Highest Dutch court: the postman may still ring twice?
The Dutch Minister of Economic Affairs and Climate Policy was wrong to unblock the ACM’s prohibited merger between postal operators PostNL and Sandd on grounds of public interest. According to the Trade and Industry Appeals Tribunal (CBb), the Minister cannot substitute the ACM’s assessment for its own when considering public interest reasons. Since the Minister did do so in this particular case, the CBb annulled the Minister’s merger clearance.
Companies should be aware that even though public interest reasons may be considered in merger cases, high standards will need to be met before these can be successful.
Background
In 2019, the Dutch Authority for Consumers and Markets (ACM) blocked the incumbent postal operator PostNL's acquisition of its only national competitor, Sandd. The ACM considered that the efficiencies gained from establishing a single postal network following the intended PostNL/Sandd merger failed to offset the anticipated price increases for consumer and business mail. In addition, the PostNL/Sandd merger was unnecessary for PostNL's continued fulfilment of its statutory universal service obligation, since PostNL would still be able to provide this service under economically acceptable conditions over the next few years. The Dutch Minister of Economic Affairs and Climate Policy subsequently overruled the ACM's prohibition decision and approved the merger under strict conditions regarding price increases and network access. According to the Minister, the continuity and affordability of the postal services, and the protection of postal employees, outweighed the competition issues identified by the ACM (see our October 2019 newsletter).
In 2020, the Rotterdam District Court annulled the Minister’s clearance of the blocked merger, mainly because the Minister had insufficiently substantiated the public interest grounds concerned (see our July 2020 newsletter). In addition to appealing the court’s annulment, the Minister issued a new, more substantiated licence (but mainly based on the same arguments) to clear the prohibited postal merger.
The CBb ruling
On appeal, the CBb confirmed the Rotterdam District Court’s earlier annulment but on different grounds. It also annulled the second licence issued. According to the CBb, the system laid down in the Dutch Competition Act prevents the Minister from ‘redoing’ the ACM’s assessment when considering whether to grant a licence on public interest grounds. As a result, the Minister needs to adhere to the ACM’s assessment and can only identify public interest grounds other than those considered in the ACM’s merger prohibition assessment.
Given that the ACM’s assessment already established that the merger’s prohibition would not affect the continuity of postal services (i.e., the universal service obligation), the Minister was – in both licences – wrong to consider a contradictory assessment on the same public interest ground. The Minister dropped the only other public interest ground raised of postal employee protection because it was, in itself, insufficient to outweigh the competition issued raised. Since no other public interest grounds were identified, the CBb found that both licences were granted unlawfully
Conclusion
The CBb ruling underlines the high standard for intervention in merger cases for non-competition related reasons. The Minister cannot ignore the ACM’s assessment underlying a merger prohibition when overruling it on public interest grounds.
Meanwhile, the postal merger saga continues: PostNL’s appeal against the ACM’s merger prohibition is still pending. However, given the difficulty of potentially unscrambling the PostNL/Sandd eggs, it is unlikely that the postman will ever ring twice again.
This article was published in the Competition Newsletter of July 2022. Other articles in this newsletter:
