On 29 October, the two coalition partners for the next Dutch government, the Liberal Party and the Labour Party, presented their coalition agreement to the public. Party leaders Mark Rutte and Diederik Samson received praise for their pragmatic and prompt coalition agreement in times of economic crisis.
One of the 115 paragraphs of the agreement relates to fines for competition infringements. It states that the Netherlands Competition Authority (NMa) will impose more cartel fines. It also adds that the estimated revenues thus obtained will be €75 million in 2014, rising to €125 million on a structural basis. These 'savings' are incorporated as a target into the budget of the Ministry of Economic Affairs.
This is not a good idea for a number of reasons. First, the projected amount to be saved by increasing fines is rather high. The NMa’s average yearly revenue over the last three years from cartel fines was approximately €18 million. Even the short term target of €75 million would require an increase of more than 400%.
Second, such targets are at odds with the statutory independence of the NMa. The targets require an enormous increase in fines and therefore a more aggressive enforcement policy. Interestingly, the NMa’s board recently stated that it wants to impose fewer fines. Its stated aim has been to increase competition compliance by settling more cases and obtaining formal undertakings from the parties that they will be compliant in the future. Therefore, the austerity measure may be in conflict with the NMa’s own views of the most efficient competition policy.
Finally, one can question whether the targets are realistic. It is unlikely that the number of cartels will increase. Nor is it likely that the rate of detection will increase (particularly because there will also be budgetary constraints on the number of investigators). The statutory rule that fines may not exceed 10% of the annual turnover will remain in place, as will the fundamental principles that require the fines to be in proportion to the gravity and duration of the infringement. Even if the NMa were to significantly increase its fines, it would therefore be unlikely that the courts would approve.
Notwithstanding the well-earned applause for the two political parties agreeing in record time on a new coalition, making higher cartel fines one of the austerity measures is not a good idea.