Widening of de minimis: undertakings get more room to cooperateMonday, 7 November 2011
Small undertakings get more room to make price-fixing agreements, in this way they might be able to compete better with large undertakings. Currently undertakings are only allowed to make price-fixing agreements in case their joint market share is not more than 5% and their joint turnover amounts not more than EUR 40 million. Under the new rules the market share limit will be extended to 10% and the turnover threshold will disappear.
Current de minimis
Article 6 of the Dutch competition act contains the cartel prohibition. This prohibition means that undertakings are not allowed to make arrangements that appreciably restrict competition on – a part of – the Dutch market. It is for example not allowed to make a price-fixing agreement with competitors or to divide the market. There is a legal exemption to this prohibition for ‘small’ undertakings, the so called de minims exemption. This exemption is laid down in article 7 of the Dutch competition act. In sub 1 of this article is laid down that undertakings are allowed to make arrangements in case not more than 8 undertakings are involved and the joint year turnover amounts to a maximum of EUR 5,500,000 (for goods) or EUR 1,100,000 (for services). In case these thresholds will be exceeded, one should see whether the undertakings can benefit from sub 2 of article 7 Dutch competition act. Sub 2 sets out that undertakings with a market share below 5% and with a turnover below EUR 40 million do not fall under the cartel prohibition.
New de minimis
On 25 February 2011 minister Verhagen of Economic affairs, Agriculture and Innovation has submitted a legislative proposal to change the Dutch competition act. The council of ministers has approved this proposal of minister Verhagen on 28 October 2011. The legislative proposal will now be submitted for approval to the Council of State.
The legislative proposal contains a widening of the de minimis exemption, because the market share threshold will be increased to 10%. In addition, the turnover threshold will disappear. This means that the changes only concern sub 2 of article 7 of the Dutch competition act. Sub 1 remains unchanged. The legislative proposal has as its object to strengthen the position of suppliers that are small- and medium-sized enterprises. The government hopes that with this change the balance between small suppliers and big purchasers with buying power will be somewhat restored.
Meaning in practice
The effect of the legislative proposal is that entrepreneurs with a small market share get some more room to make price-fixing arrangements. You can think of the small groceries which can now compete with big purchaser with buying power, such as supermarkets, because of their possibility to cooperate.
In the legislative proposal is clearly inserted that the widened de minimis exemption is not applicable to arrangements that fall within the scope of the European cartel prohibition. This is to prevent a breach with European law. A Dutch undertaking can therefore only benefit from the new de minimis in case it concerns an arrangement with Dutch purchasers regarding the Dutch market. This means that a retailer in the south of Limburg is not allowed to make arrangements regarding prices that are destined for the German or Belgium market.