In KME Yorkshire Limited and other v Toshiba Carrier UK Ltd and others  EWCA Civ 1190, the Court of Appeal held that a company that had implemented, but had not been a party to, an anti-competitive agreement could, nonetheless, be in breach of Article 101 of the TFEU. The court also observed that there is no scope for the imputation of knowledge of parent companies to subsidiaries, except where the parent exercises "decisive influence".
In 2003, the European Commission (the "Commission") found that three company groups, including KM Europa Metal group (KME Group) of Germany, had operated a secret cartel involving price-fixing and market sharing in the industrial tubes sector, between 1988 and 2001. In its decision, addressed to the three German and Finnish companies, in December 2003, the Commission imposed a fine of EUR79 million on the three groups for breach of the then Article 81(1) of the EC Treaty (now Article 101 of the Treaty on the Functioning of the European Union).
Toshiba Carrier UK Ltd and various other companies (the "Claimants"), had all bought substantial quantities of industrial tubes from the cartel member. Although the Commission's decision was only addressed to German and Finnish companies and there was no UK involvement, the Claimants brought a follow-on damages action before the High Court. The proceedings were brought against several companies, including certain UK companies who had not been the addressees of the Commission's decision (the "Defendants"), such as a UK subsidiary of the KME Group, KME Yorkshire Limited.
The Defendants applied to the High Court for the Claimants' claim to be struck-out and/or summarily dismissed, but the application was dismissed by the High Court. In the Court of Appeal, the Defendants then claimed, first, that the Claimants' statement of case did not disclose an arguable cause of action and, second, that there was a lack of evidence to support the key allegations.
The Defendants argued that an essential element of conduct infringing Article 101 is a "meeting of minds" between rival parties to conduct themselves in a way that gives rise to an unlawful agreement. They argued that simply implementing an agreement does not breach Article 101, even if they had knowledge of the agreement.
However, the Court of Appeal rejected this argument. It pointed out that it is well established that so-called “concerted practices" or indirect and isolated instances of contact between competitors may be sufficient to infringe Article 101. Furthermore, and more significantly, it stated that acts of implementation alone can amount to “concerted practices” and therefore, there were sufficient grounds for a cause of action.
Etherton LJ also stated obiter that, except where a parent company exercises 'decisive influence' over a subsidiary, there is no scope for imputation of knowledge, intent or unlawful conduct.
Significance of the decision
The judgment emphasises that an undertaking that simply implements an anti-competitive agreement, as opposed to a party that forms such an agreement, may still be in breach of Article 101 TFEU. This is potentially important, as it raises the prospect of stand-alone claims against UK subsidiaries of undertakings, thereby providing an 'anchor defendant' in the UK, who is not an addressee of the Commission decision, to allow a connection action against non-UK defendants.
The judgment is available here.