NMa looks back on results of third quarter 2008

The Netherlands Competition Authority (NMa) set limits in the third quarter of 2008 on cooperation between home care providers in the Netherlands by, among other things, imposing fines of approximately €8 million on five Dutch home care providers in the regions of Kennemerland and 't Gooi for cartel participation. Furthermore, Dutch network infrastructure manager ProRail starred in a couple of decisions by the NMa, among which in two fining decisions that have resulted in fines of €876,000 for the manager of the Dutch railways network. The NMa also set limits to the railway capacity allocation process through a decision in a dispute between ProRail and Dutch railway undertaking NS Reizigers. Also, the tariffs for energy transmission have caused quite a stir in recent months. Below is a short review of a couple of results in the past three months.

Limits to home care industry
The five home care providers in the regions of Kennemerland and 't Gooihat were fined for cartel participation divided each other's service areas. Customers were therefore unable to freely make their own choices with regard to their own care. The NMa has repeatedly informed the industry in recent years that cooperation between health care professionals (such as general practitioners and physiotherapists) in so-called chains would normally not pose any problems at all. But customers will be disadvantaged by a market division cartel, as they will no longer be able to choose their own health care provider.

Having received a notification of a merger in the home care industry in the eastern part of the Netherlands, the NMa attached conditions to the merger of ThuishulpNederland B.V. by AsitoDienstengroep B.V (ADG). ThuishulpNederland is part of the Evean Group Foundation and is solely active in the home care industry. The NMa is of the opinion that ADG can only acquire these activities from Evean after ADG has completely hived off its home-care activities in the Dutch city of Zwolle. ADG must transfer at least 90 per cent of these activities to home-care provider De Nieuwe Zorg Thuis. This decision by the NMa prevents the strengthening of the position of ThuishulpNederland in Zwolle. The municipality of Zwolle endorses the chosen solution.

Railway capacity
ProRail, the Dutch railway network infrastructure manager, was imposed two fines in the third quarter for the way it allocated railway capacity. By taking these fining decisions, the NMa indicated that ProRail needs to grant as many capacity requests from railway undertakings as possible, and that it therefore needs to treat all requests equally.

Also, ProRail has to carry out so-called capacity analyses, which should provide possible solutions to any capacity problem that railway undertakings experience, within six months after the infrastructure has been declared 'overloaded'. The NMa is of the opinion that ProRail needs to work in a timely manner towards structural solutions to increase capacity in places that experience capacity shortages, because railway undertakings do not have any other choice but to turn to ProRail.

In another dispute, between NS Reizigers (NS) and ProRail, the NMa decided that ProRail needs to comply with term limits when allocating capacity. The NMa was also of the opinion that ProRail has to take into account capacity requests from railway undertakings when it plans its maintenance works. In case there is a conflict between the capacity requests of ProRail and of a railway undertaking, both parties are required to come up with a custom-made solution. Should they not be able to reach a solution, then it is advisable to have a dispute settlement procedure in place. The NMa has therefore given ProRail the task of drawing up a dispute settlement procedure for disputes between management requests and transport requests. These decisions are in line with decisions earlier this year, which the NMa took in disputes between railway undertakings Syntus, Arriva and Veolia on the one hand, and ProRail on the other.

Stimulating efficiency and quality in energy industry
The Dutch Trade and Industry Appeals Tribunal (CBb) (external website) rendered two decisions this quarter that will have an effect on the way tariffs for transmitting natural gas and electricity are established.

The CBb gave a decision in an appeal brought by three network operators against the tightened regulatory framework for natural gas that the NMa adopted in April 2008. The CBb ruled that the network operators were able to bear the so-called x-factor, which the NMa uses as an incentive for the operators to work more efficiently. The CBb's ruling supports the choices that the NMa has made. The CBb does not share the view of the network operators who predict they will face financial problems as a result of the tightened regulatory framework. The Tribunal asserts that any causes to financial problems fall under the normal risks that companies face, or are the result of exogenous developments.

The CBb ruled late September in another case brought by network operators that the Dutch Electricity Act and Gas Act provide the NMa with room to stimulate the quality of the networks in various ways. The network operators wanted to balance the so-called q-factor with the compensations that they are required to pay in case of a serious power failure. This q-factor is the average number of failures that consumers suffer. Network operators are financially rewarded or punished based on this average.

The CBb ruled in the NMa's favor because both methods serve different needs. The objective of the compensation scheme is to award individual compensations in cases of severe power failures, whereas the q-factor aims to improve the quality of the network by punishing or rewarding the operator.

Company inspections and reports
The third quarter has seen the NMa carry out company inspections at undertakings in the cosmetics industry and in the aviation industry on suspicion of violating the Dutch Competition Act. The NMa has also drawn up reports against undertakings in the financial industry and in the painting industry on suspicion of violating the Competition Act. These undertakings will be given the opportunity to react to these reports, after which the NMa will determine whether the undertakings actually violated the Act or not, and if so, the NMa will fine them.

NMa keeps a close eye on the construction industry
The NMa will keep a close eye on the Dutch construction industry. The reports on the painting industry are not the only pieces of evidence that the NMa will do so. The NMa also intervened in mid-2008 in a tender procedure of a Dutch municipality. Having received an indication of possible cartel agreements, the NMa sent out a letter, warning the construction companies that were involved. The municipality was subsequently able to award the tender for a substantially lower price than what was initially possible in the preceding tendering phase.

The NMa also conducted an opinion survey this year. More than 500 respondents that are active in the construction industry were interviewed. Published in September, the results revealed that tackling the construction industry fraud has led to a different way of working in the construction industry as a whole. There are nevertheless still indications that price-fixing agreements have not yet been wiped out.

Green light and orange light to mergers
The NMa has made changes in the third quarter to the decision Expedited processing concentration cases in order for the NMa to work even more effectively. It is now able to handle more concentration cases without publishing the reasons behind a decision in detail.

Reasons behind a concentration decision will still be published in cases:

a. where a license is required for the concentration and where the NMa finds it desirable that further investigation into the effects of the concentration is to be carried out, or where the requirement for a license is prevented by a remedy.

b. where a concentration decision differs from an advice of the Netherlands Healthcare Authority (NZa), of the Independent Regulator of Post and Electronic Communications in the Netherlands (OPTA), or of the Dutch Media Authority [Commissariaat voor de Media] on the same concentration.

c. where stakeholders raise relevant objections during the handling of the concentration case.

The NMa received 36 merger notifications in the third quarter, and it approved 40 partially earlier submitted notifications after an initial investigation.

The NMa approved the acquisition of Yellow Pages Netherlands (Gouden Gids – part of Truvo Nederland) by De Telefoongids (part of European Directories) after further investigation.

The results of the investigation show that current competition between the two companies is limited. Furthermore, a substantial number of advertisers indicate that they will consider switching to other media, including both offline and online media, or that they will completely stop advertising in the business directories of both companies in case of a price increase. The NMa notes that a small group of advertisers might be disadvantaged by the acquisition. The group of advertisers who would be disadvantaged by the acquisition would nonetheless be smaller than the group of those who would benefit from it. Part of the equation was that the acquisition will result in consumers receiving Yellow Pages Netherlands and De Telefoongids as one business directory in 2009 at the latest. Their websites would also be integrated into one online directory, which has already happened at the time of writing.

The NMa has also approved the acquisition of Thieme Meulenhoff B.V., part of PCM Uitgevers B.V., by NDC Houdstermaatschappij B.V. (only available in dutch) This merger would not significantly impede competition, according to the NMa. Both publishers publish, among other things, textbooks for primary, secondary and higher education.

The NMa will further investigate the creation of the joint venture of Evilim Industriewater BV (Evilim) by Dutch water companies Evides Industriewater BV (Evides Industriewater) and NV Waterleiding Maatschappij Limburg (WML). The NMa believes that the creation of the joint venture might result in the proposed joint venture attaining such a dominant position that might leave buyers on the market for production and distribution of high-quality industrial water with too few alternatives. If Evides Industriewater and WML wish to proceed with the creation of this joint venture, they will need to apply for a license. The NMa will then decide within 13 weeks whether it approves the creation of the joint venture.

Market studies
The NMa increases its attention to competition in the domestic water transport industry as a result of a market study, as well as after receiving concrete tip-offs and indications from the market. Several specific segments in the industry are highly concentrated, and some competitors have entered into close collaborative agreements. The NMa will actively investigate possible violations of the Dutch Competition Act in the water transport industry.

The NMa is conducting a market scan in the auto repair industry. This market analysis is the result of having received numerous complaints from auto repair shops over the fact that many insurers refer their customers to selected auto repair shops in case of car damage. The NMa wants to use this market scan to find out to what extent insurers are at the wheel of directing auto repairs in the Netherlands. Approximately 1,200 auto repair shops will be interviewed. The NMa also wants to measure the market share of the two or three biggest players, and whether they discriminate or not. Whether the NMa will launch any further investigation will depend on the results of the market scan.

The NMa has also set its sights on the price development of Dutch bread. This investigation stems from the attention that the NMa gives to the Food and Agricultural market as a whole, as indicated during the presentation of its Agenda 2008. The NMa will also further investigate the price-making processes of several other agricultural staples besides bread.

More information on the results of the third quarter can be found online at https://www.acm.nl.