominant position nor did it infringe Dutch competition law and stressed the freedom of the NMa to decide which cases to investigate.

District Court of Leeuwarden decides on the validity of a non-competition clause (civil action)

In this case, one of the shareholders of a parent company (Frianco) decided to resign and sell his shares in the company to the other shareholders and to simultaneously take over one of the subsidiaries of Frianco (Fri-tec). The transaction amount mainly consisted of goodwill. The agreement did not include a non-competition clause. Shortly after the transaction the resigning shareholder started to compete with Frianco through his new company Fri-tec. Frianco claimed that Fri-tec acted unlawfully because the parties had orally agreed upon a non-competition clause and also because the purchase price of the shares included goodwill. Fri-tec contested this point of view stating that the cartel prohibition would stand in the way of such a non-competition clause.
The court rejected this defence. It stated that, although a non-competition clause would in this particular case be allowed because the bagatelle provision contained in the DCA applied, it did not indisputably appear from the facts that a non-competition clause had been agreed upon. The court nevertheless ruled that Fri-tec had acted unlawfully by competing in the immediate surroundings of Frianco shortly after the transaction, as Fri-tec had received a price for and transferred goodwill and was now damaging that goodwill. Although the agreement did not include a non-competition clause, Fri-tec was thus ordered not to compete and such an obligation was not considered contrary to competition law.

Looking ahead

As said, the NMa is an autonomous administrative authority. However, at the 10th anniversary of the NMa in March 2008, the minister of economic affairs announced that she wishes to reduce the legislative powers of the NMa and to pursue a more clear-cut separation of the legislative and executive powers of the NMa. The powers of the NMa will therefore be subject to a governmental investigation. Furthermore, we expect that the number of leniency applications and negotiated settlements will increase. Finally we can say that we expect quite a bit of case law concerning the new powers of the NMa.

An extract from The European Antitrust Review 2009