This case regards complaints in the context of which the Netherlands Authority for Consumers and Markets (‘ACM’) rendered a decision, on 6 July 2016, determining that the Municipality of Hellevoetsluis had violated the Dutch Public Enterprises (Market Activities) Act [Wet Markt en Overheid] (‘M&O Act’).
The municipality operated moorings in municipal marinas without charging all of the costs in the years 2014 and 2015. The municipality should have recharged the integral costs to the parties that used the moorings. “Whistleblowers” (competitors) filed a complaint. The municipality filed a notice of objection regarding this decision, and the objection was partially sustained.
The municipality did not agree with the allocation of the integral costs, with the dispute focused on which portion had to be allocated to the moorings in closed berths. The municipality’s position was that the costs of the harbour infrastructure (maintenance and capital expenditures relating to bridges, locks, and quays) should not be allocated to the moorings in closed berths. The ACM’s position was that the cost recharges should at least include operating costs, depreciation and maintenance costs, and the cost of capital. The cost recharges should also include the costs of operating assets used partly or entirely for the purposes of supplying goods and services, in proportion to the percentage of the use of such assets that is attributable to those goods or services, regardless of whether the costs concerned are direct or indirect. The ACM did not share the Municipal Executive’s view that that the Municipality of Hellevoetsluis’ maintenance of the quays, bridges, and locks in question was not a task that was the absolute and exclusive responsibility of the municipality. In the ACM’s view, the fact that the quays, bridges, and locks would, because of their public function, also be maintained if the municipality did not operate moorings did not diminish the fact that part of the related costs must be allocated to the operation of the moorings in closed berths. The Municipal Executive at least acknowledged that the municipal moorings could not exist if those general facilities, which are part of the municipal marinas and are as such crucial to their operation, had not been constructed.
The ACM’s position was that this application of the cost driver principle was consistent with the general commercial economic principal that the communal use of goods, services, and that work for multiple activities must result in the costs of those goods, services, and work being allocated to the various activities. After all, all of the indirect costs that relate in any way to an economic activity must be charged to the relevant customers. The Municipal Executive asserted that when using a cost allocation key, 50% would be a random percentage. The ACM, however, asserted that since neither function (supporting marina activities/public function) was dominant, 50% was a reasonable allocation.
The municipality also asserted that no value had to be attributed to the use of the marinas’ waters and that, if the water did indeed represent a value, that value would be no more than EUR 15 per m². The ACM determined that even in the case of a good that cannot be acquired, the market value must be used as a basis, and that the amount of EUR 15 per m² was acceptable given the appraisal reports that had been submitted. This was followed by an extensive calculation of the recharge of the integral costs of goods and services, which must be based on commercial economic principles that could be justified and that were consistently applied. The final conclusion was that, after reconsidering its view, the ACM found that, pursuant to Section 70c, preamble and part a, Competitive Trading Act [Mw], it should have determined that the Municipal Executive had, while operating the moorings in closed berths, violated Section 25i(1) Competitive Trading Act in the 2015 calendar year because it failed to recharge the integral costs of this service. The result for the 2015 calendar year, after all, was a loss. The ACM accordingly withdrew the disputed decision.
What can we learn from this? The premise of the M&O Act is that government organisations are free to perform ‘economic activities’ (and thus compete with private enterprises), but that in doing so, they must adhere to a certain code of conduct. We consider this decision on the objection to be important because it provides fair warning that all due care must be exercised when recharging and substantiating operating costs. Of course, this can be achieved at an earlier stage, such as when the municipal budget is adopted.