Liability of non-addressee subsidiaries in cartel decisions – An extension of existing principles?

Article 101 of the Treaty on the Functioning of the European Union prohibits agreements and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition within the internal market. For violation of this restriction, the European Commission may impose a fine of up to 10% of the turnover of the undertaking, and victims may seek compensation for the damages caused by the violation. Fines for violations of competition law may also be imposed by the national competition regulatory authorities, such as the Competition Council in Latvia.

According to the case-law of the Court of Justice of the European Union (“CJEU”), an undertaking consists of an “economic unit”, which may include several natural and legal persons. A subsidiary is presumed to be part of the same undertaking as the parent company if the subsidiary is wholly owned by the parent company. In turn, this means the parent company can be fined for a breach of competition law by the subsidiary,1 and the victims can take action against the parent company for the damage caused by the breach. At the same time, the CJEU has so far not clarified whether such group liability can also be applied in a top-down manner. Namely, to fine and claim liability for damages from the subsidiary for the infringement of competition law, for which the parent company has been fined for.

On the one hand, the attribution of liability to a subsidiary which has not been fined for the infringement is consistent with the already aforementioned definition of “economic unit” in European Union law. In addition, it also enhances the effectiveness of competition law enforcement by providing victims with additional opportunities to seek redress. On the other hand, the subsidiary does not have decisive influence over the parent company, thus the subsidiary is unlikely able to influence the parent company's conduct.

This issue is now before the CJEU in the Case No.C‑882/19 (“Sumal”). In the Sumal case, the claimant in the main proceedings brought an action before the Spanish court for damages against the defendant, Mercedes Benz Trucks Espana SL (“MB Trucks”), a subsidiary of Daimler AG. On 19 July 2016, the European Commission fined Daimler AG for participating in the trucks cartel. MB Trucks was not the addressee of the decision. A Spanish court has referred a question to the CJEU for a preliminary ruling, asking the CJEU to clarify whether an injured party may claim damages from a subsidiary of the parent.

Although, the CJEU has not yet rendered a judgement in this case, on 15 April 2021 the Opinion of Advocate General Giovanni Pitrucella was published. In his Opinion, Pitrucella emphasizes European Union law should be interpreted in such a way that the attribution of liability within a group is also possible in a top-down manner (i.e., the subsidiary is liable for the parent company’s infringement). Pitrucella puts forward two preconditions for this:

  • the subsidiary must form a single “economic unit” with the parent company at the time the infringement is committed (i.e., the parent company must have a decisive influence over the subsidiary); and
  • the conduct of the subsidiary on the market affected by the illegal activities of the parent company significantly contributed to the achievement of the intended objective as a result of those activities and to the materialization of the consequences of the infringement.2

The CJEU may reach different conclusions in Sumal, nevertheless the Opinion of Advocate General Pitrucella suggests a subsidiary may be held liable for an infringement of competition law by a parent company even if the subsidiary is not the addressee of the infringement decision.

 

[1] Judgment of the Court of Justice of the European Union of 20 January 2011 in Case C-90/09 P (General Química), paragraphs 34 and 35; Judgment of the Court of Justice of the European Union of 29 September 2011 in Case C-521/09 (Elf Aquitaine SA), paragraph 53.

[2] Opinion of Advocate General Giovanni Pitrucella delivered on 15 May 2021 in Case No. C-882/19 (Sumal), paragraph 78.

 

by Andris Dimants, Associate, Latvia

Team

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