On 15 September 2011, the General Court of the European Union annulled the European Commission’s decision attributing liability to Koninklijke Grolsch for the actions of its subsidiary Grolsche Bierbrouweij Nederland BV in participating in the Dutch Beer Cartel (Commission decision 2003/569 OJ 2003 L200/1). This was on the grounds that the Commission had failed to put forward sufficient evidence to establish the direct participation of Koninklijke Grolsch in the cartel, and failed to put forward reasons for attributing liability to Koninklijke Grolsch for the conduct of its subsidiary.
The decision itself concerned the co-ordination of prices in the Dutch beer market between major brewers. This took place at unofficial meetings between the competitors and concerned both the on-trade (hotels, cafes and restaurants) and off trade (e.g. supermarkets) sectors. On 18 April 2007, Koninklijke Grolsch, Bavaria NV, Heineken NV and its subsidiary Heineken Nederland BV were fined €273.783 million between them. In its share of the fine (€31.66m), Koninklijke Grolsch was held liable for the actions of the employees of its subsidiary Grolsche Bierbrouweij.
Case law has established that where a parent company holds 100% of the shares of a subsidiary company, there is a rebuttable presumption that the parent company has effective control of that subsidiary. Thus, unless the parent company can rebut this presumption, the subsidiary’s liability can be attributed to it. In Total SA and Elf Aquitaine SA v Commission, it was even held that a parent company need not hold 100% of the subsidiary company’s shares for the Commission to rely on the presumption, it is sufficient that they hold substantially all of the shareholding. If a company is to rebut the presumption, it must prove that its subsidiary acts autonomously, without the effective control of the parent company.
In this case, Koninklijke Grolsch challenged the attribution of liability to it for the actions of its subsidiary, Grolsche Bierbrouweij. The General Court ruled that the evidence available to the Commission was not enough to establish the direct participation of Koninklijke Grolsch in the cartel. The General Court ruled that if the Commission wishes to attribute liability to the parent for the conduct of its subsidiary, it should provide a detailed statement of reasons as to why it should be attributed. In this case, it was insufficient that the Commission had provided evidence that the employees of the subsidiary had attended the price co-ordination meetings. The Commission had not differentiated between the directors of the subsidiary and those of the parent company and had simply treated both companies as one entity without examining the legal, organisational and economic links between them or providing a detailed statement of the reasons why liability should be attributed. In fact, the Commission had only directed its decision to the parent company and the subsidiary was not even mentioned in its statement of reasons. This assumption that both companies formed part of the same undertaking denied the opportunity both for the defendant to rebut the presumption and for the Court to exercise its powers of review with relation to the presumption.
It is important to note that in the case of 100% owned subsidiaries, all that is required to raise the presumption of parental liability is proof of such 100% ownership at the time of the infringement.
Attributing liability to the parent enables the Commission to hold the parent jointly and severally liable for the fine imposed on the subsidiary. Given that fines for competition law offences are capped at 10% of the relevant undertaking’s turnover in the relevant market, rebutting the presumption of parental liability could also significantly reduce fines for firms with subsidiaries. Thus these cases should be of great interest to such organisations.
This case, along with those of Elf Aquitaine, L’Air Liquide and Edison, have all highlighted the problems surrounding the Commission’s current approach to the rebuttable presumption of parental liability. There is a growing trend in the appellate courts to annul decisions where the Commission has failed to consider the evidence in applying the rebuttable presumption of parental liability. These cases do not challenge the existence of the presumption in law. However, it seems clear now that the onus is on the Commission to clearly demonstrate that this presumption should be raised in a detailed statement of reasons to each addressee of a decision. If evidence is raised to rebut this presumption, it must be considered by the Commission, although in practice it may be difficult to demonstrate the autonomy of a subsidiary. For example, it should be noted from the Elf Aquitaine case that even non-operational holding companies with control only over the finances of subsidiaries can be held to exercise a decisive influence.