The European Commission imposed a fine of €13.3 million jointly and severally on three companies which had formed an economic entity during their participation in the calcium carbide cartel.(1) Before the commission's decision, the parent company sold its subsidiaries to a third party. The parent company paid €6.79 million to the commission. However, it believed that its two former subsidiaries should bear the total fine alone, since they alone had participated in the cartel. The parent company thus claimed compensation under German civil law before the Munich courts.
The Munich Higher Regional Court(2) found that the parent company had benefited economically from the cartel and was therefore fully liable towards its two former subsidiaries to pay the total fine, thus excluding any claim for compensation.
The decision was based on two grounds:
- the allocation of internal liability quotas must be determined according to German civil law; and
- the criterion for determining internal liability is which company benefited economically from the anti-competitive conduct. This, according to the court, is based on the concept of fairness, whereby the company that benefited from a cartel's economic advantages must bear the economic disadvantages, regardless of whether the cartel resulted in any profits (eg, if the cartel led to higher prices).
In the fine decision in the case at hand, the commission stated that the subsidiaries' turnover had been consolidated in the turnover of the parent company, proving that the subsidiaries' economic success contributed to that of the parent company. The court concluded from this that the subsidiaries' profits either had been distributed or had increased the value of the shares owned ultimately by the parent company. This, according to the court, justified the parent company's full liability in the internal relationship to its subsidiaries.
The decision is currently under appeal before the Federal Court of Justice.(3)
Substantiating a compensation claim between jointly and severally liable companies is difficult, due to the unclear apportionment of internal liability and the resulting high litigation risks. These uncertainties result from the fact that several criteria are discussed and disputed in literature as to how internal liability is apportioned (eg, market share or turnover, fault/responsibility for the infringement, fine amount, pro rata).
The Munich Higher Regional Court added a new criterion to the discussion by stating that the decisive factor in apportioning liability between cartel members that constitute a single economic entity is which undertaking benefited from the cartel. This means that, in practice, where the parent company and its subsidiaries are jointly and severally liable, it will always be the parent company which ultimately has to bear the entire amount of the fine alone. This may impact cases where the companies still belong to the same group; in such circumstances, the fine is not shared by all of the companies within the group that were addressees of the commission's decision but must be borne by the parent company alone. If this principle is not observed (ie, if a subsidiary bears part of the fine) this may lead to a hidden distribution of profits and might even create liability risks for the management.
One might wonder why the higher regional court did not refer to the General Court's judgment of March 3 2011 in Siemens VA Tech(4) in which the General Court ruled that it was exclusively up to the commission, exercising its power to impose fines under Article 23(2) of EU Regulation 1/2003, to determine the allocation of liability for the fines imposed on companies held jointly and severally liable, and that this task cannot be left to the national courts. Further, the General Court stated that in the absence of any such finding in the contested decision, it must be assumed that the parties were all equally liable and, consequently, that the shares of the fine imposed on them jointly and severally were equal.(5)
In the present case, the commission decision did not stipulate liability quotas. Thus, the higher regional court could have easily ruled equal (pro rata) liability by referring to the General Court's decision in Siemens VA Tech. However, it chose not to do so. The reason for this could be that, like the commission, the higher regional court holds the view that the General Court incorrectly interpreted the competency of the commission set out in Article 23(2) of EU Regulation 1/2003. The commission appealed the General Court's judgment on the grounds that the commission's jurisdiction covered only the external relationship.(6) This means imposing fines and, where necessary, determining joint and several liability of the decision's addressees. However, according to the commission, this by no means includes apportioning internal liability and possible compensation claims between jointly and severally liable companies which are subject to the laws of EU member states.
It remains to be seen whether the European Court of Justice will confirm the General Court's decision in Siemens VA Tech and whether this will increase the impact on German court decisions concerning the apportionment of liability. Perhaps the upcoming Federal Court of Justice decision will provide an indication.
For further information on this topic please contact Michael Bauer or Kirsten Baubkus at CMS Hasche Sigle's Brussels office by telephone (+32 2 65 00 420) or by fax (+32 2 65 00 422) or by email (firstname.lastname@example.org or email@example.com).
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