In its judgment of 6 October 2021, following a reference by the Provincial Court of Barcelona, the Court of Justice of the EU (CJEU) held that a victim of anti-competitive conduct is entitled to seek damages from the subsidiary (not referred to in the infringement decision) of an infringing parent company, provided both companies form part of the same economic entity and there is a link between the economic activity of the subsidiary and the subject matter of the infringement.
Thus the CJEU expressly finds that the public enforcement case law on the concept of an undertaking also applies in private enforcement regardless of the ‘corporate veil’. However it also adds a requirement for the claimant to demonstrate the existence of a link between the activity of the subsidiary and the subject matter of the infringement for which the parent company was held liable. This new limb was added by the Court in order to avoid a subsidiary in a group of companies being liable for infringements in the context of economic activities totally unconnected to its own activity and in which it was not involved.
Background to the case
Between 1997 and 1999 Sumal SL, a Spanish manufacturer of metal containers, acquired two trucks from Mercedes Benz Trucks Espana SL (MBTE), a subsidiary of Daimler AG. Sumal subsequently brought a claim for damages against MBTE, based on the Commission’s 2016 infringement decision in the trucks cartel case which involved Daimler AG and four other groups of truck manufacturers. Sumal’s claim was rejected by the Commercial Court of Barcelona on the basis that MBTE was not an addressee of the Commission’s infringement decision.
Sumal brought a further appeal before the Provincial Court of Barcelona, which stayed the proceedings in order to ask the CJEU whether the doctrine of the single economic entity under Article 101 TFEU provides grounds for extending liability from the parent company to the subsidiary and if so under what conditions.
Judgment of the Court
The role of private enforcement
In its judgment the CJEU reiterates that it is settled case law that any person who has suffered loss as a result of a breach of Article 101(1) TFEU is entitled to claim compensation for damages provided there is a causal link between the damages and the prohibited agreement. The right to seek compensation strengthens the impact of the EU competition rules as it acts as a deterrent against anti-competitive agreements and practices and thereby not only remedies the direct damage suffered by those bringing the claim but also the wider damage to the structure and functioning of the market.
Given that private enforcement is an integral part of the enforcement of the EU competition rules, the concept of ‘undertaking’ under Article 101 TFEU cannot have a different meaning in the context of private enforcement claims than it does under the Commission’s public enforcement regime under Regulation 1/2003.
The single economic entity concept
The concept of the single economic entity as an ‘undertaking’ under the EU competition rules is well developed in the context of public enforcement and refers to an economic unit that consists of several persons (natural or legal) brought together as one undertaking by virtue of the economic, organisational and legal links between them. In Akzo Nobel the Court held that, for such an economic entity to infringe Article 101(1) TFEU, all that is needed is proof that at least one legal entity belonging to the economic unit has infringed Article 101(1). It is therefore clear from the case law that the conduct of a subsidiary may be attributed to the parent company where that subsidiary does not independently determine its own conduct on the market and parent and subsidiary are part of the same corporate group.
Application to damages claims
In the context of damages claims based on the existence of a Commission infringement decision, a legal entity not referred to in that decision may therefore nevertheless be held liable due to the infringing conduct of another legal entity, provided they are both part of the same economic unit and form an undertaking which is the infringing entity. It is therefore possible, where the existence of an infringement has been established as regards a parent company, for the victim of that infringement to bring a damages claim against a subsidiary of that parent company.
As an additional element in this situation the claimant will need to prove that, based on the economic, organisational and legal links between both legal entities and on the existence of the link between the economic activity of the subsidiary and the subject matter of the infringement for which the parent company was held liable, the subsidiary and the parent company constituted an economic unit for this purpose. Thus, in the hypothetical situation of a conglomerate with separate products being sold by different subsidiaries, the subsidiary selling one product would not be liable for an infringement committed by the parent company in respect of another product.
The subsidiary must also be able to rely on its rights of defence in order to demonstrate that it does not belong to that undertaking and, where the Commission has not adopted an infringement decision, to challenge the existence of the alleged infringement.