Oversight
Purpose of competition oversight
The objective of the Competition Ordinance is to promote fair competition. In other words, to make markets work better. This means that competition between companies is not prevented, restricted or distorted, and that companies may not abuse their dominant position. Fair competition between companies leads to lower prices, higher quality, more innovation and more consumer choice. Companies benefit from a level playing field, a better investment climate and better opportunities for new companies without unnecessary entry barriers. As a result, consumer welfare increases, and the economy of a country becomes stronger. Moreover, more competition creates additional jobs as production and activity increase.
To whom do the rules of the Competition Ordinance apply?
The rules laid down in the Competition Ordinance apply to all undertakings and associations of undertakings that perform economic activities on the Aruban market. This includes national and foreign undertakings. Economic activities may consist of offering goods and/or services on the market by undertakings. It is irrelevant what legal form the undertaking has, how it is financed and whether it has a profit motive. This approach implies that undertakings do not only include ordinary companies, but also, for example, independent professionals, public enterprises and certain foundations.
The prohibition on cartels
The prohibition on cartels applies to cartel agreements. Cartel agreements are agreements that prevent, restrict or distort competition. They may include:
- agreements between undertakings;
- decisions of associations of undertakings; and
- concerted practices of undertakings.
Based on the prohibition on cartels, these agreements are prohibited. The concept of agreement should be interpreted broadly. . An agreement may be in writing or oral. It also includes informal (for example, a gentlemen’s agreement) and tacit agreements. An agreement requires only consensus on the commercial behavior of the undertakings involved.
The prohibition on cartels also applies when entrepreneurs coordinate their market behavior without expressly having agreed to do so (i.e., without actually reaching consensus). For example, a meeting at which the undertakings present inform each other of their future price increases without expressly agreeing with each other to increase the prices. Such a meeting may have the same effect as a cartel agreement if the undertakings present intend to increase their prices in line with the intended increases of their competitors. Therefore, the concept of agreement also covers such concerted practices. Below we will use the term “agreement” for all types of market behavior to which the prohibition on cartels may apply.
Anticompetitive agreements include both horizontal and vertical agreements. A horizontal agreement is an agreement between undertakings that are potential or actual competitors of each other. A vertical agreement is an agreement between undertakings that are active at different levels in the production and distribution chain (e.g., an agreement between a buyer and a supplier).
Hardcore violations
The Competition Ordinance (Article 2.1, second paragraph) contains a number of types of agreements that are always prohibited. These agreements are always detrimental to the consumer and are referred to as hardcore violations.
Hardcore violations are horizontal agreements between competing, or potentially competing, undertakings. The following types of agreements are considered hardcore violations:
- fixing selling prices or other terms and conditions of sale;
- fixing bid prices or other bidding conditions in tenders (bid-rigging);
- limiting or controlling production or sales (e.g., concerted refusal to supply); or
- sharing markets (e.g., sharing of customers or territories).
Other agreements in violation of the prohibition on cartels
In addition to the hardcore agreements, other anticompetitive agreements may also be prohibited. These are the main agreements prohibited under the prohibition on cartels (subject to exceptions):
- agreements in which suppliers prohibit retailers from reselling products to other retailers;
- agreements on the exchange of commercially sensitive information between competitors;
- agreements on cooperation in the production or distribution of a product.
These agreements are not always prohibited but only when competition is restricted and no exceptions apply.
Exceptions to the prohibition on cartels
Agreements that are not subject to the hardcore prohibitions are not always detrimental to competition. Therefore, these agreements are not always prohibited and may be covered by one of the exceptions to the prohibition on cartels. The Competition Ordinance contains the following exceptions:
- De minimus: : if the combined market share of the undertakings involved does not exceed 25%, the prohibition on cartels does not apply, in principle.
- Exemption: if agreements are anticompetitive but still bring more advantages than disadvantages to the economy of Aruba, an exemption from the prohibition on cartels may be applied for at the AFTA. The undertakings involved must then demonstrate that they meet four cumulative requirements. You can apply for an exemption by completing the ‘application form for exemption from the prohibition on cartels.
- Block exemption: certain categories of anticompetitive agreements may be exempted from the prohibition on cartels by national decree. Again, in general, the advantages of such agreements must outweigh the disadvantages. This is the case if the same four requirements that apply to obtaining an exemption are met. At present, no block exemptions apply.
Specific exceptions to the prohibition on cartels
In addition to the de minimus, exemption and block exemption exceptions, the Competition Ordinance provides for two specific exceptions to the prohibition on cartels. These exceptions apply to:
- collective bargaining agreements; and
- services of general economic interest.
An agreement concluded based on collective bargaining between employers’ and employees’ organizations, the direct objective of which is the improvement of employment and employee benefits of employees, is not subject to the prohibition on cartels. Services of general economic interest are not covered by the prohibition on cartels. This means that agreements that are necessary for public service activities are not subject to the prohibition on cartels.
Tenders and the prohibition on cartels: Bid-rigging
A tender is the procedure in which a client announces that it wants a contract to be performed and invites companies to submit a bid. It may concern the supply of goods or the provision of services.
Bid-rigging is a form of collusion between bidders. Bid-rigging occurs if:
- in response to a tender, one or more bidders agree with each other to refrain from bidding;
- bids are adjusted in advance; or
- agreements are made with each other about who will be awarded the contract.
Such agreements reduce or eliminate competition and lead to higher costs for clients. Bid-rigging is a hardcore agreement that is always in violation of the prohibition on cartels (Article 2.1, second paragraph, subparagraph b, of the Competition Ordinance).
The most common forms of bid-rigging are:
- Bid suppression: companies (bidders) agree who will bid for a tender or who will withdraw its bid after bidding so that the other has a greater chance of being awarded the contract.
- Overbidding: companies (bidders) deliberately submit a higher bid than the bidder they have mutually agreed should be awarded the contract. Another way is to make the terms of the bid so unappealing for the client that the company will certainly not be awarded the contract.
- Market sharing: companies (bidders) agree in which geographic area they may be awarded the contract.
- Rotation system: companies (bidders) agree whose turn it is to be awarded a contract.
Many calls for tenders take place within the public sector and are then referred to as public procurements. Often it is known in advance which companies will submit a bid. Sometimes it is also known what the budget or maximum price is for the contracting authority. This knowledge makes it easier for competitors to make agreements and to adjust these cartel agreements. Bid-rigging in a public procurement is to the detriment of all residents of Aruba. After all, they pay the bill for the more expensive bids through taxes.
Prohibition on abuse of a dominant position
An undertaking with a dominant position is able to act to an appreciable extent independently of its competitors, suppliers, customers or end users. Therefore, such an undertaking is subject to stricter rules than an undertaking without a dominant position. This is necessary to protect the interests of remaining competitors, suppliers, customers and end users. Having a dominant position is not prohibited. The Competition Ordnance only states that undertakings with such a position may not abuse it.
When does an undertaking have a dominant position?
The first step is to determine which market is involved. A market is the area in which competition takes place between suppliers of equivalent products. Therefore, each market is determined by the geographic area and by the type of product. Both the relevant geographic market and the relevant product market must therefore be defined.
- The relevant product market consists of all goods and/or services which the customer considers to be interchangeable or substitutable based on their characteristics, prices and intended use.
- The relevant geographic market comprises the area in which undertakings demand and supply goods and/or services, in which the conditions of competition are equivalent and are appreciably different from neighboring areas. The relevant market must be at least partially located in Aruba; otherwise the Aruban competition rules do not apply. The market(s) on which each undertaking is active can thus be determined. Example: the car insurance market in Aruba or the bakery products market in Oranjestad.
Once the relevant market has been defined, the second step is to determine whether the undertaking(s) in question hold(s) a dominant position in that relevant market. The market structure is particularly important in this respect. A dominant position cannot always be inferred from the market share alone. Therefore, other factors are also considered, such as the number of undertakings active on the market and their market position. If it appears that an undertaking has a market share of at least 60 percent on the relevant market, it will be considered to have a dominant position in any case. Even with a smaller market share, this can sometimes be the case.
Abuse of a dominant position
Having a dominant position as such does not pose a problem and is therefore not prohibited. The Competition Ordinance is only violated if an undertaking abuses its dominant position. An undertaking could abuse its dominant position, for example, by charging extremely high prices, applying unreasonable terms of delivery, excluding certain customers from delivery, charging different prices for equivalent services, pushing competitors out of the market or preventing new undertakings from entering the market by, for example, (temporarily) applying extremely low prices.
Notification of concentrations
Concentrations of undertakings (through a merger or acquisition) can result in powerful undertakings that are dominant enough to prevent or eliminate competition on a particular market. This can be detrimental to economic development. To prevent future restrictions on competition, the Competition Ordinance provides for an obligation to notify intended mergers, acquisitions and joint ventures. This notification obligation allows the AFTA to monitor the creation or strengthening of dominant positions of undertakings. The concentration notified cannot be blocked by the AFTA, but, in case of abuse of a dominant position or to prevent such abuse, the AFTA can intervene, if necessary. More information about abuse of a dominant position can be found in the brochure ‘The Competition Ordinance’ under the heading “The prohibition on abuse of a dominant position”. If your undertaking is involved in a merger, acquisition or joint venture, you may have to notify this concentration to the AFTA in advance.
Which concentrations should I notify to the AFTA?
The obligation to notify only applies to relatively large concentrations in Aruba. You should notify the intended concentration if any of the situations below applies:
- The combined turnover of the undertakings involved exceeded Afl. 125 million in the previous calendar year. In addition, at least two of the undertakings involved must each have an annual turnover of at least Afl. 15 million in Aruba.
- The undertakings involved together create or strengthen a market share of 30% or more on one or more relevant markets in Aruba.
What information should I provide in case of a concentration notification?
In case of a concentration notification, you should provide detailed information about, among other things, the undertakings involved, the type of concentration, the market conditions and the expected impacts of the concentration. If you are obligated to notify a concentration to the AFTA, click here to download the “notification of a concentration” form. Please note! You are obligated to notify a concentration to the AFTA prior to its implementation. If you fail to do so, you risk a fine.
Objection and appeal
If you, as an interested party, do not agree with a decision addressed to you, which arises from the Competition Ordinance, you may object to it and, if you wish, then file an appeal against it. This is provided for in the Aruban National Ordinance on Administrative Justice (in Dutch: “Landsverordening Administrative Rechtspraak”).
In the event of an objection, the AFTA will review the decision. A notice of objection may be filed by an interested party within six weeks after the date of the decision. An interested party is a legal entity or individual whose interests are directly affected by a decision. Your notice of objection should be filed in in writing at the AFTA and should contain at least the following information:
- the name and address of the person filing the notice of objection and, if the notice of objection is filed on his or her behalf by an authorized representative, the name and address of the authorized representative;
- a description of the decision against which the notice of objection is filed, if possible on submission of a copy thereof;
- the grounds on which the objection is based;
- the date of the notice of objection; and
- a signature by or on behalf of the person filing the notice of objection.
If the notice of objection is filed by an authorized representative who is not registered with the Joint Court as an attorney-at-law, the authorization should also be submitted.
If possible, attach a copy of the decision you are objecting to and any other documents relating to the decision to the notice of objection.
After the filing of your notice of objection, you will receive proof of receipt and you will be informed of the handling process. As the person filing the notice of objection, you will be invited by the Objection Advisory Committee to attend a hearing. If necessary, experts and other interested parties will also be invited. The Objection Advisory Committee is responsible for advising the AFTA on its decisions on your notice of objection. After the AFTA has received the advice of the Objection Advisory Committee, the AFTA will decide on your notice of objection. In any case, the AFTA will decide on your notice of objection within four months after the filing of your notice of objection.
The decision on the notice of objection will state the reasons. A copy of the advice of the Committee and the report of the hearing will be attached to the decision on the notice of objection. If the advice contains the full reasons for the decision, a reference to the advice will suffice to justify the decision. If the decision deviates from the advice, the reasons for the deviation will be stated, and a copy of the decision will be sent to the Objection Advisory Committee.
If you disagree with the decision made by the AFTA on your notice of objection, you may file an appeal against it with the Court of First Instance of Aruba.
Appeal with the Court of First Instance and the Joint Court of Justice
Appeal with the Court of First Instance
An interested party may file an appeal against a decision of the AFTA on a notice of objection with the Court of First Instance of Aruba. The time limit for filing a notice of appeal with the Court of First Instance is six weeks and takes effect the day after the date of the decision on your objection.
An appeal may be filed if:
- the decision is contrary to a generally applicable rule;
- in making the decision, the administrative body manifestly used its power for a purpose other than that for which it was granted;
- with due consideration of all interests, the administrative body could not, in all reasonableness, have arrived at the decision;
- the decision is not supported by the reasons stated for it;
- the decision violates another principle of proper administration which is at the root of judicial ethics.
Your notice of appeal should be filed in writing with the Court of First Instance Aruba and should contain at least the following information:
- the name and address of the appellant and, if the notice of appeal is filed by an authorized representative, the name and address of the authorized representative;
- a description of the decision against which the appeal is filed, if possible on submission of a copy of the decision and the documents relating to it;
- the grounds on which the appeal is based;
- the date of the notice of appeal; and
- a signature by or on behalf of the person filing the notice of objection.
Appeal with the Joint Court of Justice
Both the interested party and the AFTA may file an appeal against a judgment of the Court of First Instance with the Joint Court of Justice of Aruba (the Joint Court). The time limit for filing a notice of appeal with the Joint Court is six weeks and takes effect the day after the date of the decision on the appeal by the Court of First Instance.
An appeal may be filed with the Joint Court if:
- the decision is contrary to a generally applicable rule;
- in making the decision, the administrative body manifestly used its power for a purpose other than that for which it was granted;
- with due consideration of all interests, the administrative body could not, in all reasonableness, have arrived at the decision;
- the decision is not supported by the reasons stated for it;
- the decision violates another principle of proper administration which is at the root of judicial ethics.
Your notice of appeal should be filed in writing with the Joint Court and should contain at least the following information
- the name and address of the appellant and, if the notice of appeal is filed by an authorized representative, the name and address of the authorized representative;
- a description of the decision against which the appeal is filed, if possible on submission of a copy of the decision and the documents relating to it;
- the grounds on which the appeal is based;
- the date of the notice of appeal; and
- a signature by or on behalf of the person filing the notice of objection.
Court fees are payable when filing a notice of appeal with the Court of First Instance and the Joint Court. Other rules concerning the objection and appeal procedure can be found in the National Ordinance on Administrative Justice
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