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NMa Fines Supplier of Bull Semen for Abuse of a Dominant Position

The Netherlands Competition Authority (NMa) has imposed a fine and an order subject to a penalty on CR Delta VRV Holding B.V. (CR Delta). CR Delta and its subsidiary, Holland Genetics B.V., by far the largest suppliers of bull semen to cattle farmers in the Netherlands, abused their dominant position by binding cattle farmers to them through three discount schemes for the purchase of bull semen. The purpose of the schemes was to limit the access of competing suppliers to cattle farmers and to limit their commercial opportunities. Since this is an infringement of the Competition Act, NMa imposed a fine of EUR 2,600,000 on CR Delta. In addition, NMa has ordered CR Delta to terminate the discount schemes in question within two months and to inform its customers of this. If CR Delta fails to comply with this, the company will forfeit a penalty of EUR 2,500 a day subject to a maximum of EUR 1,000,000.

The schemes offered by CR Delta to bind cattle farmers to it and which it is required to terminate in their current form are:

  • a quantum discount scheme: on reaching a certain turnover threshold, a discount is granted which is calculated on the basis of the total annual amount paid for the procurement of bull semen from CR Delta;
  • the so-called testers discount: a cattle farmer with a test agreement, who purchases bull semen for testing purposes from CR Delta, is automatically given a 10% discount on the purchase of bull semen;
  • the customer loyalty scheme: customers who purchase 90% or more of their total annual bull semen requirement from CR Delta are given a discount on the total annual amount paid for the procurement of bull semen.

The last scheme was revoked by CR Delta after NMa commenced its investigation at the beginning of 2003.

Companies with a dominant position have a special responsibility under the Competition Act since, in contrast to other companies, they are in a position to have a strong influence on or even manipulate market conditions. As with other companies, they may engage in competition on the basis of the price, quality and service of their products and services. However, they may not abuse their strong position to eliminate competition by other means. The various discounts that CR Delta offers cattle farmers encourage loyalty with regard to the purchase of bull semen from CR Delta. With its market share of approximately 80%, CR Delta has a dominant position in the Netherlands on the market for the supply of bull semen to cattle farmers. It was established that the infringement occurred in the period from 1 September 2001 to 1 September 2003. It is possible to file an administrative appeal with NMa against this decision and to lodge a judicial appeal (with the Court of Rotterdam) and possibly a further judicial appeal (to the Trade and Industries Appeals Tribunal).

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