Two contradictory reports were published last week about the Dutch bell pepper cartel. The Authority for Consumers & Markets (ACM) will increase the fines for the cartels, and that the fines for the bell pepper cartel will decrease sharply.
Rainbow and UWG will not get a 14 million euro fine, but a 1.63 million euro fine for grower’s associations FrEsteem, cooperative Rainbow Paprikatelers (RPT, Rainbow bell pepper cultivators), and sales subsidiaries FresQ UWG and FresQ RGG. The growers’ cooperatives of bell peppers were fined because of price cartel formation with market organisation ZON in the May 2006 - February 2009 period.
How did they manage to have a 14 million euro fine decreased by almost 90 per cent? Lawyer Tim Raats explains how the new fine came about.
Reduction through sales: from 14 to 9 million euro
The fines were decreased in two steps. They first looked at the sales of the organisations to determine the maximum sum of the fine. “Until 1 July, the maximum fine amounted to 450,000 euros, or ten per cent of annual sales of the companies concerned, the highest of those two amounts was used. With a company association (such as grower’s associations) the ACM (Authority for Consumers and Markets) can count the combined annual sales of its members,” Tim Raats, competition specialist at law firm BarentsKrans, explains. As was reported yesterday, the maximum fine was increased as of 1 July, however, the bell pepper cartel is still covered by the old rules.
The maximum fines of the grower’s associations FrEsteem and RPT have been determined to be ten per cent of the combined sales of joined bell pepper cultivators. That resulted in a maximum fine of 5.2 million euros for FrEsteem and 4.3 million euros for RPT.
Sales of sales subsidiaries FresQ UWG and FresQ RGG is much lower. This would result in maximum fines of 22,000 euros and 37,000 euros. Therefore, ACM determined the maximum fines for these parties at 450,000 euros per sales company. Grower’s association FresQ is severally liable for these fines according to the ACM.
To prevent the growers being fined twice, the fine of the sales companies was deducted from that of the grower’s association. This all amounted to sums of 9.5 million euros in total.
Reduction through capacity: from 9 to 1.6 million euros
The second step in the reduction is about the capacity of the organisations and the sector. This caused the fines of grower’s associations FrEsteem and RPT to be lowered. “Capacity of FrEsteem, RPT and FresQ in the strictest sense of the word was limited to zero,” concludes the ACM. “During the years before, from the moment they were fined, capacity was insufficient to be able to pay the fines.”
No one in the sector will be surprised by that. Grower’s association FresQ was quickly dismantled, and the bell pepper sector went through some bad years. Yet the ACM does not think that is enough of a reason to fine them. They lowered the fines: from 5.2 million euros to 450,000 euros for FrEsteem, and from 4.3 million euros to 280,000 euros for the smaller RPT.
Total fines
This makes the total of the fines 900,000 euros for grower’s association FresQ (450,000 euros for both UWG and RGG), 450,000 euros for FrEsteem and 280,000 euros for RPT. Tim Raats concludes that the steps taken are logical. “But it is of course a striking decrease regarding the fines given in 2012.” Furthermore, exceptional of the case is that the fined organisation no longer exists in that form. Grower’s association FresQ does not exist anymore. That creates a unique situation.
Who is going to pay?
But who is now going to pay the price? The ACM expects the growers will have to. “Although strictly speaking the member-bell pepper growers have not been fined, but the cooperatives they were members of and the sales companies, the ACM bears in mind that, in the end, the member-bell pepper growers will have to pay the fine,” the ACM reckons. The fines for FrEsteem and Cooperative RPT will be for the current members. “They could ask their current members, who are former members of FresQ, for considerable contributions.”