NMa fines two cartels in Dutch home care industry
The Netherlands Competition Authority (NMa) imposes fines, varying between €611,000 and €4 million, on five home care providers in the Dutch regions of Kennemerland and 't Gooi for involvement in cartel activities. These cartels deprived clients of their freedom to choose their own care.
Kennemerland
In late 2006, the NMa received indications that major home care providers in the service area of regional health care office Kennemerland had divided the market amongst themselves along geographical lines. They divided the area in two sections, using the North Sea Canal as the boundary line. Dividing the market had been their answer to the introduction of competition in 2004 through the amendment of the Exceptional Medical Expenses Act (AWBZ). They preferred to make arrangements to maintain the status quo rather than to compete with each other for clients. In fact, the home care providers in question referred clients to one another. They were fully aware of the fact that they impeded competition by doing so, as evidenced by documents of the parties involved. They consciously chose to cooperate in this market instead of competing with one another.
The two home care providers in Kennemerland that are fined are Viva! Zorggroep Foundation (formerly Thuiszorg IJmond Foundation and Partners in de Zorg Foundation), which is fined €4,003,000, and Zorgbalans, which is fined €800,000.
't Gooi
The region of 't Gooi was also home to a cartel, which consisted of three major home care providers, that significantly impeded competition. Documents reveal that parties called competitive behavior 'not productive', and that managers of these organizations 'did not prefer' competition. The home care providers involved delegated various activities to one another, creating a tight distribution of work and sections in the service area of the regional health care office. Unthreatened by the other home care providers, the Thuiszorg Gooi en Vechtstreek Foundation (TGV) offers the most home care service in the entire region, while Vivium Zorggroep Foundation and Hilverzorg Foundation provide home care services to clients in an area within the region. Furthermore, Vivium and Hilverzorg had agreed not to become active in each other's sections. They referred clients of the three providers to one another in order to maintain the distribution of work and sections.
TGV, Vivium and Hilverzorg are fined €1,621,000, €816,000 and €611,000 respectively.
Freedom of choice restricted
The cartels in the regions of Kennemerland and 't Gooi resulted in clients having their freedom of choice restricted, whereas the AWBZ and the Social Support Act (WMO) were aimed at enabling clients to take part in deciding about their own home care services and about who would provide them. Having made mutual arrangements, the home care providers had no need to be afraid that clients would switch to a competitor. If clients had the opportunity to choose the best offer, then health care providers would be stimulated to satisfy their clients' needs. 'These health care providers frustrate competition with their arrangements. Clients do not have enough options, and this will lead to an increase in health care costs as well,' member of the Board of the NMa René Jansen says.
Transition to a market-based system
The Dutch home care industry is faced with many changes. 'The NMa has actively provided a lot of information and advice on what is allowed and prohibited according to the Dutch Competition Act for many years after the introduction of a market-based system. Now it is imperative to have compliance,' Mr. Jansen says. The fines, totaling almost €8 million, could have been set substantially higher, considering the revenues of these providers (a total of €178 million). However, the NMa sees the transition to a more market-based system, which the industry is currently undergoing, as one of the reasons to mitigate the fines. This transition calls for the home care providers to make major adjustments. The NMa is of the opinion that fines should not be counterproductive to this process. When contemplating mitigation of fines, the NMa also takes into account the fact that a fine should not cause an undertaking to go into bankruptcy.
The home care providers in question announced early September that they intended to look at their conduct from the perspective of the Dutch Competition Act in order to avoid fines. The NMa considered this announcement to come at too late a stage, and to be not concrete enough. Furthermore, such an offer is not opportune when severe violations of the Dutch Competition Act are concerned, such as price-fixing and dividing the market.
What is next?
The NMa has been carrying out investigations into the home care industry since 2006. The current fining decisions are the first public results of these investigations. More investigations are currently underway. The NMa has already received leniency requests from other home care providers as well. Undertakings and individuals who give instructions or exercise de facto leadership to cartel practices can apply for leniency, provided that they confess to a cartel. The leniency scheme offers a leniency applicant the opportunity to completely escape a fine, if the applicant is the first one to confess to the existence of a cartel.