Recent developments of the Dutch Act on Government and Free Markets in a nutshell – part 2
Recent developments of the Dutch Act on Government and Free Markets in a nutshell – part 2
In this second of two blogs on recent developments of the Dutch Act on Government and Free Markets (“M&O Act“) (in Dutch: Wet Markt & Overheid), we discuss the most recent developments in the M&O Act over the past year. We conclude with a number of practical tips for entrepreneurs who are faced with (unfair) competition from state-owned companies.
In the first of two blogs on recent developments of the M&O Act, we discuss the intended legislative amendment and case law concerning so-called “general interest decisions”.
Other recent developments
In addition to the case law on the reasoning of public interest decisions (discussed in part 1 of this blog series), other important issues in the context of the M&O Act have been decided by the Dutch courts and the Authority for Consumers & Markets (“ACM”) in the past year.
ACM decision on objection DVI: Ministry’s roadshows provides benefit
On 21 December 2021, ACM confirmed in a decision on objection that the Ministry of Economic Affairs and Climate Policy (“EZK”) gave preferential treatment to its public company Dutch Venture Initiative (“DVI”) over other investment funds. DVI invests in funds that in turn invest in innovative, fast-growing SMEs. The case was prompted by a signal from the private investment fund, MKB Multifunds, which ACM received. According to MKB Multifunds, DVI and Oost NL have benefited in several ways. In its decision of 23 februari 2021, ACM found that there was no violation.
In its decision on the objection, ACM revised the primary decision on one point and came to the conclusion that there was, after all, preferential treatment within the meaning of Section 25j(1) of the Competition Act (‘Mw‘) (in Dutch: Mededingingswet). According to ACM, EZK had tried to interest investors in the DVI by organising ‘road shows’ and this constituted an infringement of the prohibition against preferential treatment within the meaning of Section 25j(1) Mw. ACM considered that the prohibition against preferential treatment, in the same way as the prohibition on State aid laid down in article 107 of the TFEU, aims to prevent the public authorities from conferring competitive advantages on an undertaking for the performance of economic activities. Therefore, ACM assesses whether the interest of an investor in DVI-funds fulfils the cumulative State aid elements of Article 107 TFEU.
The three cumulative elements of the State aid prohibition are: a) the direct or indirect granting of State resources; b) the advantage provided is not in conformity with the market; and c) there is selectivity. According to ACM, all three elements have been met and the Ministry of Economic Affairs is violating the M&A Act with this conduct. Non-financial support can therefore also qualify as ‘preverential treatment within the meaning of the M&A Act.
ACM decision on objection Land Registry: Klickviewer is governmental task
In its decision on objection, ACM focuses on the question of when a public service task can be exercised. The decision on objection is based on ACM’s earlier rejection of a complaint by BlindGuide, Geodirect, GOconnectIT, MijnKlic, Prosilic, Syntax Inframediairs, GO WIBON and Spatial Eye (the “Service Providers”). In the complaint, the Service Providers claimed that the Land Registry and Mapping Agency (the “Land Registry”) acted contrary to the M&O Act by not including the integral costs. The further developed KLIC-viewer is in fact offered free of charge. According to the Service Providers, the Land Registry should have offered the KLIC-viewer at least at cost price. The KLIC-viewer enables excavation contractors to see exactly where cables and pipelines are located at the location where they intend to carry out excavation work. The purpose of this is to prevent excavation damage. The Service Providers offer (paid) applications that provide insight into this data (among other things).
The central question is whether the provision of the further developed KLIC-viewer should be regarded as an economic activity or falls within the public task of the Land Registry. In its analysis, ACM explicitly refers to the Tendernet case of the Court of Justice of 7 November 2019 and Compass Datenbank case of the Court of Justice of 12 July 2012. On the basis of this European case law, ACM finds that when assessing activities carried out by public authorities it is sufficient to assess whether there is a close connection (connection criterion) between the activity concerned and the exercise of powers of the public authority. In that case there is no economic activity. Only if there is no such close connection and the activity qualifies as an economic activity, it should be assessed whether the activity can be separated from the public task (separation criterion).
According to the ACM, the provision of the KLIC-Viewer was closely linked to the Kadaster’s public service task as laid down in the Information Exchange of Above-ground and Underground Networks Act (‘WIBON‘) (in Dutch: Wet informatie-uitwisseling bovengrondse en ondergrondse netten en netwerken) and the Kadaster Act. ACM rejects the Service Providers’ argument that it should have applied the separation criterion even though there was a close link between the public service task and the activities of the Land Registry. According to ACM, the separation criterion only plays a role if there is no close link with the exercise of a public authority.
ACM decision parking garages municipality of Hilversum: unfair competition
In its decision of 26 januari 2021, the ACM ruled that the municipality of Hilversum had violated the M&O Act. ACM established that the municipality of Hilversum did not pass on all costs for the three municipal parking garages. As a result, it was competing unfairly with two commercial parking garages and a Q-Park parking garage.
The ACM has repeatedly rapped the knuckles of municipalities because the charges for municipal car parks and parking areas did not cover the cost price. This was the case in the municipalities of s’-Herthogenbosch, Hengelo, Emmen and Veenendaal. In the latter case, the municipality of Veenendaal took the position that barrier parking, like street parking, falls within the exercise of public authority and should therefore not be regarded as an economic activity, or at least that barrier parking and street parking are related in such a way that they cannot be seen separately, so that barrier parking should not be regarded as an economic activity either.
The CBb rejects this reasoning in ruling of 8 december 2020, in which it established that, unlike parking behind a barrier ‘barrier parking’, parking at the street parking ‘street parking’ is exclusively governed by public law. After all, the powers to regulate street parking are exercised exclusively by public authorities. The CBb ruled that barrier parking is an economic activity. The CBb must then answer the question whether the provision of ‘barrier parking’, in view of its nature, its purpose and the rules applicable to it, cannot be regarded as separate from the regulation of street parking, either because the regulation of street parking without the provision of barrier parking would be largely pointless, or because these activities are closely connected (seperation cirterion). The Court answered this question – not entirely surprisingly – in the negative. According to the CBb, ACM was right to make a distinction between the character of the activity of ‘barrier parking’ on the one hand, and that of street parking on the other hand.
ACM decision on objection camper municipality Stadskanaal: after increase of rates no more preferential treatment
In decision on objection dated 7 January 2021, the ACM rejected an objection from a commercial campsite, Camping Musselkanaal, about camper pitches from the municipality of Stadskanaal. Initially, the ACM could not act because the municipality of Stadskanaal had made a general interest decision. After the Court of Rotterdam annulled this decision, the ACM ruled in its decision that the municipality of Stadskanaal did not pass on all of its integral costs for the operation of the Spoordok camper pitches between 1 July 2014 and 1 June 2018. With regard to the period from 1 June 2018 to 31 December 2018, the ACM ruled that the municipality did cover the integral costs with a rate increase. Camping Musselkanaal objected to the decision but its objection was declared unfounded. In the end, the municipality was no longer able to circumvent the M&O Act by the annulled general interest decision and ultimately complied with the M&O Act after all.
Court decision on Heumen sports complex: rent unjustly too low
On 5 January 2021, the Court of Rotterdam ruled in the appeal cases brought by the municipality of Heumen and the lessor of sports facilities against the decision on objection of ACM. In that decision, the ACM confirmed its earlier opinion that the municipality of Heumen had leased a sports complex to a private company, Laco, in 2018 and 2019 without passing on all of the integral costs. Among other things, the municipality paid an operating fee to the private landlord. The competitive position of a competitor of the lessor, Lierdal Sportcentre, was thus affected. According to ACM, the municipality acted contrary to the M&O Act in doing so. The court upheld ACM’s decision but did not get around to a substantive assessment of its opinion. The two appeals were declared inadmissible by the court on formal grounds.
Suffering from an overly entrepreneurial government? Five tips for duped companies
Based on the developments discussed, we distil the following practical tips for companies dealing with a (potentially) competitive government:
- Be alert to possible “general interest decisions” of municipalities and provinces and object to them in time. This can prevent the public interest decision from overriding the M&A Act.
- Check whether there is an economic activity. This may be the case if a government offers products or services that other entrepreneurs also (can) offer. An overview of examples of economic activities can be found here.
- Take a critical look at the service or products offered by the authority and at what remuneration. If the fee charged by the authority is not in line with the market, the integral costs may not be passed on properly. It may also be the case that the government is favouring its own company by granting subsidies or in some other way.
- A company that suspects that a government body is competing unfairly can file a complaint with ACM.
- A company that is faced with an unfairly competitive authority can claim compensation for the period during which the authority competed unfairly with the company.