NMa fines tree growers and reprimands association of undertakings
The Netherlands Competition Authority (NMa) has imposed fines of up to more than 1 EUR million on seven tree growers for entering into cartel agreements in the period from January 1998 to the end of February 2004. Such agreements between competitors contravene the Competition Act. Following its investigation into the tree growing business, the NMa also reprimanded the Dutch Association of Tree Growers [Nederlandse Bond van Boomkwekers] for issuing price recommendations to its members. Price agreements, also including price recommendations given out by an association of undertakings, are prohibited on the basis of the Competition Act.
Fine for tree growers
Prior to registering for local council procurement contracts, the companies concerned met on various occasions and in varying groups in order to discuss collusive tendering arrangements. The procurement contracts involved related to the provision of horticultural products such as trees and shrubs. The meetings were interrelated and formed a system with nation-wide coverage. Wherever possible, the system aimed at the allocation of contracts among group members and provided for coordinated bidding. Practices took hold well before the effectuation of the Competition Act in 1998. Companies allocated supplies in four ways: through a rota system (each year one of the companies 'takes its turn' in providing a municipal council with tree products). Also, parties arranged for the allocation of particular neighbourhoods (providing tree nursery products to one or several neighbourhoods within a municipality) and agreed on product allocation, distinguishing various types of tree nursery products. In addition, local councils were allocated among members of the group. One of the companies faces a 15 per cent fine increase, owing to its leading, stimulating and initiating role in the cartel.
Harmful effect of anti-competitive activities
Collusive tendering agreements constitute a serious infringement of the Competition Act. Procurement procedures are instrumental in helping a client find the best deal in terms of the price/quality-ratio. It is important that companies submitting tenders do not communicate on the subject of the tender beforehand, as this may significantly restrict or even eliminate competition. Cartel agreements put local councils at a disadvantage as prices paid exceed the price level that would have been achieved under normal competitive conditions.
The case was brought to light after a tip-off from the Fiscal Information and Investigations Service/ Economic Investigation Service [FIOD/ ECD]. During an investigation the Service found several documents referring to cartel agreements between the companies concerned.
Dutch Association of Tree Growers
During an investigation into the tree growing business, the NMa also came across so-called 'seasonal price catalogues', which have been used by the Dutch Association of Tree Growers. These booklets feature indicative cost prices for growers, intended as pricing policy guidelines. On the basis of jointly recommended prices or price increases (irrespective of whether they are actually implemented), it is possible to make a reasonably accurate prediction of the pricing policy among competitors. As the members of the Dutch Association of Tree Growers represent a significant part of the market, price agreements of this kind will have an appreciable effect, placing clients, among which local councils, at a direct disadvantage. The NMa called on the Dutch Association of Tree Growers to put an immediate end to the distribution of the booklets, if it were to avoid being subjected to a competition investigation. A recent monitoring exercise showed that the Dutch Association of Tree Growers has complied with commitments made in this regard. Therefore, the NMa will refrain from pursuing further investigations.
Leniency
The investigation into the tree growing business made use of evidence previously submitted by two companies under the leniency programme. The NMa has reduced the fine imposed on both these companies.
As of 1 October 2007, the NMa may also impose fines on individuals for giving instruction to or exercising de facto leadership with regard to cartel conduct. In line with this, natural persons as well as companies may become eligible for fine reduction or fine immunity by notifying the NMa of their participation in a cartel (leniency).