The Grocery Retail Market: Is Antitrust Efficiently Handling This Market?’ (Merger, Restrictive Practices, Abuse of Dominant Position)

‘The grocery retail market: is antitrust efficiently handling this market?’ (merger, restrictive practices, abuse of dominant position)

The Netherlands

1 ECONOMIC BACKGROUND

1 Could you give, to help us understand the background in your country, a very short introduction of the national market structure at the main vertical levels i.e. primary agricultural production, secondary production (processing) and grocery retail?

The Dutch primary agricultural production sector comprises approximately 69,000 farmers.1 Since 2000, the number of farmers has dropped by nearly 30%, while the surface area used for agricultural purposes decreased by a mere 6%.2 The scale of production companies has therefore increased. The standard turnover per producer has increased by approximately 40% over this period, to EUR 274,000.3 A significant part of agricultural production consists of dairy farms and livestock farms (25%). Arable farming (fruit, vegetables and potatoes) is the second largest subsector (17%).4 Most producers are members of producers’ associations or cooperatives, which sell the products on behalf of their members. Membership regulations generally require members to sell exclusively via the association or cooperative. Some producers’ associations also act as traders at the secondary level. By way of example: there are 1,600 apple growers active in the Netherlands. 75% of the apples produced by these growers are collected and distributed via either The Greenery or Fruitmasters, two producers’ associations, which also act as (international) traders.5

Depending on the type of product there may be one or more trading levels and/or processing activities involved. The level of concentration at these levels varies per product and per activity. By way of example: after the sales at the initial wholesale level (including The Greenery and Fruitmasters) apples are delivered to the retail channel via a large number of service providers, the largest of which has a market share of 10-15%.6 The secondary level has in international character. 70% of the fruit and vegetables that have been produced in the Netherlands are exported while 45% of the fruit and vegetables consumed in the Netherlands have been imported.7

The grocery retail level comprises approximately 13,000 retailers, operating 30,000 sales points. 5,700 of these sales points are supermarkets89, which distribute 75% of grocery

1 Central Bureau for Statistics (2013) http://statline.cbs.nl/StatWeb/publication/?DM=SLNL&PA=80783NED&D1=0&D2=a&D3=0 &D4=0,5,(l-2),(l-1),l&VW=T. 2 Central Bureau for Statistics (2011) http://www.cbs.nl/nl-NL/menu/themas/landbouw/publicaties/landbouw-vogelvlucht/default.htm. 3 Ibid. 4 Central Bureau for Statistics (2011) http://www.cbs.nl/nl-NL/menu/themas/landbouw/publicaties/landbouw-vogelvlucht/structuur- landbouw/2012-sectoren-2011.htm. 5 Research Institute LEI (‘LEI’) (2009) report, ‘Prijsvorming van voedingsproducten’, p. 29. 6 Ibid. 7 Economic research institute SEO (‘SEO’) report, ‘Van teelt tot schaap’, p. 5. 8 Rabobank (2012) report, ‘Cijfers en trends: supermarkten’, p. 2. 9 4,400 full service supermarkets and 1,300 mini-supers. 1

produce in the Netherlands.10 Although at the time of writing there are still very few hypermarkets, they are on the rise.11 The market for supermarkets in the Netherlands is characterised by fierce competition. From 2003 until 2006 there was an outright 'price war'.12 This has led to the disappearance of two supermarket chains13 and discussions on whether a prohibition of sales below cost would be desirable (see answer to question 4 below).

Currently the top three purchasers at retail level represent approximately 85%14 of the market: Albert Heijn (33.7%), Jumbo (20-22%)1516 and purchasing co-operative Superunie (30%).1718 Discounters Aldi and Lidl each have a market share of approximately 8%. Their market shares are increasing. 2 LEGAL BACKGROUND

2 What is the scope of your competition law with respect to the grocery sector? Does it include a ban on unfair competition as well as the prohibition of anticompetitive practices? Are there other (per se) prohibitions (such as a prohibition of resale price maintenance) which may be applied to the retail grocery market? There are no specific competition rules for the grocery sector in the Netherlands. The sector is subject to the general rules set out in the Dutch Competition Act (‘DCA’, Nederlandse mededingingswet), which entered into force in 1998. The Dutch competition rules are modelled on and interpreted in accordance with the European competition rules. Article 6 DCA prohibits restrictive agreements, decisions by associations of undertakings and concerted practices which aim at or effect the prevention, restriction or distortion of competition on the Dutch market or on part thereof. Article 24 DCA prohibits abuse of dominance. The DCA also provides for a merger control regime. Originally the Dutch Competition Authority (‘NMa’, Nederlandse, mededingingsautoriteit) was appointed to enforce compliance with the DCA. On 1 April 2013, the NMa was replaced by the Authority for Consumers and Markets (‘ACM’, Autoriteit Consument & Markt).19 As the national rules are modelled on the EU competition rules, the same restrictions that are considered hardcore restrictions under the EU rules will in general be considered hardcore or per se restrictions under the Dutch competition rules.

10 NMa (2009) report, ‘Prijsvorming in de agri-food sector’, p. 11. 11 Albert Heijn operates 30 extra large stores. In March 2013 Jumbo opened a 6,000 m2 food market and announced the opening of a second mega store. 12 This period started with Albert Heijn lowering the price of 1000 products. Other supermarkets followed suit. This led to a series of price decreases. 13 Edah and Konmar. The supermarkets operating under these brands have been acquired by the remaining retailers. 14 Nielsen (2013) http://www.hbd.nl/pages/14/Bestedingen-en-marktaandelen/Supermarkten.html?branche_id=30&hoofdonderwerp_id=14. 15 Ibid. 16 In 2012 Jumbo Group (10%) took over C1000 (12%). Prior to the acquisition Jumbo and C1000 had already formed a purchasing cooperative: Bijeen. 17 Nielsen (2013) http://www.hbd.nl/pages/14/Bestedingen-en-marktaandelen/Supermarkten.html?branche_id=30&hoofdonderwerp_id=14. 18 Superunie represents the following chains: Boni, MCD, Coop, Deen, Hoogvliet, Jan Linders, Nettorama, Poiesz, Sligro, Spar, Plus and Vomar. 19 The ACM replaces three separate supervisory authorities: the Dutch Competition Authority (Nederlandse, mededingingsautoriteit), the telecommunications authority 'Opta' and the Consumer Authority. 2

Having said this, during the consultations about the review of the Block Exemption Regulation on Vertical Restrains in 2009, the Dutch competition authority submitted a contribution to the European Commission, suggesting that vertical price maintenance should be removed from the list of hardcore restrictions.20 Given that the EU block exemptions have a direct effect under the Dutch competition rules21, resale price maintenance remains listed as a hardcore restriction. However, to this date the Dutch competition authority does not give priority to enforcing resale price maintenance cases.

In addition, unlike the EU de minimis exemption from the prohibition on restrictive agreements, the Dutch statutory de minimis exemption also includes hardcore restrictions. Article 7 DCA exempts (i) all agreements/decisions/concerted practices that involve no more than 8 undertakings, who have a combined turnover that does not exceed EUR 5.5 million if they are involved in the sales of goods or EUR 1.1 million in all other cases22, and (ii) all agreements/decisions/concerted practices between (potential) competitors provided that the combined market share of the parties involved does not exceed 10% on any of the markets affected.23 This second exemption was introduced in 2011. It aimed to strengthen the position of small and medium seized undertakings inter alia against buying power from large retailers.

Finally, there is a national block exemption which exempts certain price fixing agreements (See answer to question 3). Like the EU competition rules, the DCA does not aim to ban unfair competition. Unfair competition and/or unfair practices by large retailers are under debate in the Netherlands (See answer to question 4). 3 Has your country adopted provisions specifically (or mostly) aimed at the retail market in your competition law? If so, could you describe the material contents of such provisions? Yes. In addition to the EU block exemptions, two national exemption regulations apply Both regulations are aimed at the retail sector. The practical importance of these exemptions is limited. The Decree on the Exemption of Cooperation Agreements in Retail (Besluit vrijstellingen samenwerkingsovereenkomsten detailhandel), exempts the following restrictions in 'franchise-like'24 networks: (i) maximum price agreements in relation to a temporary marketing action and, under certain conditions, (ii) a purchasing obligation for a maximum period of 10 years. Given the broad exemptions of the Block Exemption on Vertical Restraints the decree is of little practical importance.

20 NMa (2009) ‘Contribution to the public consultation on the review of the competition rules applicable to vertical agreements’. In this contribution to the Commissions consultation, the NMa noted that in the vast majority of the cases it had investigated, it had not been able to establish a theory of harm. There was sufficient inter-brand competition and/or insufficient evidence that retail price maintenance facilitated a horizontal cartel or had market consequences to the same effect. In the experience of the NMa in many cases involving smaller undertakings, resale price maintenance is used as a marketing tool leading to the wider availability of branded products. 21 Article 12 DCA. 22 Article 7 (1) DCA. 23 Article 7 (2) DCA. 24 The Decree does not use the term franchise, but the definition of Cooperation Agreements in Retail lists a number of characteristics that are common to franchise agreements, such as the use of a common identity, the transfer of technical or commercial know-how and supply of support. 3

The Retail Exclusivity Agreements (Exemption) Decree (Besluit vrijstelling branchebeschermingsovereenkomsten) exempts agreements in which the owner of a shopping centre grants a retailer of a particular type (for example a shoe shop) exclusivity in the shopping centre fora period of 6 years. This exemption applies to newly opened shopping centres only. Consequently, like the Decree on the Exemption of Cooperation Agreements in Retail, its practical importance is limited. 4 Has your country enacted specific laws (uniquely or primarily) aimed at controlling the structure of the grocery retail market or the behavior of large scale grocery retailers outside of competition law? If so, could you describe the material contents of such legislation? Are these regulations based on principles of fairness, correcting asymmetry in bargaining power, necessity to prevent inflationary pressure of grocery retail prices or other principles? No, there are no such laws to date. In 2005, during the 'price war' between supermarkets (see answer to question 1 above), in response to parliamentary questions, the Ministry of Economic Affairs ordered two studies into the feasibility and desirability of introducing a statutory prohibition to sell products below purchase price.25 In addition, the competition authority submitted a letter to the Minister, stating that it saw no reason to start an investigation into whether the price war between the supermarkets constituted an abuse of dominance. The competition authority deemed the situation a sign of fierce competition between supermarkets, which benefited the consumer with lower prices.26 The Minister decided not to introduce a statutory prohibition to sell products below purchase price.27 Currently, unfair business practices by retailers with buying power are subject to public debate. Following complaints (particularly from suppliers in the agro-food sector) and subsequent questions and motions from the parliament, the Ministry of Economic Affairs commissioned a number of studies investigating the extent to which suppliers in the Netherlands perceive buying power28, the question whether the existing legal framework is sufficient to prevent and solve unfair practices by retailers possessing buying power29 and an exploration of the possibilities and feasibility of self-regulation in business to business relations.30 The reports conclude that there is (at least in the perception of suppliers) buying power31 and that the current legal framework (competition law and civil law) is insufficient to

25 Research Institute EIM (‘EIM’) (2005) report, ‘Verbod op verkoop beneden de inkoopprijs’ and research institute Oxera (2005), report ‘What is the impact of a minimum price rule?’. 26 NMa, letter to the Minister of Economic Affairs, dated 23 June 2005. 27 Minister of Economic Affairs and Minister of Agriculture, Nature and Food Quality, letter in response to a motion of member of parliament Atsma et al.., dated 1 July 2005. 28 EIM (2009) report, ‘De aard en omvang van inkoopmacht, onderzoek naar de perceptie van leveranciers’. EIM investigated the following sectors: food and beverage, fashion, interior textiles, building materials. 29 SEO (2013) report, ‘Oneerlijke handelspraktijken. Voldoet bestaande (zelf)regulering?’ 30 Tilburg University, Tilburg Institute for Interdisciplinary Studies of Civil Law and Conflict Resolution Systems (2012) report, ‘Eerlijk, scherp en betrouwbaar, een interactieve verkenning naar ijkpunten voor eerlijk zaken doen met en effectieve conflictoplossing’. 31 34% of the suppliers in the food and beverage sector said they have a weak or very weak negotiating position towards their main purchasers. 4

provide an effective solution.32 The Dutch government has chosen not to introduce legislation, but wishes market parties to self-regulate via a code of conduct. The Minister has initiated two pilot projects for establishing a code of conduct, one involving the agro-food sector.33 5 Is the retail grocery sector exempted in part or full from competition law? Could you describe the scope of these exemptions and their rationale? No, no such exemptions apply. 3 ADVOCACY

6 Has the competition authority of your country done market studies (or made sector inquiries) of the retail grocery sector? Yes, the competition authority has done market studies that are relevant to the retail grocery sector. In 2004, following a market consultation, the Dutch competition authority (then the NMa), published a vision paper on buying power.34 Although the paper deals with buying power in general, it is also relevant to the retail of groceries and contains examples relating to this sector. This paper will be discussed in more detail in chapter 5 below. In addition, in December 2009 the NMa published a report on pricing in the agro-food sector.35 The assessment and conclusions in this report are based on interviews and research undertaken by the competition authority and on the outcome of a large study by research institute LEI.36

Finally, in 2011 the NMa commissioned a study of the fisheries sector.37 The report on this sector is descriptive and does not contain a competitive analysis. Indeed it only briefly refers to the retail sector. Questions 7 - 9 will be answered on the basis of the 2009 report of the NMa on pricing in the agro-food sector. 7 Why were the sector inquiries or market studies undertaken? (concern with competition failures, price movements, regional or national price differentials, political pressure, etc…) The competition authority regards the agro-food sector as one of its priorities, given the importance of this sector to consumers. The competition authority notes that the (increasingly) concentrated nature of the sector and the relatively homogenous nature of the

32 Competition law provides insufficient protection since retailers with buyer power do not always have a dominant position. Moreover, in order to constitute abuse, the authority will assess whether there is consumer harm. This is not the case if advantages are passed on to consumers. Finally, investigations/procedures by the competition authority can take a lot of time. As regards the possibilities under civil law, suppliers rarely initiate legal proceedings against retailers, out of fear that this might hurt the commercial relationship. Although collective actions (for example a claim by a sector organisation) are possible under Dutch law (Article3:305a Dutch Civil Code), this does not provide a suitable solution since the evidence that will have to be presented by the collective entity will often reveal the identity of the producers concerned. Moreover, it is not possible to claim damages in such collective actions. 33 Minister of Economic Affairs, letter to the Chairman of the Parliament, dated 3 April 2013. 34 NMa (2004) report ‘Visiedocument Inkoopmacht ‘. 35 NMa (2009) report ‘Prijsvorming in de agri-foodsector’. 36 LEI (2009) report ‘Prijsvorming van voedingsproducten’. In 2010 LEI published an addendum to the report describing the production chain for tomatoes. 37 EIM (2011) report ‘Marktstudie visserijketen’. 5

products increase the risk of collusion. Over time, the competition authority has received several complaints from producers, traders and trade associations about the alleged abuse of buying power by supermarkets. Moreover, the authority found similar signals in the media.

The authority wanted to gain insight into the price developments and price formation at different levels within the chain and to find an explanation for the relatively large price differences at the various levels, in order to assess whether there are indications that the complaints and signals it had received were founded. 8 What were the main topics covered by such market studies (or market enquiries)? The study covered a selection of 8 basic foodstuffs: Eggs, apples, onions, cucumbers, bell peppers, bread and potatoes.38 The study contained (i) a description of the production and distribution chain per product, (ii) for each product, the development in prices, costs and margin per level in the chain over the period 2005-2008, and (iii) an (econometric) analysis of the price mechanism in the sector.39 On the basis of this analysis the extent was calculated to which (iv) parties at a certain level of the chain are able to durably improve their margins and (v) concentrations at the supermarket level will influence the purchase and sales prices of supermarkets.

9 What were the main conclusions and/or recommendations? About the price developments the study concluded that: (i) prices at all levels of the production chain have increased, the most at production level and the least at supermarket level40, (ii) the development of margins at production and supermarket level vary, the margins at wholesale trade level have increased, (iii) prices paid in supermarkets are many times higher than selling prices at producer level, which can be explained by costs incurred at wholesale (and supermarket) level. The main conclusions of the study were that there are no indications that supermarkets are dominant in determining the prices of foodstuffs. Prices at supermarket level are influenced by prices higher up in the chain, particularly by the prices at production level. Supermarkets cannot durably increase their margins, since such increase would be compensated by a price increase at wholesale level. The increase of concentration at supermarket level has only a limited effect on supply and demand price. Asymmetrical price adjusting41 has just a negligible effect on supermarket margins. No recommendations were made.

4 MERGER CONTROL

10 Are there special thresholds for merger control in the retail (or the grocery retail) sector? Who is in charge of controlling the mergers at the local level?

38 These products were selected on the basis of the following criteria: homogenous products to prevent over-complexity of the research, which have been subject to price increases at consumer level over the past years and in relation to which there has been public attention because of alleged market imperfections. Finally, the products had to be as varied as possible. 39 An analysis was made on the basis of the so-called Vector Autoregressive model and Vector Error Correction model, to what extent and for how long a sudden price increase at a certain level of the chain would affect the prices at other levels in the chain. 40 An exception to this were cucumbers. Cucumber prices increased the most at supermarket level and the least at production level. 41 A fast increase of price if purchase prices go up and a slow(er) decrease of prices if purchase prices go down. 6

The Dutch competition authority, ACM, is in charge of controlling mergers and other types of concentrations.42 A concentration is subject to the obligation to notify the ACM if the following thresholds are met:

the combined worldwide turnover of the undertakings concerned exceeds EUR 113.45 million; and at least two of the undertakings concerned realized an individual turnover in the Netherlands of at least EUR 30 million.

There are no specific thresholds for mergers in the (grocery) retail sector.43 11 How are relevant product (or service) markets defined in the grocery sector at the retail level? Are all types of grocery formats considered to be in the same relevant retail market? Or are different store formats (such as, for example, discount store and supermarkets or brick and mortar stores and internets retailers) considered to belong to different markets? Is there a statutory definition of markets or what kind of test is applied by court or enforcement agencies to delineate relevant markets? Dutch competition law does not contain a definition of the relevant product market, nor does it contain a test on how to define markets. Markets are defined in accordance with the rules and principles set out in the EU competition rules.

At grocery retail level, the ACM distinguishes separate product markets for: i. the sale of daily consumer goods via supermarkets (hereafter, the ‘supermarket market’); ii. the procurement of daily consumer goods for sale via the retail market, in which account is taken of the differences between groups of products (however, to date the ACM has not defined separate markets for such product groups) (hereafter, the ‘purchase market’); iii. offering supermarket franchise services (hereafter, the ‘franchise market’).

The ACM does take account of store size, calculating the market share of the merger parties both on the basis of turnover and on 'sales surface'. Moreover, in some cases involving concentrations between large supermarkets, the ACM takes into account that small-sized supermarkets (<500m2) generally offer a limited product range and therefore do not constitute a full substitute for a (large) supermarket. Consequently, the ACM did not include such small- sized supermarkets in its assessment. The ACM considered that the supermarket market could potentially be split into a market for supermarkets, hypermarkets and discounters, but to date has not adopted such narrow market definition.44

So far the online activities of supermarkets have not been the specific subject of the assessments.

42 The term concentration is defined and interpreted in line with the EU competition rules. 43 The only sector that is subject to specific (decreased) thresholds is the health care sector. 44 NMa decision of 22 February 2000 in case 1710/48, Schuitema – A&P; NMa decision of 26 September 2001 in case 2668, Sperwer - Laurus; NMa decision of 4 February 2002 in case 2838/16, Sperwer – Spar; NMa decision of 3 April 2002 in case 2818/20, Laurus – LIDL; NMa decision of 26 October 2006 in case 5586, Ahold-Konmar Superstores; NMa decision of September 24 2007 in case 6145/28, Sperwer-Sligro-Meermarkt-Atten; NMa decision of 4 December 2009 in case 6802/43 Jumbo- Super de Boer; NMa decision of 21 February 2012 in case 7323/81, Jumbo-C1000; NMa decision of July 25 2012 in case 7429/16, Coop-Diverse Jumbo Activa; NMa decision of 26 July 2012 in case 7432/23, Ahold-Jumbo Activa. 7

12 How are relevant geographical markets defined for the retail grocery sector? Is there a statutory definition of what constitutes a relevant market? What criteria are used by courts or enforcement agencies? Dutch competition law does not contain a definition of the relevant geographic market, or a statutory test. Like product markets, the geographic scope of a market is established in accordance with the rules and principles set out in the EU competition rules.

Supermarket Market In all cases to this date (the most recent cases dating back to July 2012), the competition authority refrained from drawing any definite conclusions about the geographic scope of the supermarket market. The authority held that the market has a local, as well as a national45, dimension and, subsequently, assessed both the effects of a concentration on the national market as well as the relevant local markets.46 As regards the local market, the ACM starts with the area within a 15-minute drive radius of a supermarket. This area is subsequently limited to a village or city, since consumers are generally not inclined to do their daily shopping outside their place of residence. Therefore the local relevant market constitutes of the 15-minute radius within a town. An exception is made for situations where urban sprawl has wiped out town boundaries, or for situations where the parties provide evidence that consumers are in fact inclined to visit a supermarket in another town.47 In those cases the ACM assesses the 15-minute radius area, without taking account of town borders. Purchase Market and Franchise Market Both the purchase market and the franchise market are considered national in scope.48

13 Has the growth or concentration of grocery retail networks (franchises, cooperatives etc….) been considered to be problematic in your country? What are the legal instruments which can be used to control their growth or concentration? All of the large retail formulas constitute of a combination of both owner-operated stores and a network of franchise stores. Moreover, as set out above, on the purchase market purchasing cooperatives operate that represent several supermarkets. Provided that a transaction meets the merger control thresholds and is therefore subject to notification and assessment under the merger control regime, the ACM takes the growth or (further) concentration of these networks into account in merger control assessments. Supermarket Market Given the close economic ties, tight central supervision and joint goals of franchisor and

45 Arguments supporting a national market are (i) the overlap between local geographic markets, which (potentially) leads to a chain effect, (ii) (nation wide) uniformity in (a) commercial policy, (b) prices, (c) product range, (d) level of service and (iii) market dynamics. See, NMa decision of 22 February 2000 in case 1710/48, Schuitema – A&P; NMa decision of 26 September 2001 in case 2668, Sperwer -Laurus and NMa decision of 4 February 2002 in case 2838/16, Sperwer – Spar. 46 Ibid footnote 46. 47NMa decision of 26 October 2006 in case 5586, Ahold-Konmar Superstores NMa decision of 4 December 2009 in case 6802/43, Jumbo- Super de Boer; NMa decision of 21 February 2012 in case 7323/81, Jumbo-C1000; NMa decision of 25 July 2012 in case 7429/16, Coop-Diverse Jumbo Activa; NMa decision of 26 July 2012 in case 7432/23, Ahold-Jumbo Activa. 48 NMa decision of 26 October 2006 in case 5586, Ahold-Konmar Superstores; NMa decision of 4 December 2009 in case 6802/43, Jumbo- Super de Boer; NMa decision of July 25 2012 in case 7429/16, Coop-Diverse Jumbo Activa, NMa decision of 26 July 2012 in case 7432/23, Ahold-Jumbo Activa. 8

franchisees, the Dutch competition authority does not distinguish between owner-operated stores and franchise stores and therefore the activities and market share of the franchisees are attributed to the franchisor when assessing the parties' positions on the supermarket market.49 If the supermarket market is assessed as a national market, none of the market players holds a dominant position (see answer to question 1 above). If the supermarket market is considered local in scope, the ACM deems the acquisition or increase of market shares up to 50% no problem. If the market share of the acquirer (including its franchise network) exceeds 50% on a local market, the parties have to bring forward mitigating circumstances, such as the high market share of competitor(s) on such local market or evidence of customer movements that show that consumers frequent supermarkets outside the town considered to constitute the relevant geographic market. Franchise Market The market share of the provider of franchise services is determined by its market share on the (potential) national supermarket market. Given this national scope, there have not been any cases to date in which the joint market share of the parties was considered problematic. Purchase Market Finally, to the extent that the acquirer in a concentration is a member of a purchasing cooperative, the competition authority in assessing the effects of a merger on the purchase market takes into account the position of such purchasing cooperative. In an old case dating from 200150, the authority signalled that a concentration would lead to a significant increase in the market share of one of the purchasing cooperatives (up to 43%), making it twice as large as the second purchaser (23%), but approved the transaction (in the first phase) subject to the requirement that one of the parties would terminate its membership of the cooperative. In more recent cases, the increase of the market share of a cooperative or its position51 in the purchase market was not considered problematic. The ACM could review the purchasing cooperatives, as well as the (terms if the) franchise networks, under article 6 DCA (prohibition of restrictive agreements), but to date has not done so. 14 Has the increasing (or high) level of concentration of the retail grocery sector been offered as a reason for mergers among grocery suppliers? Has the competition authority taken into consideration the countervailing force of retailers to allow mergers among suppliers which may have otherwise raised competition problems? Please refer to case law. The reasons for a transaction are not explicitly taken into account by the ACM in its merger control assessment. Therefore, we are not aware of any cases in which the level of concentration between retailers was put forward as a reason for a merger between suppliers. However, there have been two recent cases involving concentrations between Dutch suppliers of snacks52, and biscuit rusk53 respectively, in which the suppliers put forward the existence of

49 NMa decision of 4 February 2002 in case 2838/16, Sperwer – Spar. 50 NMa decision of 15 June 1998 in case 811, Vendex-de Boer. 51 The concentration between Jumbo and C1000 did not change the market structure on the purchase market since Jumbo and C1000 where already purchasing via their purchasing cooperative Bijeen. 52 NMa decision of 14 September 2012 in case 7313/318, NPM Capital - Lion Capital - Buitenfood - Ad van Geloven. This case was first notified to the European Commission, who referred it to the ACM because of the effects on the Dutch market. 9

buying power at retail level as a justification for the large market shares that would be created as a result of the concentrations. However, in both cases the NMa ruled that it was unlikely that retailers disposed of sufficient countervailing buying power to justify the increase of market share of the producers on the production/sales markets.54 For the sake of completeness, we note that in other cases involving a concentration between suppliers, the competition authority considered that the concentration would lead to buying power towards the producers. Although in most cases the authority considered this a problem55, in the other case it did not, given that there was a lot of competition on the downstream market.56 15 Has the increasing (or high) level of concentration among the suppliers of grocery products been offered as a reason for mergers in the grocery retail sector? Has the competition authority taken into consideration the countervailing force of suppliers to allow mergers among suppliers which may have otherwise raised competition problems? Please refer to case law. No, the level of concentration among suppliers seems not to have been raised as a reason or argument in relation to concentrations in the retail grocery sector. 16 What remedies are imposed when there is a problematic concentration in the retail grocery sector (divestiture, behavioural remedies, regulatory changes, etc…)? In how many concentration cases has the competition authority (or the adjudicating body) imposed remedies for concentrations in the food retail sector over the past five years? In the last 5 years, the competition authority has assessed 8 concentrations in the retail grocery sector.57 In 4 of these cases, the authority raised concerns as regards to the competition on (a number of) (potential) local supermarket markets.58 In these cases, the parties offered remedies in the first phase of the merger review procedure. Therefore the authority approved the transactions, subject to conditions, without requiring a second phase investigation. In all cases the remedies consisted of the divesture of (one or more) supermarkets (sales of owner-operated stores and transfer of franchise agreements). In three of the cases the remedy included the appointment of a monitoring trustee. In two of these cases, in addition to the monitoring trustee, a sales trustee could be appointed if the parties would fail to find a buyer

53 NMa decision of 14 December 2012 in case 7321/401, Continental Bakeries - A.A. ter Beek. 54 In the snacks-case the ACM granted a licence, subject to commitments, but the parties later aborted their plan to concentrate. In the biscuit rusk- case, the ACM ordered a second phase investigation. The parties decided to abort their plan to concentrate. In April 2013 the target was acquired by a German company, Borggreve. 55 NMa decision of 1 February 1999 in case 1173, Campina Melkunie - Zuiver Zuivel/De Vereeniging and NMa decision of 7 July 1999 in case 1132, FCDF - De Kievit. 56 NMa decision of 4 May 2010 in case 6891, Van Drie - Alpuro. The Court of Rotterdam confirmed the approach of the NMa but ordered it to support its definition of the geographic scope of the downstream market with better argumentation. Court of Rotterdam judgment of 25 August 2011. 57 NMa decision of 23 September 2008 in case 6517/6, CoopCodis-Harskamp; NMa Decision of 4 December 2009 in case 6802/43, Jumbo - Super de Boer; NMa decision of 5 March 2010 in case 6879/24, Schuitema-Super de Boer active; NMa decision of 10 May 2010 in case 6960/8, Coop-Super de Boer active; NMa decision of 29 July 2010 in case 7002/5, Emté Supermarkten-Sanders supermarkten; NMa decision of 21 February 2012 in case 7323/81, Jumbo-C1000; NMa decision of 25 July 2012 in case 7429/16, Coop-diverse Jumbo active; NMa decision of 26 July 2012 in case 7432/23, Ahold-Jumbo Activa. 58 NMa decision of , 4 December 2009 in case 6802/43, Jumbo-Super de Boer; NMa decision of 5 March 2010 in case 6879/24, Schuitema- SdB Activa; NMa decision of 25 July 2012 in case 7429/16, Coop-Diverse Jumbo Activa. 10

themselves. In two cases the remedies included a behavioural commitment, on the basis of which the acquirer agreed, for a period of 10 years, to refrain from (re)gaining economic influence over the divested supermarkets.

17 Are internet stores an important part of the retail grocery sector? What are the specific competition or fairness problems raised in relation with their existence? Which laws applying to brick and mortar food retail stores do not apply to internet grocery retail stores? Although its share in the total grocery retail sales is still limited, online sales are a fast growing phenomenon.59 The percentage of online food sales is expected to grow to 15-20% of the total food sales.60 To date no competition law issues have been raised in respect of online sales of grocery products. It is possible though that, as the importance of online sales increases, smaller retailers will raise issues similar to those raised in relation to opening hours on Sundays: larger retailers have an competitive advantage since they have larger budgets and better logistics (see answer to question 35). Legislation which is specific for brick and mortar stores, such as rules concerning opening hours and licences, will not apply to online sales. However, online sellers will have to comply with rules concerning online sales (see answer to question 33).

5 ABUSE OF BUYING POWER, ABUSE OF DEPENDENCY

18 If your competition law prohibits abuse of buying power or abuse of dependency, how is buying power (or dependency) defined? Is there a statutory definition of buying power? What test is used by enforcement agencies? Abuse of buying power is a form of abuse of dominance. It is assessed under the general prohibition on abuse of dominance set out in article 24 DCA.

There is no statutory definition of buying power in the Netherlands. As set out above, in 2004 the Dutch competition authority published a vision paper on buying power (‘Vision Paper’). In this paper the authority defines buying power as: ‘market power on the demand side of the market. This is the case if a party on the demand side can operate independently from the suppliers.’61

To determine whether an undertaking has a dominant position or buying power, the competition authority determines (i) the relevant (purchase) market and (ii) the position of the alleged dominant party on this market. Next, it (iii) assesses the alternative sales channels for

59 In 2001, Albert Heijn started with online sales via its affiliate, albert.nl. The delivery services of albert.nl cover nearly all of the Netherlands. Last year, Albert Heijn also introduced pick-up points where consumers can pick up products they have ordered online. In 2012 Ahold acquired bol.com, the second largest online store in the Netherlands. Other supermarkets also offer online services and there are also a few other online players active. However, to date, the scope of the products offered is limited and most of the online services are organised locally. 60 ING Economisch Bureau ( 2013) report, ‘Sectorvisie Supermarkten: Supermarkten houden groei vast, Online boodschap breekt door’. 61 NMa (2004) report, ‘Visiedocument inkoopmacht’, p. 5. 11

suppliers (i.e. other buyers) and (iv) the existence of market power on the supply side of the market which would make it unlikely that the (large) purchaser can exercise buying power.62 19 Are abuses of buying power or dependency prohibited per se or prohibited only if they restrict competition on a relevant market?

Behaviour is considered abusive only if it has an exclusionary or exploitative effect.63 Therefore there is no behaviour that is abusive per se. The competition authority does not have to show the actual effect of the behaviour, it is sufficient to make a reasonable case that the behaviour will or may have a restrictive effect on competition.64

20 Is there a statutory definition of what constituted an abuse of 'buying power' or and abuse of 'dependency'? What test(s) is (are) used in enforcement to define such abuses?

The DCA does not give a definition of 'abuse'. The concept of abuse is interpreted in accordance with the EU rules. The test applied is rather vague. Acknowledging that there is no clear distinction between fierce competition and the abuse of buying power,65 the authority assesses whether the behaviour leads to the exclusion of market parties (particularly in the downstream market) or whether the behaviour can be considered exploitative, for example because it is discriminatory or unjustified. Furthermore, although not a clear requirement, the competition authority assesses whether the behaviour has a negative effect on the downstream market, i.e. whether it causes harm to consumers.66 If there is sufficient competition on the downstream market, the buyer is likely to pass any advantages it has gained on the purchase market on to its customers and it is unlikely that there will be abuse. 21 List practices which have been considered in the case law as abuse of buying power or dependency. There are no examples in case law concerning the grocery retail market. Indeed, the Dutch competition authority has not taken any decisions concerning the abuse of buying power. The Vision Paper mentions that exclusive supply agreements may constitute abuse of buying power. Other examples mentioned are the unilateral enforcement of certain (exploitative) conditions such as payment conditions, supply conditions and warranties. The Paper notes that a refusal to negotiate the terms of a contract that has been submitted to a supplier does not necessarily constitute abuse.67

6 COMPETITION LAW ENFORCEMENT

62 NMa (2004) report, ‘Visiedocument inkoopmacht’, p. 20 and NMa decision of 18 June 1999 in case 882, Amicon health insurance provider. See also the NMa decision on the objection in this case 882 of 13 December 1999 and NMa decision of 30 December 1999 in case 1150, Avebe vs SEP. Objection and appeals were denied on the merits, see Administrative High Court for Trade and Industry judgment of 27 Juni 2003, AWB 02/867. 63 See, for example NMa (2004) report, ‘Visiedocument inkoopmacht’, p. 5 and 24 and SEO (2013) report, ‘Oneerlijke handelspraktijken’. 64 Administrative High Court for Trade and Industry judgment of 7 October 2010, CRV Holding BV- Nederlandse Mededingsingsautoriteit, LJN: BN9947, para 6.4.4. 65 NMa (2004) report ‘Visiedocument inkoopmacht’, p 23. 66 NMa (2004) report ‘Visiedocument inkoopmacht’, p 25 and speech of H. Don, member of the board of the NMa, delivered on 6 October 2011 at the conference ‘Ontwikkelingen mededingingsrecht’, Kurhaus. 67 NMa (2004) report ‘Visiedocument inkoopmacht’, para 22. 12

22 Please list the relevant case-law (both before the national competition authority and the courts) related to the conduct of grocery retailers in your country in the last 5 years; please report by type of conduct and type of retail grocery format. Besides the merger cases discussed above (see answer to question 16), the Dutch competition authority has not taken any (enforcement) decisions involving grocery retailers over the last 5 years. Indeed, on several occasions the authority has expressed the viewpoint that the fierce competition between the (large) grocery retailers in the Netherlands benefits consumers68 and that if the pricing in the chain does not allow producers a viable income, there is overcapacity, which should not be solved by income protection or cartel agreements, but by innovation, cost reduction and a shift of activities. To the extent that producers claim that the margins at the secondary level are cause for the pressure on their income, the ACM points out that high margins should be a reason to enter a market, referring to producers who have done so. There are no (published) civil cases concerning the conduct of grocery retailers in the last 5 years. 23 Does the competition authority deal with horizontal anticompetitive practices at the local level (for example price fixing agreement between the only two retail food stores in a small village)? If not, how can such micro-violations be sanctioned? No, it does not. Such micro-violations may fall under the statutory de minimis exemption (see answer to question 2 above). To the extent that the violations do not fall within the scope of the de minimis exemption, the ACM is likely to reject such micro-cases on the basis of its priority policy.69 (Third) parties may initiate civil actions and claim any such agreements - over the de minimis thresholds - are void or constitute a breach of contract/unlawful action, and claim damages. There are very few or no (published) examples of such case law. 24 Have horizontal agreements between grocery suppliers to withdraw quantities in order to keep prices up (over and beyond what is allowed by the Common Agricultural Policy) been sanctioned under competition law? The Dutch competition authority has sanctioned several cartels between suppliers at production level70; three of these cartels included arrangements to limit production: the shrimp cartel and the 2 cartels involving onions. In 1999 the competition authority exempted a crisis cartel between pork slaughterhouses. These cases will be discussed below.71

24-1 ) Please briefly summarize the most important relevant cases in the last five years.

68 For example, NMa, letter to the Minister of Economic Affairs, dated 23 June 2005 and speech of H. Don, member of the board of the NMa, delivered on 6 October 2011 at the conference "Ontwikkelingen mededingingsrecht", Kurhaus . 69 The prioritization criteria used by the NMa/ACM are: (i) economic importance, (ii) consumer interest, (iii) likelihood of an infringement, (iv) efficiency of its actions, and (v) the gravity of the infringement. 70 Other cases concern market sharing arrangements and/or price fixing between flower producers, NMa decision of 16 December 2010 in case 6306, and producers of bell peppers, NMa decision of 15 May 2012 in case 7036. 71 Following the EHEC crisis in 2011 and the subsequent collapse of the market for vegetables grown in greenhouses, producers suggested a temporary measure to reduce the supply of cucumbers, tomatoes, bell peppers, aubergines and lettuce. With the support of the Minister of Economic Affairs, they requested the European Commission for permission. The Commission informed the parties that the proposed measures would not be exempted under the CAP and would be incompatible with article 101 TFEU. See State Secretary of Economic Affairs, letter dated 26 August 2011. The assessment of the European Commission hasnot been published. 13

Shrimp In January 2003 the Dutch competition authority imposed fines (total EUR 13.8 million) on Dutch, German and Danish producers’ associations of shrimp fishers and shrimp wholesale traders (16 parties in total). 72 These parties had agreed on a weekly quota per boat and minimum price guarantees between traders and producers in the period between 1 January 199873 and 30 January 2000. Fishermen who deviated from the quota were sanctioned by the producers’ association. Although the fines have been reduced (EUR 4 million), the highest appeal tribunal, the Administrative High Court for Trade and Industry (College van Beroep voor het Bedrijfsleven), confirmed the infringement, but reduced the fines (EUR 4 million).74 Onions In May 2012, the Dutch competition authority fined 5 producers of silverskin unions (which represented 70% of the EU production of silverskin unions) for agreements concerning the maximum number of hectares (quota) that would be sowed with cocktail union seeds in the period from 1998 until 2010. 75 From 1998 until 2003 the undertakings concerned had formed a cooperative that supervised the execution of the arrangements (the quota). After 2003 the arrangements continued without supervision by the cooperative. From 2006 the undertakings concerned also exchanged information on prices. 76 In February 2013 the Dutch competition authority fined 7 producers of first year onions (representing 80% of the Dutch production of first year onions) for agreements in 2009 and 2010 concerning a reduction of harvest in order to push up prices. Pork Slaughterhouses In 1999 the competition authority formally exempted an arrangement between pork slaughterhouses (representing 80% of the market) to establish a fund which aimed to sanitize overcapacity in the sector by buying and subsequently closing pork slaughterhouses. 77 The authority assessed the arrangements under the rules for crisis cartels and granted an exemption for a period of 5 years. The authority did not approve of agreements reducing the production of the remaining capacity of the slaughterhouses. 78 25 Has the internal governance of grocery retail networks (franchises, cooperatives, etc…) been considered to be problematic in your country from the point of view of competition? What are the legal instruments which can be used to control this? Has the competition authority dealt with the internal rules of retail grocery networks? No, besides its consideration why the market position of a retailer also includes the activities of its franchisees (see answer to question 13 above), the Dutch competition authority has not considered any issues regarding the internal governance structure of grocery retail networks.

72 NMa decision of 14 January 2003 in case 2269/326, Garnalen.

73 The arrangements had been in place prior to this date, but the DCA did not came into force until 1 January 1998 and therefore the authority of the Dutch competition authority was confined to this period. 74 Administrative High Court for Trade and Industry judgment of 17 March 2010, AWB 06/599, 06/604, 06/631, 06/671, 06/673. 75 NMa decision of 25 May 2012 in case 6964, Silverskin onions. 76 NMa decision of 18 December 2012 in case 6987/261, First year onions. 77 NMa decision of 23 March 1999 in case 374, Stichting Saneringsfonds Varkensslachterijen. 78 Appeals against this part of the decision were dismissed, see NMa decision of 24 March 2000 in case 374 and District Court of Rotterdam, judgment of 4 December 2011, LJN: AD 9026. 14

25-1 Please briefly summarize the most important relevant cases in the last five years. There is no case law of the Dutch competition authority on this subject. 26 Under what conditions can recommended resale prices in the retail grocery sector be considered a violation of the competition law? Similar to EU competition law, recommended resale prices are not prohibited by Dutch law, unless such recommended prices are combined with incentives not to deviate from the recommended price, as a result of which they have the effect of a fixed or minimum price.

26-1 Please briefly summarize the most important relevant cases in the last five years. There is no case law of the Dutch competition authority on this subject. 27 Are reselling below cost, de-listing of suppliers, resale price maintenance, prohibited by competition law? Reselling below cost and de-listing of suppliers are not prohibited as such under the DCA. Under circumstances, similar to those under the EU competition rules, it may qualify as an abuse of dominance. In line with the EU rules, resale price maintenance formally qualifies as a hardcore restriction of the competition rules. However, if the thresholds for this exemption are not exceeded, hardcore restrictions may benefit from the statutory de minimis exemption under the DCA (see the answer to question 2 above). Moreover, as the ACM is of the opinion that resale price maintenance does not necessarily aim to restrict competition it does not act forcefully on this subject (see the answer to question 2 above).

27-1 Please briefly summarize the most important relevant cases in the last five years. There is no case law of the Dutch competition authority on this subject. One of the very few (published) civil court cases involving the grocery retail sector, involved a dispute between Albert Heijn and a producer and supplier of gingerbread, Peijnenburg, in 2005.79 The Peijnenburg gingerbread was used by the largest consumers' association in the Netherlands in its weekly price comparison between supermarkets. In view thereof Albert Heijn discounted this product well below the purchase price. Fearing that other supermarkets would follow Albert Heijn's lead, Peijenburg ceased its supplies to Albert Heijn. Albert Heijn claimed that Peijnenburg could not terminate the relationship and that any attempt of Peijnenburg to have Albert Heijn increase its resale price would constitute prohibited resale price maintenance. The Court ruled that by the standards of fairness and reasonableness, Peijnenburg was entitled to terminate its relationship with Albert Heijn with immediate effect. As regards the competition law argument the Court stated that this was for the competition authority to assess (which argument could be criticized). The competition authority reacted to the ruling by issuing a press release stating that resale price maintenance is prohibited under national competition law.80 It did not, however, take any action. 28 Have there been collective boycotts by small food retail stores against suppliers selling to discounters during the past five years?

79 District Court of s-Hertogenbosch, judgment of 10 February 2005, LJN: AS5628. 80 ACM (2005) https://www.acm.nl/nl/publicaties/publicatie/5358/NMa-verticale-prijsbinding-niet-toegestaan/ 15

There have been no such boycotts.

28-1 Please briefly summarize the most important relevant cases in the last five years. Not applicable. 29 Are there any cases of small suppliers (for example farmers) jointly retaliating against large grocery food retailers, to punish the latter for selling low priced imported agricultural products cheaply? Can such practices be found to be violations of the competition law? List the case-law during the last five years? What other legal means exist to fight such practices? There have been no such retaliations. Therefore no case law exists on the subject. If over the de minimis thresholds (see answer to question 2), such joint retaliation could be incompatible with the DCA. Moreover, depending on the contractual arrangements between the relevant supplier(s) and the retailer, the retaliation could constitute breach of contract by the supplier. 29-1 Please briefly summarize the most important relevant cases in the last five years. Not applicable. 30 Are there cases of large-scale retail grocery stores agreeing to limit competition on prices? At the national level? At the local level? There are no cases on this subject matter.

30-1 Please briefly summarize the most important relevant cases in the last year Not applicable. 31 Are abusively high prices punishable under your competition law? What standard is applied to establish what constitutes a high price? Abusively high prices can constitute abuse of dominance and, if so, they are incompatible with the DCA. There is no strict standard determining which prices can be considered abusively high. An excessive margin, compared to the costs, may be an indication of excessive pricing.81 In addition, a comparison will be made with prices charged by suppliers.82 If no such suppliers are available in the Netherlands, an international tariff comparison may be made.83

31-1 Please briefly summarize the most important relevant cases in the last five years. There have not been any cases involving grocery retailers. Music rights The competition authority rejected a complaint submitted by a radio station concerning abusive prices charged by the organisation collecting intellectual property right licence fees

81 NMa decision of 28 April 2004 in case 2910-700, Interpay. 82 NMa decision of 30 November 1998 in case 130, Essers - Telekabel. 83 District Court of Rotterdam, judgment of 10 January 2005, LJN: AS9459. 16

on behalf of musicians (Buma).84 The complainant appealed against the decision. The Court of Appeal of Rotterdam affirmed that, in relation to intellectual property rights, a cost-based assessment is not useful. In such situation the Court deemed a comparison a sufficient method to ascertain whether the tariffs were abusive.85 Harbour fees Oil companies initiated a civil case against the local authority of Rotterdam, in which they claimed that the harbour tariffs charged by the Port of Rotterdam were discriminatory and abusively high. The Court of Rotterdam ruled86 that a dominant undertaking does not have to charge cost price and is allowed to add a reasonable margin to its cost. A price that is much higher than the costs without any justification (therefore an excessive margin) constitutes abuse. Moreover, the Court ruled that a dominant undertaking may be required to keep transparent accounts and that in the absence of such accounts the burden of proof that the prices are not excessive lies with the dominant company. This latter part of the judgement was overruled by the Appeals Court. The Appeals Court ruled that it is up to the claimant to provide evidence of its claims and therefore of the abusive nature of the prices.87 Providing such evidence it very difficult in practice. 32 In the last five years, have there been any cases against retail grocery distributors where the waterbed effect was a central issue? How did the competition authority assess such effects? There are no cases on the subject matter.

32-1 Please briefly summarize the most important relevant cases in the last five years. Not applicable.

7 REGULATIONS

33 What are the main general or sector specific regulations applying to retail grocery market structures or behaviors aside from competition law? Please give the substance of these regulations. To what extend do they limit the scope for competition in the retail grocery sector? Retail General The Opening Hours Act (Winkeltijdenwet) regulates the opening hours of retail shops and until recently provided for strict rules on opening hours on Sundays, including but not limited to, a maximum of 12 Sundays a year and the fact that the area in which the shop is located should be designated as a 'tourist area'. These strict rules mainly aimed to protect smaller retailers. In February 2013 the Dutch government decided on a more lenient regime, by removing the conditions and delegating the authority to set rules on this subject to local governments.

Grocery Retail

84 NMa decision of 2 April 2004 in case 3295 /133, Fresh-FM - Buma. 85 District Court of Rotterdam, judgment dated 27 August 2009, LJN: BJ6328 86 District Court of Rotterdam judgment dated 14 June 2007. 87 Appeals Court of The Hague judgment of 1 June 2010, LJN: BM6398. 17

No specific permits or licences apply to grocery retail. Naturally supermarkets are subject to food safety and hygiene regulations. These rules do not have an (significant) effect on competition.

There are two collective labour agreements for the grocery sector: one applies to large grocery companies and one to franchise companies. The collective agreements apply automatically to all undertakings in the sector.88 The content of the collective agreements are similar, with the exception of the arrangements on pensions and early retirement. Given these similarities they will not have an (significant) effect on competition. 34 Are there specific constraints which apply differently on large scale (grocery) retailers depending on whether they are concentrated structures or they result from "non-structural aggregations" of firms (such as retailers' cooperatives, retailers' voluntary associations, franchising contracts and alliances by companies) to undertake joined purchasing and logistics functions? There are no such constraints. See comment on collective employment agreements in the answer to question 33 above. 35 Are there specific regulations applying to internet retail stores? Are internet grocery stores subject to the same regulations (referred to in question 32) as brick and mortar stores? There are no specific rules for internet grocery stores.

The EU directive on online sales89 has been implemented in the Dutch Civil Code.90 However, given the perishable nature of food products the revocation right laid down in these rules will be of limited effect only in this sector. Online store are generally subject to the same regulations as brick and mortar grocery stores, with the exception that the regulations on opening hours do not apply to internet stores. 36 Are reselling below cost, de-listing of suppliers, resale price maintenance prohibited by a specific statute (outside of competition law)? No, there are no such regulations. In 2005 the Ministry of Economic Affairs investigated the desirability of introducing a statutory prohibition on reselling below cost, but decided against it.91 See answer to question 4. 37 Are there regulations which prevent or limit the ability of large scale food retailers from passing on discounts they obtain from suppliers? No, there are no such regulations. Indeed, passing on such discounts is considered beneficial to the consumer.92

88 The current and earlier versions of the collective agreements have been declared generally applicable by the Minister of Social Affairs and Employment, most recently by its decision dated 7 June 2012. 89 Directive 97/7/EG on the protection of consumers in respect of distance contracts. 90 Articles 7:64a - 7:46j of the Dutch Civil Code ("DCC"). 91 EIM (2005) report "Verbod op verkoop beneden de inkoopprijs". 18

38 Are some grocery products subject to price control? What is the rationale for such regulation? Are such price controls regularly reviewed and if so what is the periodicity of the review? Is the competition authority required to give an opinion before a price control is established? In July 1993 regulations providing for a minimum price for bread were abolished. These regulations aimed to protect small bakeries against competition from supermarkets.93 Currently there are no price controls on grocery products.

8 REGULATION OF LARGE SCALE FOOD RETAILING AND VERTICAL RELATIONSHIPS BETWEEN SUPPLIERS AND RETAILERS

39 Are there contractual relationships between large scale food retailers and small suppliers or small scale retailers regulated in your country? If so, what is the scope of the regulation? No, there are no specific rules regulating such relationships. They are subject to the general rules of contract law, set out in the Dutch Civil Code ("DCC"). These general rules embrace the principle of contractual freedom, particularly where it concerns B2B agreements. Therefore, parties are free to determine the conditions of their cooperation. Given that pacta servanda sunt, agreements cannot be unilaterally changed unless such right to unilateral amendment is provided for in the agreement. Damages as a result of defaults will have to be reimbursed.94

Moreover, agreements are subject to the principles offairness and reasonableness95, which principles can either impose additional rights and obligations or render unfair clauses unenforceable. More in particular, unreasonably burdensome conditions set out in general terms are voidable96. Agreements that where concluded under the influence of threat, fraud or abuse of circumstance can be annulled97. Under circumstances unfair practices could constitute an unlawful act98. As of March 2013, the DCC provides for maximum payment terms.99

Finally collective (and therefore anonymous) actions are possible under Dutch law100. Although Dutch civil law in theory provides for a fair level of protection for smaller suppliers, they do not make use of this protection. This is partly due to the fact that the above rules contain a lot of 'open norms', which will be assessed on a case-to-case basis. Suppliers do not

92 See for example NMa letter to the Minister of Economic Affairs, dated 23 June 2005 and ACM (2013) report "Marktvisie Autoriteit Consument &Markt". 93 Until 1966 supermarkets were prohibited from selling bread at all.

94 Article 6:74 DCC. 95 Article 6:248 DCC. 96 Article 6:233 DCC. 97 Article 3:44 DCC, 98 Article 6:162 DCC. 99 Article 6:119a DCC. This provision implements directive 2011/7/EU on the combating late payment in commercial transactions. 100 Article 6:305a DCC. 19

start legal proceedings because they are cost and time consuming and, more importantly, may jeopardise the commercial relationship. For a further discussion of the aspects relating to (unfair) agreements between large retailers and suppliers, see the answers to questions 43 and 44 below. 40 What is the role of the competition authority (if any) in the adoption and enforcement of such regulations? Not applicable. 41 Do the regulations apply to large scale retail food distributors refer explicitly or implicitly to the necessity to achieve a level playing field or to protect fairness of transactions. If so, is there any judicial interpretation of the content of these concepts? Not applicable. 42 Are small scale farmers or suppliers of food exempted from competition law and allowed to collectively sell their products in order to counterbalance the buying power of large scale distributors? Up to the thresholds of the de minimis exemption (see answer to question 2) any type of (restrictive) cooperation between small suppliers is allowed. Over these thresholds, joint sales will be assessed in accordance with the general competition rules as set out in the Horizontal Guidelines of the European Commission.101 No specific exemptions apply to farmers or suppliers of food. 43 List negotiating practices of large scale retailers which are prohibited per se by unfair trade law (such as reselling at a loss, clauses of category management, upfront payments, slotting allowances, long delays of payments, etc…). Who is in charge of implementing those regulations? How abundant is the case law for each type of practice? There are no specific unfair trade laws in the Netherlands and therefore there are no practices prohibited per se.

It follows from a study performed by EIM (2009)102 that 34% of the small suppliers in the food sector103 claim they have a weak position towards their most important customers. This figure has not changed over the last 5 years. 48% of the producers are of the opinion that large retailers set unfair conditions104. The types of unfair practices reported by suppliers mainly concern unilateral (retroactive) amendment of contract terms, particularly on prices, discounts and payment terms and the transfer of financial costs/risks to the supplier (contribution to marketing, category management, governmental costs, slotting allowance).

101 NMa (2004) "Visiedocument inkoopmacht", para. 138. 102 EIM (2009) report, "De aard en omvang van inkoopmacht, onderzoek naar de perceptie van leveranciers". 103 5-100 employees. 104 33% of producers in the food sector claim that the largest retailers sometimes set unfair conditions, 15% of producers claim this happens a lot and 52% think retailers do not set unfair conditions. 20

However, 80% of the suppliers are in a strong enough position to negotiate with the retailer or to decide to no longer do business with the retailer. Only 4% say they simply accept such practices. None of the recipients would start legal proceedings. This reflects the fact that there is no case law on unfair practices by retailers. 44 What are the legislative changes that you would recommend to improve the competitive landscape in the grocery retail sector in your country and why? We do not think legislative changes are needed in the Netherlands. Competition between grocery retailers in the Netherlands is fierce. We acknowledge that this fierce competition does not bring positive effects only for consumers. It also contributes to retailers increasing pressure on suppliers. In the long run, such pressure could lead to a decrease of innovation and supply. In view thereof we agree that action should be taken to combat unfair practices by large retailers. We subscribe to the approach chosen by the Minister to have the sector self-regulate this issue. A Code of Conduct is the most suitable instrument to provide concrete rules on what practices are considered acceptable and unacceptable in the sector. Established by the market parties themselves such code is most likely to be supported and observed. Combating unfair practices with additional civil legislation does not seem effective, since suppliers simply do not make use of the protection granted to them under civil law. Moreover, given the difficulty the competition authority seems to have with enforcing (the open norms of) the prohibition on abuse of dominance, adding a new or more extensive prohibition on unfair practices by parties with buying power in competition law seems ineffective too. We believe the current competition law framework provides sufficient basis to act against (excessive) situations that risk damaging competition in the market both in the short term and in the long run. It will be of great importance though that the government will oversee the self- regulation process to ensure excessive compromise. Moreover, to be effective the code will have to provide for an effective enforcement mechanism.

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