WILLEMSTAD – The Fair Trade Authority Curacao (FTAC) has issued two decisions in case number: A.0018.20. The FTAC decided on June 1, 2021 to impose a fine of NAf. 400,000 on accountancy firm Ernst & Young (EY). It is the first time that the FTAC has imposed a fine.
The fine was imposed on EY for not (timely) reporting a concentration. The FTAC is of the opinion that EY should have notified the FTAC of its acquisition of control over (parts of) KDC Interim at the beginning of 2019, the trade name under which accountants and advisors of the former KPMG Dutch Caribbean were housed since 1 January 2019. In the second decision, the FTAC decided that no fine will be imposed on KDC because KDC was not subject to a notification obligation.
Concentrations can lead to companies with a dominant position and thus to less competition in Curaçao. Article 5.2, first paragraph of the National Ordinance on Competition therefore provides that a concentration, a merger or takeover must be reported to the FTAC prior to its conclusion if it meets certain conditions. This notification obligation gives the FTAC the opportunity to monitor the emergence or strengthening of dominant positions of companies.
In Curaçao, companies are required to report major mergers, acquisitions and joint ventures (‘concentrations’) to the FTAC prior to their completion based on the National Ordinance on Competition. Companies must notify mergers if they jointly create or strengthen a market share of at least 30%. The FTAC cannot block concentrations, but it can impose fines if a concentration is incorrectly not reported, or if incorrect or misleading information is provided to the FTAC.
Investigation conducted by the FTAC
The FTAC launched the investigation into EY in response to media coverage, including a page-size advertisement from EY itself, announcing the acquisition of KDC Interim. Although every company is presumed to be aware of its obligations under applicable law, it should also be noted that in response to the reporting, the FTAC has expressly pointed out to EY the obligations under pursuant to Article 5.2 of the National Ordinance on Competition.
During its investigation, the FTAC identified the parties active in the market for audit and assurance services. Initially, the FTAC’s investigation team held discussions with key competitors of EY and the former KPMG about market conditions and perceived competition in the market. The FTAC also made use of its investigative powers by requesting data and documents from the parties involved through various information requests.
The results of the investigation gave cause to draw up a report as referred to in Article 7.11, first paragraph, of the National Ordinance on Competition, in which the suspicion of a violation of the notification obligation by the investigation team of the FTAC was substantiated. In accordance with the third paragraph of Article 7.11 of the National Ordinance on Competition, the sanctions team requested and received the opinion of EY on this report.
Decision-making by the FTAC
Based on the above investigation, and views submitted by the parties in accordance with Article 7.11 of the National Ordinance on Competition, the FTAC concluded in its meeting of 1 June 2021 that there was a violation by EY. The FTAC is of the opinion that it has been established that the agreements between EY and KDC bring about a concentration within the meaning of Article 5.1 of the National Ordinance on Competition. From the information provided by EY with the top of KPMG, trading under the name of KDC Interim agreements concluded that upon execution of those agreements, EY acquires control over (parts of) KPMG/KDC and the joint market share exceeds the market share threshold of 30%.
According to the FTAC, it is established that this concentration was not notified to the FTAC by EY in accordance with Article 5.2 of the National Ordinance on Competition.
The concentration thus concerns the acquisition by EY of control over (at least part of) the company KDC, consisting of part of KDC’s staff and part of KDC’s customers.
KDC does not acquire any control and in the event of a takeover the notification obligation rests on the acquiring party, which is why no fine was ultimately imposed on KDC Interim in the second decision in this case of the FTAC. In this the FTAC concludes that KDC Interim was not obliged to report regarding the takeover of (parts of) KDC by EY and that the violation cannot therefore be attributed to KDC Interim.
For this reason, the FTAC has closed the investigation into KDC and has decided in accordance with Article 7.13 paragraph 1 National Ordinance on Competition that no fine will be imposed.
Bron: Curacao Chonicle