Alstom and Areva, two French engineering groups, have both filed challenges in the European Court of First Instance against a decision by the European Commission. They have objected to the level of fines imposed on them by the Commission and to the Commission’s decision that they are both liable for the actions of subsidiaries sold by Alstom to Areva.
In 2007, the Commission imposed over €750 million fines on the participants of the gas insulated switchgear cartel. The cartel engaged in practices restricting competition from 1988 to 2004 and included two businesses which were owned by Alstom for much of the period covered by the cartel but which were acquired by Areva four months before the cartel ended. Alstom and Areva, as parents, were each held to be jointly liable with the subsidiaries for the subsidiaries’ actions.
The decision to impose joint and several liability as between parent and subsidiary was consistent with established Commission case law. This states that if a parent company exercises “decisive influence” over the commercial behaviour of its subsidiary, then both form part of the same economic undertaking and both can be fined. The Commission therefore imposed fines on Alstom and Areva on the presumption that - as the parent companies of wholly-owned subsidiaries - they had exercised decisive influence. It is irrelevant whether the parent company was itself involved in the infringement.
Areva argue that they did not know the firms they bought from Alstom had been engaged in anticompetitive practices until documents were seized by the Commission, and they therefore submit that the fines should be imposed only on Alstom and not on Areva. Alstom, claim that they had provided documentary evidence to the Commission that the parent company had played no role in directing the commercial activities of the subsidiaries and therefore that the parent company and the subsidiaries should be treated as separate entities.
Both companies also contest the Commission’s decision to brand them as the ‘ringleaders’, which caused both parties’ fines to be increased by 50%. Alstom argue that despite being the cartel’s secretary they had not played a ‘strategic role’ in the cartel. An initial hearing took place on 24 March and the cases have been designated as T-117/07 Areva SA et al v Commission and T-121/07 Alstom v Commission.
Previous cases on parent liability
The issue of parent liability was also raised in June 2008 by Elf Aquitaine in the Court of First Instance. They appealed against a fine imposed on them by the Commission in relation to the Monochloroacetic Acid (MCAA) cartel. Elf Aquitaine were fined jointly with their subsidiary Arkema. Arkema argued that as MCAA only accounted for a small percentage of both companies’ turnovers, that it was relatively unimportant to Elf Aquitaine and it was wrong to presume that the top levels of the company would be interested in it. Elf Aquitaine also submitted that the Commission’s presumption in relation to parent companies was extremely difficult to rebut. They felt that they were being required by the Commission to prove a negative by having to prove that, despite being the parent company, they had not influenced the market behaviour of their subsidiary. Elf Aquitaine were also aggrieved because under their national law, parent and subsidiary companies are treated as independent undertakings; the Commission's view was therefore inconsistent with that of national law.
The cartel involved eleven groups of companies in Europe and Japan who were in total fined €750 million which, at the time, was the largest fine ever imposed on a single cartel. Since 2007, larger fines have been imposed on members of cartels in the vitamins industry, elevators and escalators industry and most recently, the marine hose industry, with the record amount of €1.3 billion for the car glass cartel in 2008.
Between 1988 and 2004, the Commission found that the companies had rigged bids for procurement contracts, fixed prices, allocated projects to each other, shared markets and exchanged commercially important and confidential information. The investigation started with surprise inspections in May 2004, which were prompted by an application for immunity lodged by ABB who received full immunity from fines under the Commission’s leniency programme, as it was the first company to come forward with information about the cartel.