Wise to go Dutch on employee Competition Authority fines - International Law Office

Unlike the European Commission, the Competition Authority is authorised to impose fines on individuals for competition law violations.(1) The authority stated in 2010 that it would take account of companies picking up the tab for their employees' individual fines when deciding on a potential downward adjustment of the company's fine.(2) In October 2011 it warned that a company paying fines levied on individual employees could even result in an increase in the company's fine.(3) The Association of General Practitioners recently found out that the authority means business: its basic fine was increased by 5% because it had promised to pay the fines imposed on two of its officials (for further details please see "Trade associations should beware of their recommendations").

This appears to be the first time that a company's payment of fines levied on individuals has led to its own fine actually being increased.(4) In 2010 the authority stated that indemnification against fines levied on individuals amounts to "fine sponsoring", something which "law-abiding" companies should not do. In this context, it makes sense that a general indemnification against fines before any potential authority investigation being initiated might be regarded as giving employees 'carte blanche' to breach competition law.

Companies should, however, be aware that the authority does not seem to distinguish between general indemnifications against authority fines and indemnifications given during an authority investigation: even though the association decided during the authority's ongoing investigation that it would pay any fines imposed on individuals, its own fine was subsequently increased.

Companies should also beware of including authority fines in directors' and officers' liability insurance. According to the authority, it would be against the social responsibility laid down in the Association of Insurers' code of conduct for insurance companies to insure authority fines. This has not yet been tested, however.

For further information on this topic please contact Jolling De Pree or Erik H Pijnacker Hordijk at De Brauw Blackstone Westbroek by telephone (+31 70 328 53 28), fax (+31 70 328 53 25) or email (jolling.depree@debrauw.com or erik.pijnackerhordijk@debrauw.com).

Endnotes

(1) EU Regulation 1/2003 (OJ 2003, L1/1) does not authorise the European Commission to impose fines on individuals. The commission can interview individuals who consent to be interviewed on
the basis of Article 19 of EU Regulation 1/2003. Under Article 20(2)(e) of the regulation, the commission is empowered to ask individuals to explain facts or documents relating to the subject matter and purpose of a dawn raid. It is only in such event that the commission can impose a fine on the undertaking for failure by an individual to respond to a question.

(2) See the speech by Pieter Kalbfleisch of October 7 2010, "Ontwikkelingen Mededingingsrecht 2010".

(3) See the speech by Henk Don of October 6 2011, "Ontwikkelingen Mededingingsrecht".

(4) In 2010 the authority imposed fines on eight executives, whereas in 2011 the authority imposed fines on two individuals.