Aruba’s Competition Ordinance entered into force early this year, allowing competition problems to be addressed under both administrative and civil law.
The Competition Ordinance entered into force in Aruba early this year, which has finally given the island a competition regime. In this blog, we address the history and content of the Competition Ordinance. We also discuss to what extent it resembles the Dutch and European competition regimes, as well as the main differences. Finally, we address the competition situation in neighbouring Curaçao, where a similar competition regime came into force earlier.
Competition in Aruba
An earlier survey by Stichting Economisch Onderzoek (Economic Research Foundation or SEO) into an effective pricing and competition policy in the Caribbean Netherlands exposed a number of competition problems in Aruba. The market is small by nature, for instance, which means that the risk of market distortions and market imperfections is greater than in other countries, due to the limited number of players. This can lead to monopolies and oligopolies. SEO itself established during the survey, for instance, that cartels existed in Aruba in the food and banking products markets.
The conclusion of the report was therefore that competition in Aruba was distorted and that a competition regime should be put in place. A study by Economisch Bureau Amsterdam also showed that the implementation of the Aruba Fair Trade Authority and the introduction of a Competition Ordinance should be prioritised. Aruba started preparing the Competition Ordinance in response to these surveys. The Parliament of Aruba adopted the Competition Ordinance in 2020. It was also agreed at that time to set up the Aruba Fair Trade Authority (AFTA).
Aruba Fair Trade Authority
The AFTA, also referred to as the Authority for Markets and Consumers, oversees competition in Aruba. The AFTA has made various brochures, videos and documents available on its website that provide insight into the AFTA interpretation of the Competition Ordinance. The AFTA works together with the Dutch ACM and the Fair Trade Authority Curaçao (FTAC). The intention is for AFTA also to enforce consumer law as from 2025. This is to be achieved through a merger with Aruba’s Department of Rental and Consumer Affairs. There are also plans at a later stage to put the AFTA in charge of the regulation (yet to be created) of utility sectors. The AFTA currently has a staff of only six. The Dutch link with AFTA is interesting. In addition to its chair, Roly Sint Jagouit, for instance, the Board consists of Martijn Snoep (chair of the ACM) and Matthijs Visser (former economist at RBB Economics), who are well-known in Dutch competition circles.
The Competition Ordinance
The Competition Ordinance is aligned with the European-law conceptual framework where possible. For instance, key competition law concepts such as ‘undertaking’ and ‘control’ are defined in the same way as in the European regime. Some competition law aspects are set up slightly differently.
The Competition Ordinance offers the possibility of imposing fines. Such fines are subject to a cap of AWG 1 million (approximately €512,000), or AWG 2 million (approximately €1 million) if the benefit gained by the offence exceeds AWG 1 million. For companies with a turnover of more than AWG 10 million (approximately €5.1 million), the maximum fine is 10% of the annual turnover. Moreover, the fine is doubled in the event of recidivism (within five years). Administrative enforcement by the AFTA is subject to objection and appeal under the National Administrative Justice Ordinance.
The Competition Ordinance deals with the three core areas of competition law: the cartel prohibition, the prohibition of abuse of dominance, and merger control. We will briefly address each of these three core areas.
Cartel prohibition
The essence of the cartel prohibition is that agreements between companies are prohibited if they may restrict competition. The interpretation of the cartel prohibition in the Competition Ordinance is as closely as possible to the European cartel prohibition (see this and this blog). Agreements in violation of the cartel prohibition are also void in Aruba (see this blog).
Aruban competition law differs subtly from European law with regard to ‘per se’ prohibited practices (in Europe: purpose limitations), which are always prohibited. These include collusion in tenders, price-fixing, limiting production/volume, and market allocation. These in no event qualify for exemption in Aruba; an exemption under European competition law is equally unlikely.
As in European law, the Competition Ordinance has opted to leave collaborations outside the scope of competition law if they cannot appreciably restrict competition. That is the case in Aruba if the companies involved have a (combined) market share of less than 25%. This is higher than in European competition law, where the European Commission has opted for a limit of 10% for horizontal agreements and 15% for vertical agreements (see the De Minimis Notice).
As under the European rules, an exception applies under Aruban law to anti-competitive collaborations if the advantages outweigh the disadvantages. In the EU, companies themselves must assess whether they can make use of this exception (self-assessment). This obligation does not exist under Aruban law. To be eligible for this exception, an exemption must be obtained from the AFTA, meaning that companies must submit their anti-competitive collaboration for approval. This is reminiscent of the old exemption system that applied in the EU and the Netherlands until 2004.
Aruba also has the option of using block exemptions. Block exemptions are an elaboration of the statutory exception that a collaboration is permissible if the advantages outweigh the possible disadvantages. They therefore provide a safe harbour for specific agreements between companies, provided that certain conditions are met. A case in point is the European Block Exemption Regulation for vertical (distribution) agreements (see this and this blog). To date, the Aruban legislature has not yet drafted any block exemptions.
Abuse of dominance
The prohibition of abuse of a dominant position means that companies that can act to a significant extent independently of competitors, suppliers, customers or end-users may not restrict competition. In Aruba also the doctrine of abuse of a dominant position is aligned with the European regime (see this blog). But there are some differences in this respect too. Under Aruban competition law, for instance, dominance is deemed to exist at a market share of 60%, unlike in the European Union, where this assumption applies at a market share of 50% already (see this blog).
In addition to the power to impose fines, the AFTA furthermore has the power to impose preventive measures in case of abuse of dominance. These obligations may be imposed for a maximum period of three years. The AFTA may impose the following obligations:
- Obligation to disclose information
- Obligation to treat customers equally
- Obligation to abandon tying arrangements
- Obligation to keep separate financial records of products that a company supplies to itself and to third parties.
- Obligation to apply reasonable terms and conditions
Merger control
Mergers, acquisitions and joint ventures between companies may restrict competition. Corporate mergers must therefore be submitted to competition authorities in the European Union for approval, often depending on the turnover involved (see also this blog). A merger control regime has now also been introduced in Aruba.
The notification requirement for M&A transactions in Aruba arises if the companies involved generated a combined annual turnover of at least AWG 125 million (approximately €64 million) in the preceding calendar year and at least two of the companies involved individually generated an annual turnover of at least AWG 15 million (approximately €7.7 million) in the preceding calendar year. A notification requirement also applies if the market share of the parties involved in one or more relevant markets in Aruba is 30% or more. This differs from Dutch and European practice, where no market share threshold applies, but only turnover thresholds.
Until 2028, notifiable transactions will not be subject to substantive review by AFTA. In any event until 2028, Aruba’s merger control will consist exclusively of a notification regime. No substantive assessment will therefore take place for the time being. In light of the notified mergers, the desirability of substantive merger control will be investigated when the Competition Ordinance is evaluated.
Curaçao
On the neighbouring island of Curaçao, a competition regime has been in place since 1 September 2017, overseen by the FTAC. Curaçao has also aligned its competition regime with the concepts of European competition law. Therefore, only a notification requirement applies to M&A transactions in Curaçao. As in Aruba, no substantive assessment takes place. To date, the FTAC has fined, among others, the Dutch Caribbean Taxi Association for breaching the obligation to cooperate. It also established a cartel violation by the Curaçao Ports Authority and several post-paid tour operators. It furthermore imposed a fine of ANG 400,000 (approximately €200,000) on EY for breaching the prohibition on gun-jumping in an M&A transaction (see this blog) by failing to notify the FTAC of the transaction in advance. These results are relatively limited at first glance, which may be partly due to the lack of sufficient clout within the FTAC.
Conclusion
The entry into force of the Competition Ordinance in Aruba and the establishment of the AFTA mark a major change for the business community and its legal advisers. For the first time, it will be possible to address competition issues under both administrative and civil law. The Aruban competition regime is largely aligned with the European-law concepts but differs on some (relatively minor) points. The future will show how effective the new competition regime will be in Aruba. This will depend in part on the number of people whom the AFTA can attract. It is in any event clear that the AFTA has a wide range of powers.
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