European Union: The Dutch Beer Cartel Decision: A Shot In The Arm Of Private Enforcement In The Netherlands?

Last Updated: 2 June 2008
Article by Wilko Van Weert and Dr. Gordon Christian

Originally published in Competition Law Insight , July 2007.

For many years, one of the most important trends in competition law enforcement worldwide has been the increasing focus of competition authorities on the detection and punishment of cartels, often at the expense of investigating competition complaints from companies or individuals. The reason for this is summed up neatly by a recent comment made by Thomas Barnett, assistant attorney general in charge of the US Department of Justice's Antitrust Division, in connection with the alleged marine hoses cartel, where he described illegal cartels as the "supreme evil of antitrust".

It is clear that this continuing strong focus on cartel enforcement in Europe, which applies both at the EU and national level, is going to provide ample opportunities for cartel victims to seek compensation from cartelists on the basis of follow-on damages actions, where claimants only need to prove quantum, rather than also proving liability and causation. However, because most cartel damages actions are usually settled before they come to court, over the last few years there has been something of a disconnect between (on the one hand) increasingly large cartel fines and (on the other) a mere trickle of cartel damages actions actually being conducted in open court.

Accelerating Private Enforcement

However, the authors believe that there are a number of features which will probably accelerate private enforcement in Europe. First, the European Commission's new fining guidelines (2006) are likely to lead to significantly higher fines for cartel conduct, and the publicity which these fines will attract are likely to increase the willingness of cartel victims to sue for damages.

Secondly, it is expected that the Commission will publish a white paper on private enforcement towards the end of this year. The white paper will build on the Commission's green paper (published at the end of 2005) and responses received during the course of the public consultation that followed. The clear aim of the Commission's white paper will be to propose amendments to the current damages action regime in order to remove some of its current weaknesses.

Thirdly, national competition authorities are also doing a considerable amount of work to encourage private enforcement a good example is the OFT's recent paper on the subject, which suggested that new forms of representative action and easier settlement mechanisms should be introduced to facilitate private enforcement. Yet, it is only with the emergence of follow-on damages actions in Europe as the standard riposte to cartel decisions by the European Commission or national competition authorities that one will be able to argue that public and private enforcement of competition law in Europe work effectively and in a complementary manner.

Against this background, we now turn to the European Commission's latest cartel decision in the beer sector and related private enforcement activities in the Netherlands.

The Commission's Beer Cartel Decisions

The European Commission's decision to fine the Dutch brewers Heineken, Grolsch and Bavaria a total of nearly €274m for an illegal cartel (which primarily involved price-fixing and customer allocation) is the latest in a string of beer cartel decisions imposed in a number of other member states.

Beer Cartels In Belgium, Luxembourg And France

In 2001, the Commission fined a number of brewers more than €91m for participating in two separate beer cartels in Belgium. Interbrew and Alken-Maes were fined more than €46m and €44m respectively for a cartel involving price-fixing, market sharing and information exchange in the "horeca" sector (the Dutch collective expression for hotels, restaurants and cafés) and in the retail sector. The second cartel concerned private label beers sold in Belgium, and, in addition to the two brewers identified above, the small brewers Haacht and Martens were also found to be involved.

Although the Commission does not have a formal "leniency-plus" regime in place a commonly criticised lacuna in the EC leniency regime Interbrew (known as InBev since its merger with AmBev in 2004) was spurred by the Commission's investigations preceding the 2001 Belgian beer cartel decision into revealing its participation in a number of other national beer cartels. The result was the imposition of nearly €0.5m in fines on three small Luxembourg brewers for a market-sharing cartel. Further European Commission investigations also unearthed a cartel in the French beer market, leading to a fine of €2.5m on Heineken and Danone for an "armistice agreement" designed to share the French horeca beer market on an "equitable basis".

Beer Cartel In The Netherlands

Given this background, it is not surprising that the European Commission has come down hard on a cartel in the Dutch beer market which the Commission has been investigating since InBev provided it with evidence (in the context of a leniency application) in 1999/2000.

As the European Commission sets out in its press release, its investigation found evidence that InBev, Heineken, Grolsch and Bavaria were guilty of price-fixing, customer allocation and the co-ordination of rebates and other trading conditions. As a result, Heineken, Grolsch and Bavaria were fined a total of nearly €274m, and InBev received full immunity in accordance with the Commission's leniency policy. The Dutch beer cartel covered both the "on-trade" (ie horeca) as well as the "off-trade" (ie retail) sides of the market, and the cartel also included the brewers' private label activities in the Netherlands. The Commission found various types of incriminating evidence, including handwritten notes that documented the price rises agreed at the cartel meetings. Based on the duration of the cartel (from 1996-99), the size of the Dutch beer market (one of the largest in Europe) and the considerable size of most of the firms involved (particularly Heineken), the Commission felt justified in imposing a fine on Heineken that ranks in the top 10 largest financial penalties ever imposed by the European Commission on a single company for a cartel infringement. In addition, the fine imposed in the Dutch beer cartel means that, looked at cumulatively, the Commission has, by the fourth month of 2007, already exceeded the total amount of cartel fines imposed in 2006, namely €1.8bn.

Given the proliferation of statements of objections sent by the Commission this year (relating to, among others, the alleged professional video tape cartel, 20 March 2007; the alleged bulk liquid shipping cartel, 11 April 2007; and the alleged chloroprene rubber cartel, 8 May 2007), it is likely that the total fines figure will rise significantly. This is largely because (at least in relation to the three cartels mentioned above) the new EC fining guidelines will be applied, and these provide for potentially much larger fines than has been the case to date.

There are several interesting aspects of the Dutch beer cartel decision. First of all, the competition commissioner Neelie Kroes highlighted the fact that, in this case, the cartel behaviour was co-ordinated and actively managed by senior management at the brewers in question, including board members, managing directors and national sales managers. (This is in contrast to other cases where such conduct has been confined to a small number of junior staff.). Furthermore, the brewers' use of code words and their tendency to meet in public places suggests both knowledge that the practices were illegal and that attempts were made to cover up what they were doing.

This observation is particularly significant given that a reform of Dutch competition law (which the authors understand is currently going through the lower house of the Dutch parliament) is likely to introduce criminal liability for individuals involved in serious anticompetitive activities. Interestingly, even when specifically questioned by the press, InBev declined to comment on whether its chief executive had attended the cartel meetings.

Secondly, the European Commission acknowledges (rightly, in the authors' opinion) that an administrative procedure of more than seven years since the dawn raids took place was "unduly long". The Commission has therefore allowed Heineken, Grolsch and Bavaria (the three Dutch beer cartelists) what appears to be a rather random reduction of €100,000 to compensate for the excessive procedure. It will be interesting to see whether the Commission provides more detailed reasoning for the size of the reduction when the full decision about the Dutch beer cartel is published in due course. In any event, given the amount of the fines (€22m being the lowest fine imposed), the reduction is striking for its triviality in the overall context of the case.

Heineken, Grolsch and Bavaria have all announced their intention to appeal the Commission's decision to the Court of First Instance in Luxembourg. Heineken has called its fine "excessive and unjustified"; Grolsch said that it was "stunned by the ruling"; and Bavaria believes it has always operated as a price-fighter and is being unjustly punished.

Private Enforcement In The Netherlands

There is no specific statutory basis for competition-related damages claims in the Netherlands. Cases are brought on the basis of provisions in the Dutch Civil Code which provide that natural or legal persons committing tortious acts for which they are responsible must compensate the victim for any damage suffered (see article 162, Book 6 of the Dutch Civil Code).

Since damages under Dutch law have the object of compensating only the loss actually incurred by the claimant, no punitive or exemplary damages are available.

In principle, the civil court has a number of methods available for the assessment of damage and concerning the method of compensation. If the loss cannot be established accurately, it may be "constructed" or even estimated. This freedom of assessment will be important in the event of any claim against the beer brewers, given the multitude of relatively small claimants.

In addition, and importantly from the point of view of the European Commission's decision in the Dutch beer cartel case, a 2004 amendment to the Dutch Civil Procedure Act now explicitly recognises that EC competition law breaches can be litigated before the Dutch civil courts.

There are a number of differences between competition litigation in the UK and in the Netherlands. First, there is no specialised competition law court in the Netherlands on the lines of the Competition Appeal Tribunal in the UK. Although the Rotterdam District Court is widely recognised as a centre of expertise for competition law issues mainly as a result of its competence as an appeals court against decisions from the NMa (the Dutch competition authority) in civil matters it is a court like any other, with no specific jurisdiction attributed to it. Secondly, Dutch procedural law does not provide for pre-trial disclosure and, thirdly, there are no US-style class actions.

However, there have been certain recent developments that may give rise to collective damages actions for consumers. In addition, it is interesting to note that the Netherlands has pioneered a system of arbitration of competition law disputes something that was particularly evident recently in a huge construction fraud case that involved hundreds of construction companies and thousands of damages actions by regional and local authorities.

The significant publicity of the Dutch beer cartel decision has already led to the Royal Horeca Netherlands organisation (RHN) threatening the brewers with a claim for (what are described as) "substantial" damages and a demand for lower beer wholesale prices. Whether or not the RHN will go ahead with its claims may depend on several factors, including the outcome of an appeal by the brewers. However, given the high profile of the case and the public discussion it has generated about compensation for loss caused by a cartel, it is likely that the Commission's decision will boost private enforcement in the Netherlands. Such a development is likely to be welcomed both by the Commission and by the NMa, as both institutions have made significant efforts in the last couple of years to encourage cartel victims to seek compensation from cartelists.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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