Decisions by the Netherlands Competition Authority (NMa) Home care

SUMMARY OF 'T GOOI CASE

Facts
This case took place in health care office region 't Gooi and it concerned cooperation between three home care providers: Hilverzorg Group, Vivium and TGV. Other providers are active in the same region as well.
The case starts at the time of the introduction of competition in the Exceptional Medical Expenses Act (AWBZ) in 2003-2004, when Hilverzorg primarily provided residential care in the region of 't Gooi, as well as extramural care in the surrounding areas of its nursing homes. Vivium provided the services for the locations of its own, and TGV primarily provided extramural care. At first, the undertakings decide to merge.
The three parties notify the NMa of their intention to merge on July 28th, 2005. The NMa decides on November 4th in case number 4212 that a license is required, as competition objections call for further investigation. The parties apply for a license in May 2006, but withdraw the application in November because they expect the license application to be turned down.
Several documents reveal the desire of the parties involved to aim for complementarity, in case the merger cannot go through, instead of to compete on the activities of the companies involved. While the concentration procedure is still ongoing, rhey consequently already work on an alternative form of cooperation, one that will have the same results as the merger would have.
They enter into a cooperation agreement on June 30th, 2006, of which a signed copy is included in the dossier. Various activities are transferred under this agreement, such as care teams and facilities.
The three undertakings come to the following redistribution of their activities: Vivium and Hilverzorg transfer their extramural-home care teams to TGV, while TGV transfers its extramural-home care and nursing teams to both Vivium and to Hilverzorg. The care and nursing teams of TGV are grouped around the residential institutions of Vivium and Hilverzorg in such a way that two separate geographical working areas are created.
Furthermore, parties agree not to compete with each other on the abovementioned activities. They agree to refer clients to one another if one of them is approached by a client for a service it does not offer under the agreement, and TGV refers clients for care and nursing to Vivium or Hilverzorg, depending on the client's address. In doing so, they maintain the distribution for an indefinite period of time.
TGV, joined by the other two providers, who are thus prevented from cooperating with other interested parties, submits a tender for a contract that the municipalities in the Dutch region 't Gooi collectively put out, which is the result of the introduction of the Social Support Act (WMO). TGV is awarded the contract, and thus becomes the sole provider of home care in the region.
Vivium and TGV merge at a later stage, while the original foundations are preserved but are placed under the control of the board of the Vivium-TGV Foundation. This changes the balance of power within the alliance and sets in motion a process of dissolution. The agreement is formally continued until January 1st, 2008 for fiscal reasons, and does not lead to any visible change in conduct in 2007.

Decision by NMa
Looking at the facts, the NMa concludes that there are indeed agreements and, as a result thereof, harmonization of conduct, both having the effect of impeding competition in the health care office region 't Gooi, which should be considered as the relevant market. Considering the substantial market position (a combined market share of more than 60 per cent in personal nursing care, and a combined market share of more than 70 per cent in domestic care), the impediment to competition must be considered to be appreciable. As a result, they violate Section 6, paragraph 1 of the Dutch Competition Act.
Invoking the European group exemption for specialization agreements, nor invoking the exemption from the prohibition of cartels of Section 6, paragraph 3 of the Dutch Competition Act, nor invoking the provision with regard to ancillary restrictions will bear any fruit for the parties. In short, the impediments to competition significantly exceed what could be justified based on the rationale of these exceptional provisions, and various conditions are not met.
The undertakings in question strongly emphasized during the procedure that their cooperation had the intention of improving the quality of care. Specifically, their agreements would benefit the development of so-called chain care (seamless integration of extramural and residential care for the same client) and district-oriented care (home care that is organized at locations close to the clients).
The NMa does not dispute the assertion that the parties strived for chain care and district-oriented care, but it gathers from the dossier that the elimination of mutual competition was expressly strived after as a separately stated objective, which is clearly evidenced by the way the cooperation was designed, by statements made by people involved at the managerial level, and by the context as a whole. According to settled case law, when it has been established that an agreement has the effect of impeding competition, the assertion that parties did not have the intention to impede competition, nor that the agreement also had another objective, will generally not benefit the parties.
The fact that the undertakings set up their cooperation as second best option to the originally intended merger, to which the NMa had raised competition objections, is particularly important in this regard. The NMa points out that the three pillars of the Dutch Competition Act, which are the prohibition of cartels, the prohibition on the abuse of a dominant position, and the regulation of concentrations, constitute one entity, and that they should be interpreted with the same objective in mind, so that undertakings cannot escape the law by just altering the design of their cooperation.
Chain care and district-oriented care can be achieved by expansion of individual activities, by transfer of activities between undertakings, and by cooperation that is specifically aimed at improving integration of non-competing activities. However, any decision by an undertaking should always be taken independently and freely. A permanent form of cooperation that has the providers promise each other that they will respect each other's working areas for a longer period of time falls under the prohibition of cartels, and the prohibitive nature of the cooperation cannot be taken away by the intention to also aim for better care.

Fines
The NMa Fining Code, which is applied by the NMa regardless of the industry it investigates, stipulates that the relevant turnover is the starting point – the duration of the violation has already been discounted.
The NMa classifies the present violation as 'severe', and not as 'very severe' as might have been the case with a classic, secret cartel. It is classified as 'severe', because parties were each other's close competitors and had a strong position on the market, because they undermined the development of competition in the home care industry, which lawmakers had intended, and because clients and the regional health care office have been restricted in their freedom of choice. Next to those aspects, there are also factors that mitigate the gravity of the violation: the regional health care office could respond by stimulating entry into the market, and while the parties' ambitions with regard to the provision of care cannot take away the ascertainment of the violation, they can be taken into account to some extent here, and a time-limited area protection is appropriate when transfers of activities are concerned that are not prohibited in themselves.
Furthermore, the NMa acknowledges that there are special circumstances in the home care industry that give reasons for a mitigation of the fines (25 per cent). First, the NMa does not have the intention to deprive home care undertakings of their financial resources to compete in the market, so as to not frustrate the development of the competition process. Second, the NMa is not blind to the fact that budget restrictions and tariff regulation act as a ceiling for possible price increases that could be the result of the illegal cooperation at the expense of public funds.

The Hilverzorg Foundation is fined EUR 611,000.
The Vivium Zorggroep Foundation is fined EUR 816,000.
The Thuiszorg Gooi en Vechtstreek Foundation, Centrum voor Regionale Dienstverlening is fined EUR 1,621,000.
The holding Vivium-TGV Foundation is jointly and severally liable for the latter two fines.


SUMMARY OF KENNEMERLAND CASE (NMa decision of September 19th, 2008)

Facts
In 2003-2004, four home care providers in the health care office region of Kennemerland regularly consult with each other about their joint reaction to the anticipated development of increased competition between providers under the Exceptional Medical Expenses Act (AWBZ). These four providers are Ouderenzorg Velsen Foundation (SOV), ZorgBalans Groep Foundation, Thuiszorg IJmond Foundation (TIJ), and Partners in de Zorg Foundation (PiZ).
Having looked into various scenarios, they opt in 2005 to carry out two mergers, and that the two new combinations will not compete with each other. SOV and ZorgBalans Groep Foundation form Zorgbalans Foundation (Zorgbalans) as of January 1st, 2006, which has a service area south of the North Sea Canal. TIJ and PiZ fall under the newly established holding Viva! Zorggroep Foundation (Viva!) with a service area north of the North Sea Canal. Both of these concentrations do not exceed the threshold for concentration regulation under the Dutch Competition Act, and are subsequently not notified. At the same, activities in section Velsen-South, which is on the 'wrong side' of the boundary line, are transferred to Zorgbalans. Furthermore, a non-competition agreement is reached that provides for protection of buyer and seller, without any clear time limit.
The undertakings argue that, by combining residential and extramural care both north and south of the canal into one undertaking, they are better able to organize chain care and district-oriented care, which accords with their joint vision on care provision. At the same time, however, two large adjacent service areas are created, separated by the North Sea Canal, and are each controlled by one dominant player, Zorgbalans and Viva!. The arrangements include promises not to initiate activities in the other party's service area. Clients are referred based on their address. Any possible competition between these two providers is thus consciously eliminated, for now and in the future, when competition might have otherwise developed further.
As the Social Support Act (WMO) takes effect on January 1st, 2007, Zorgbalans and Viva! go head to head when a domestic nursing contract is jointly put out to tender by municipalities in the region. To that extent, that part of the arrangements ceases to exist. However, they promise each other that the other party could continue working, in case the tender is lost, but then as subcontractor. This is the case when Viva! wins; implementing this deal, the providers explicitly confirm in a side letter that Viva! does not have the intention to provide other kinds of care than domestic care (which means they will not provide nursing care) in the service area of Zorgbalans.

Decision by NMa
Looking at the facts, the NMa concludes that there are agreements that have the effect of impeding competition in the health care office region Kennemerland, which should be considered as the relevant market. Considering the substantial market position (a combined market share of more than 50 per cent in 2006, more than 70 per cent in 2007 in personal nursing care, and more then 90 per cent in domestic care), the impediment to competition must be considered to be appreciable. As a result, they violate Section 6, paragraph 1 of the Dutch Competition Act.
They cannot apply for a legal exemption from the prohibition of cartels: the arrangements as a whole impede competition far more than the objective of improving efficiency of the care provision might call for. The non-competition agreement that is attached to the transfer of Velsen-South also greatly oversteps what is needed to protect the buyer against a depreciation of the value of the transferred 'assets'.
The undertakings in question strongly emphasized during the procedure that their cooperation had the intention of improving the quality of care, which they aimed for under a 'shared vision on care provision'. Specifically, their agreements would benefit the development of chain care (seamless integration of between extramural and residential care for the same client) and district-oriented care (home care that is organized at locations close to the clients).
The NMa does not dispute the assertion that the parties strived for chain care and district-oriented care, but it gathers from the dossier that the elimination of mutual competition was expressly strived after as a separately stated objective, which is clearly evidenced by the way the cooperation was designed, and by the context as a whole, for example an often verbalized dislike for competition that was often heard at the managerial level. According to settled case law, when it has been established that an agreement has the effect of impeding competition, the assertion that parties did not have the intention to impede competition, nor that the agreement also had another objective, will generally not benefit the parties.
Chain care and district-oriented care can be achieved by expansion of individual activities, by transfer of activities between undertakings, and by cooperation that is specifically aimed at improving integration of non-competing activities. However, any decision by an undertaking should always be taken independently and freely. A permanent form of cooperation that has the providers promise each other that they will respect each other's working areas for a longer period of time falls under the prohibition of cartels, and the prohibitive nature of the cooperation cannot be taken away by the intention to also aim for better care.

Fines
The NMa Fining Code, which is applied by the NMa regardless of the industry it investigates, stipulates that the relevant turnover is the starting point – the duration of the violation has already been discounted.
The NMa classifies the present violation as 'severe', and not as 'very severe' as might have been the case with a classic, secret cartel. It is classified as 'severe', because parties were each other's close competitors and had a strong position on the market, because they undermined the development of competition in the home care industry, which lawmakers had intended, and because clients and the regional health care office have been restricted in their freedom of choice. Next to those aspects, there are also factors that mitigate the gravity of the violation: the regional health care office could respond by stimulating entry into the market, and while the parties' ambitions with regard to the provision of care cannot take away the ascertainment of the violation, they can be taken into account to some extent here, and a time-limited area protection is appropriate when transfers of activities are concerned that are not prohibited in themselves.
Furthermore, the NMa acknowledges that there are special circumstances in the home care industry that give reasons for a mitigation of the fines (25 per cent). First, the NMa does not have the intention to deprive home care undertakings of their financial resources to compete in the market, so as to not frustrate the development of the competition process. Second, the NMa is not blind to the fact that budget restrictions and tariff regulation act as a ceiling for possible price increases that could be the result of the illegal cooperation at the expense of public funds.
In the case of Zorgbalans, the NMa mitigates its fine on an individual basis, because an unmitigated fine would likely result in bankruptcy of the undertaking.

The Viva! Zorggroep Foundation is fined EUR 4,003,000.
The Zorgbalans Foundation is fined EUR 800,000.