Prove it or lose it: court sets aside ACM fines in two separate cases
The Rotterdam District Court recently confirmed the high bar which has been set for the ACM when proving its case: the court annulled the fines imposed by the ACM in two different cases and, significantly, each for the same reason.
The court first set aside a fine imposed on Midac, a battery importer, because the ACM had failed to prove that Midac intended to contribute to the common objectives of the cartel and thus participated in a single continuous infringement. The ACM's second fine, imposed on Dutch railway operator NS, was struck down due to insufficient substantiation of the ACM's claim that NS held a dominant position on the main railway network.
If a company is subject to an ACM fine, it would therefore be advisable to double-check the thoroughness of the ACM's investigation and substantiation of its claims when considering appeal.
Single continuous infringement and Midac
In 2017, the ACM imposed a fine of EUR 583,000 on Midac for participation in a price-fixing cartel for forklift truck batteries. According to the ACM, the price-fixing agreements, involving a trade association and a number of battery importers, had been in place between 2004 and 2013. The ACM qualified the cartel as a single continuous infringement in which Midac had participated from 1 January 2013. The ACM based this finding on (1) telephone conversations and emails between Midac's director and one of the other battery importers involved, and (2) Midac accepting the price lists sent by the trade association without explicitly distancing itself from the price-fixing agreements.
The court first reiterated earlier case law which establishes that for a company to be considered as participating in a single continuous infringement, there must be proof that the company:
- intended to contribute to the cartel's common objective with its conduct, and
- was aware of the conduct of the other participants aimed to achieve the cartel's common objective.
According to the court, the ACM had failed to prove these requirements had been fulfilled in this particular case. The fact that Midac's director had been aware of the cartel due to his earlier employment at other battery importers did not prove that Midac intended to contribute to the cartel's common objective or wanted to join it, particularly since alternative explanations for this contact were available. Similarly, the price lists Midac received from the trade association were no sign of Midac wanting to contribute to the cartel's common objectives, as Midac neither reacted to receiving these lists nor used them for determining its prices. The court therefore set aside the fine imposed by the ACM on Midac. The ACM has stated it is studying the ruling and will later decide whether it will appeal to the Trade and Industry Appeals Tribunal.
Dominant position and NS
Also in 2017, the ACM imposed a fine of nearly EUR 41 million on NS for abuse of dominance. According to the ACM, NS had abused its dominant position on the main railway network by, amongst other things, submitting a loss-making bid for a public transportation tender in Limburg. The bid was intended to obstruct its competitors and prevent possible future decentralisation of the main railway network (see also our July 2017 newsletter).
On appeal, the court was unconvinced by the ACM's arguments that NS held a dominant position on the relevant market. According to the ACM, NS could act independently on the main railway network market because:
- NS is the sole concession holder of the main railway network until 2025;
- the contracting authority had no real alternative, other than NS, to award the concession to;
- there was insufficient buyer power from the contracting authority and end users, such as train passengers, to keep NS' conduct in check.
The court found these reasons insufficient to conclude on NS' dominance. If NS did indeed hold a dominant position, it could have steered the negotiations over the concession conditions in such way so as to leave itself enough leeway to act independently. But since the ACM had neglected to investigate if and how the concession conditions affected NS' conduct, it could not be established beyond a reasonable doubt that NS had a dominant position on the main railway network market.
Even though it was therefore no longer necessary to consider whether the conduct constituted abuse, the court nonetheless examined the question of whether allegedly the loss-making bid for the Limburg concession could be considered abusive. It referred to earlier EU case law to point out that, in order to take account of an abuse on a market other than that on which the dominant position was identified, it is necessary to prove that there is a connecting link between the two markets.
According to the court, the ACM had failed to demonstrate a sufficiently close link between the allegedly loss-making bid for the Limburg concession and NS' position on the main railway network market. The Limburg concession was not a decisive factor in the decision whether the main railway network would be decentralised as of 2024 (the expiration date of the current main rail network concession). Envisaged EU regulatory proposals and political developments led the court to believe that the effects of the conduct regarding the Limburg concession on the potential market for (all or part of) the main railway network (after 2024) were insufficiently certain to be considered as a sufficiently close link. The court therefore annulled the fine imposed on NS. The ACM is currently analysing the ruling and will then determine any further steps to take.
Conclusion
Both rulings show that in order to improve its track record, the ACM will need to expend more effort on finding proof of infringements before imposing fines – a key factor which companies should consider when deciding whether to settle or appeal fines imposed on them.
This article was published in the Competition Law Newsletter of July 2019. Other articles in this newsletter:
