Netherlands: Sellers Not Liable For Gun Jumping: The End Of An Era

Contrary to the European Commission¹ and most jurisdictions, the NMa considers the purchaser and seller jointly responsible for notification of (sole control) acquisitions under the Dutch merger rules and fined purchasers as well as sellers for failure to notify a concentration. This practice will need to end, however, as the Trade and Industry Appeals Tribunal, the highest administrative court in competition matters, recently upheld the Rotterdam District Court's earlier ruling²  that a seller bears no responsibility for filing a concentration meeting the Dutch turnover thresholds.³

In January 2011, the Rotterdam District Court ruled that the NMa wrongfully imposed a fine on a seller for failure to notify an acquisition of sole control.⁴ The NMa imposed a fine, corrected in administrative appeal, of EUR 22,500 on the seller in 2008. According to the NMa, a joint notification duty for seller and purchaser follows from the wording of Article 34 Dutch Competition Act (DCA) and the DCA's Explanatory Memorandum. Article 34 DCA provides that "it is prohibited to implement a concentration (before the [NMa's] Board has been notified of the intention to do so (...))". The NMa found that because a seller contributes to the implementation of the concentration by transferring control to the purchaser, both the seller and the purchaser are responsible for notification. This joint responsibility is supported by the Explanatory Memorandum's use of the plural form, i.e., "parties", "joint initiative", "each", "the other" and "all", when discussing responsibility for notification. The Rotterdam Court ruled that if the NMa's reasoning were followed, this would lead to the peculiar situation in which a seller realises the concentration, although its turnover is not taken into account in determining whether the turnover thresholds for notification are triggered. The Court also considered it illogical from a competition law perspective to oblige a seller to notify since the seller is the party that transfers control and thus loses market position. The Court, furthermore, referred to the EU Merger Regulation to support its reasoning that sellers do not fall under the duty to notify laid down in Article 34 DCA in cases of (sole control) acquisitions.

The Tribunal upheld the Court's ruling and stated that it seemed unlikely that the Dutch legislator intended to deviate from the EU merger rules in regard of the duty to notify, particularly since, according to the DCA's Explanatory Memorandum, Dutch merger control is modelled after the EU merger control rules. In addition, legal certainty requires that the party to which the duty to notify applies should follow explicitly from the DCA. Since the notification duty laid down in Article 34 DCA does not explicitly mention the seller, the NMa was not authorised to impose a fine on the seller for failure to notify.⁵ This ruling brings an end to a more than decade-long practice by the NMa to fine the purchaser as well as the seller for failure to notify acquisitions of sole control. In joint control situations, on the other hand, all parties acquiring joint control have the duty to notify. The NMa's fining policy in regard of notification of such concentrations remains unaltered.

Since the entry into force of the DCA in 1998, the NMa has fined 10 sellers for failure to notify a concentration for a total amount of approximately EUR 2.7 million. The majority of these sellers will, however, be out of luck trying to recover their fines from the NMa, as they did not appeal the NMa's fining decision within the set 6-week time frame.

 Footnotes

1. Pursuant to Article 4(2) of Regulation 139/2004 (OJ 2004, L24/1), mergers must be notified jointly by the parties to the merger or by those acquiring joint control as the case may be. In all other cases, the notification must be effected by the person or undertaking acquiring control of the whole or parts of one or more undertakings (i.e., the purchaser).

2. Rotterdam District Court, 13 January 2011, LJN: BP0781.

3. Trade and Industry Appeals Tribunal, 24 February 2012, LJN: BV6874.

4. Rotterdam District Court, 13 January 2011, LJN: BP0781.

5. Trade and Industry Appeals Tribunal, 24 February 2012, LJN: BV6874.

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