In a much-anticipated case the Court of Justice of the EU (“CJEU”) has ruled that a company can be held liable for competition law infringements committed by outside contractors only if it was aware of the illegal conduct or could have “reasonably foreseen” the behaviour. In an unusual move, the Court also diverted from the Opinion of the Advocate General who had suggested there should be a “rebuttable presumption” that companies take responsibility for external contractors that break antitrust rules.
What was the case about?
Three food suppliers submitted tenders in response to the call for tenders by a municipal counsel, all using the same legal advisers.
An employee of the legal adviser was found by the Latvian regional court to have benchmarked the prices in each tender based on the other tenders and then arranged for a specific operator to be the most competitive.
All three tender companies were found to have breached national competition law. On appeal, the Latvian Supreme Court referred the question of liability to the European Court of Justice (“ECJ”).
What question was referred to the CJEU?
In 2011 the Latvian competition counsel ruled that all three tenders had infringed the domestic rules on anti-competitive agreements, which is modelled on EU law. The Latvian Supreme Court asked the CJEU whether:
“Article 101(1) TFEU must be interpreted as meaning that, in order for it to be established that an undertaking has participated in an agreement restricting competition, it must be shown that an officer of the undertaking has personally engaged in conduct or been aware of, or consented to, conduct by persons providing an external service to the undertaking and at the same time acting on behalf of other parties to a possible prohibited practice?”
What did the court decide?
The CJEU held that a service provider is a separate undertaking from those to which it provides services and the acts of such a provider cannot automatically be attributed to one of those undertakings.
It went on to confirm that the relationship between an undertaking and its employees is not comparable to the relationship between that undertaking and the service providers which supply services to it.
However, it is possible that a service provider which presents itself as independent is in fact acting under the control of an undertaking that is using its services. This would be the case if the service provider had only little or no autonomy over the way its affairs were carried out, with its notional independence disguising an employment relationship. For example, this would be the case for a parent company with decisive influence over a subsidiary entity.
Article 101(1) TFEU must be interpreted as meaning that an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider only if one of the following conditions are met:
- the service provider was in fact acting under the direction or control of the undertaking concerned, or
- that undertaking was aware of the anti-competitive objectives pursued by its competitors and the service provider and intended to contribute to them by its own conduct, or
- that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed.