Although the imposition of fines is a significant – and, perhaps, the most obvious – risk for parties involved in a competition law violation, it is not the only risk associated therewith. Even if no fine – or a fine of EUR 0 – is imposed on a party, it may still wish to bring actions against the infringement decision to mitigate other potentially adverse consequences. The Dutch Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, “CBb“), the highest Dutch court competent for relevant proceedings, recently confirmed that parties who have been found to be involved in a competition violation are allowed to challenge such decision, even if they do not actually have to pay a fine.
The CBb confirmed this principle in two separate judgements that both relate to the same cartel. The Dutch competition authority (Autoriteit Consument & Markt, “ACM“) had imposed fines on three undertakings and two natural persons for their involvement this cartel in February 2017. The judgements of the CBb were published in July 2019 (ECLI:NL:CBB:2019:329) and February 2020 (ECLI:NL:CBB:2020:91), respectively.
In the decision related to the 2019 judgement, ACM had found that a natural person acted as de facto leader to the infringement that was (allegedly) committed by one of the companies involved in the cartel in his capacity of company director. However, ACM ultimately imposed a fine of EUR 0 on the director as he could benefit from the leniency application submitted by his company. Despite this, the director objected to the decision stating that the principle of equality could have been violated since two directors of other companies involved were (possibly) not considered to be de facto leaders.
In the other decision, ACM initially had established that the appellant, as a parent company, was jointly and severally liable for the fine imposed on its subsidiary for the (alleged) involvement of the latter in the cartel. During the objection proceedings, however, ACM decided to refrain from imposing a fine on the parent for lack of financial capacity. Although the parent was therefore not obliged to pay a fine, it challenged this decision arguing that no violation had occurred and, alternatively, ACM wrongly had found that the violation could be attributed to it.
Interest in bringing proceedings?
According to established Dutch case law, an administrative court only has to rule on an objection to a contested decision if the applicant has sufficient interest in the assessment of the lawfulness of that decision. This means that the applicant should have a current and actual interest. In other words, it should actually be possible to achieve the result that the applicant seeks to achieve by lodging the appeal and this should have actual significance to the applicant.
In both cases, the District Court of Rotterdam held in first instance that the appellants did not have sufficient interest and declared the objections inadmissible. Indeed, in one case, the court explicitly considered that even if the party were to be followed in its claim, it would not be able to achieve the results it sought to pursue. In this regard, the District Court stated that “after all, no fine was imposed on the claimant. Therefore, no administrative sanction decision had been taken. A more favorable legal effect than that is not conceivable in these proceedings.”
Other potential consequences of an infringement decision
The CBb held on appeal that the findings of the District Court were incorrect. In fact, as also acknowledged by the CBb, the imposition of an administrative fine is only one of various potential consequences deriving from an infringement decision by a competition authority. According to the CBb, this is particularly true where the authority establishes in the decision that (i) a competition violation occurred and (ii) the addressee was involved in such violation. Strikingly, however, the District Court seemed to have neglected these other risks in first instance.
Among the risks that an addressee of an infringement decision may face, is the (more obvious) risk of follow-on damages actions. This risk may already imply multiple damages claims, significant monetary exposure and time-consuming proceedings – and, thus, should arguably as such suffice to have sufficient legal interests in bringing proceedings.
However, other risks may also come into play. For example, the Dutch Competition Act provides that maximum fines for competition law violations may be doubled in case of recidivism. In practice, the means that the maximum fine for a cartel infringement may be up to 80% of the annual worldwide group turnover, if the company concerned has received an irrevocable fine for a previous violation of a same or similar statutory provision within five years of the date of the fine report relating to the infringement.
A company may also face the risk of exclusion from public procurement procedures. The Dutch Public Procurement Act provides that exclusion may follow if a contracting authority has sufficiently plausible indications to conclude that the company has entered into an agreement with other economic operators that is aimed at distorting competition. To this end, the contracting authority may take infringement decisions by the EU Commission and ACM into account which have become final within three years before the application, provided that no immunity or a fine reduction was granted further a leniency application.
Furthermore, infringements decisions may affect an individual’s ability to perform certain (key) functions. For example, Dutch financial regulatory laws provides that individuals are only allowed to act as directors of regulated financial institutions (e.g., banks and insurance companies) if they are “reliable”, and found to be so by the competent regulator. The regulator may however find that if a director or its current or former company was the subject of an infringement decision by a competition authority, this director does not meet the necessary reliability standards to fulfill a position as director of a regulated financial institution. In a worst-case scenario, such finding may even result in a prohibition to appoint, or a resignation of, the director concerned.
In line with the above, the CBb considered that although the appellants did not have to pay a fine, they still had sufficient interest in lodging objections against their respective infringement decisions. Therefore, the CBb quashed the judgements of the District Court and sent the cases back for reconsideration.
Although parties that escape administrative fines for a competition law violation may be relieved in first instance, these judgements confirm that they may still have an interest in bringing proceedings against the infringement decision. This is particularly true in light of the wide array of other potential consequences of such decision. Also for that reason, the (non-)imposition of a fine is not necessarily the final chapter of any competition violation.