In the past year, the judge regularly had to consider the Market and Government Act (" M&O Act "). This law is aimed at preventing the government from disrupting the level playing field when it carries out an economic activity itself. The most important statements are discussed in this blog. For example, there is more clarity about the assessment framework for an economic activity, about how costs should be passed on by the government and what requirements are set for the exception of a general interest decision. The judgments make it clear that it can pay for private companies to litigate against a competing government.
The M&O Act prevents governments from competing unfairly with private market parties when offering economic activities (such as offering parking space or renting out ramps ). This is the case, for example, when the government offers a product or service below cost, provides favorable financing to its own government companies, or uses information that is not accessible to others. Private companies cannot compete with this because the government has a 'head start' that cannot be caught up and can 'finance' market activities with tax money. The M&O Act therefore prescribes four rules of conduct that the (decentralized) government must adhere to:
- pass on at least all integral costs (cost calculation);
- do not favor own government companies (prohibition of privilege);
- re-use government data if market parties can also access this data (under the same conditions) (mandatory data sharing); and
- create a separation of functions between the administrative and economic activities of the organization that is active on the market (separation of functions).
The law does not apply if the government performs a public task or performs an activity in the public interest . The M&O Act is included in the Competition Act ("Mw") and entrepreneurs can go to the Consumer & Market Authority ("ACM"). ACM can determine a violation by decision and impose an order subject to a penalty . Damaged companies can file a claim for damages in the event of a violation. For example, Q-park recently held the Municipality of Veenendaal liable for the damage that it would have suffered because the municipality applied a low rate to its parking garages.
No economic activity
The Commercial Appeals Tribunal (“CBb”) has provided more clarity in the Klic viewer case as to when there is an economic activity. The reason was the Klic-viewer application that is offered by Kadaster for free to read information about underground cables and pipes. For the interpretation of the concept of economic activity, the CBb joined the Court of Justice's Compass-Datenbank and Eurocontrol cases. This shows that it must be assessed to what extent the activity takes place within the framework of the exercise of public authority and whether there is a legal basis for this. It is not decisive here whether the legal rules explicitly prescribe the activity. Whether other market parties offer a similar activity was not relevant. Another example is the Social Insurance Bank offering salary administration services in the context of a personal budget . In that case, too, the exercise of a public task is involved. In the Ferry flights case, the court ruled that the transport of aircraft is an economic activity (precisely) because this activity was also offered by other companies.
Costs of the calculation
At least the government must pass on all integral costs if it carries out an economic activity. In the case of Jachthavens Hellevoetsluis , the CBb confirmed that the costs of a means of production must be allocated to the extent to which the means of production is used for the economic activity. In this case it concerned the rental of berths for boats (of which 50% of the costs of the port infrastructure had to be allocated to the commercial port activities). The CBb thereby confirmed the judgment of ACM and the court and aligned with the Explanatory Memorandum to the M&O Act and the Market and Government Decree (in which the cost items are defined).
General interest service
Governments have the option of taking a general interest decision, as a result of which the M&O Act does not apply. In practice it appears that these decisions do not always meet the due care requirements of the Awb (see our earlier blog about this). Examples are the Zeewolde Marina and the Hengelo municipality . The CBb has provided the following assessment framework:
- Careful preparation & motivation. The government must properly substantiate why market parties cannot provide for certain (general) activities (there must be market failure). In the case of Parking Garages Hengelo, for example, there was insufficient support for why market parties could not meet the parking requirements.
- Necessity. The government must demonstrate that the public interest to be pursued is served. For example, the municipality of Zeewolde had insufficiently substantiated why the operation of the port of call could not take place at the full cost price and what the necessity was to offer the activity below cost price. The municipality also had insufficient research into what pricing was needed to serve the public interest.
- Reasonableness & proportionality. The government must reasonably take a public interest decision. The decision must have the effect that the intended effect is actually achieved and that the disadvantage for the market party or parties involved is limited or compensated as much as possible. This means that a weighing of interests must take place.
This assessment framework was recently applied in the Emmen parking garages case . This judgment also shows that judges critically examine whether a general interest decision has been reasonably and carefully taken. This development is in line with the bill which aims to tighten the general interest exception by giving entrepreneurs more say . For example, a general interest decision must comply with the uniform public preparation procedure of the General Administrative Law Act (“ Awb ”). This means that the government is obliged to publish the intended general interest decision and to give stakeholders the opportunity to respond.
Whether it is sufficiently guaranteed that general interest decisions will no longer undermine the practical effectiveness of the M&O Act in the future remains to be seen. In any case, this intended amendment of the law and the thorough review by the court contribute to the gradual realization of a level playing field between entrepreneurs and governments. Until then, it may be worthwhile for private companies to properly check whether a competing government is not breaking the law.