In a ruling of 17 May 2013 (case T-146/09 – Parker ITR et Parker-Hannifin), the European Court of Justice confirms and specifies the conditions in which a company which acquires a cartel related activity can be held liable for anti-competitive practices committed prior to the acquisition.

The facts of the case are as follows: according to the European Commission’s findings, companies operating on the Marine Hose market formed an anti-competitive cartel from 1986 up to 2007. In January 2002, one of the participants in the cartel was bought out by the Parker-Hannifin group. The transaction was carried out in two stages. The seller, the Saiag group, first transferred assets of the relevant activity to a subsidiary specially set up for this purpose. Then, the seller sold all shares of said subsidiary to the buyer group. Both transactions took place on the same day. The European Commission imputed the past anticompetitive behavior to the NewCo relying on the economic continuity concept which is allegedly evidenced by the takeover of assets.

The ECJ overturned the decision of the European Commission on this point based on the principle of the individual nature of penalties. Indeed, according to constant case law, it is first of all the legal entity having committed the breach that is liable for such breach. It is only if said entity has ceased to legally or economically exist, “in order to avoid a company escaping fines” via restructuring, that anti-competitive behavior may be imputed to another entity on the basis of the economic continuity concept. If a company is sold to a third party on market condition, it is for the selling entity to assume liability, even if it can no longer be punished on account of the period of limitations. In this case, the seller, the Siag group, was liable and not the company set up solely for the transfer of assets, which thus did not itself commit the breach.

In practice, this means that the buyer has less of an anti-trust risk when the activity was taken over by the contribution of assets or by the setting up of a subsidiary for the activity as part of the sale than when the transaction involves the purchase of the shares of a subsidiary that already exists.