The European Court of Justice (ECJ) has held that three buyers were liable to pay damages in respect of cartel activity carried out by recently acquired subsidiaries before their acquisition.

In Vantaan kaupunki v Skanska Industrial Solutions Oy and others, four unconnected Finnish companies had participated in a cartel in the asphalt sector.

Subsequently, three of the four companies were acquired by three separate, unconnected buyers, all of which were Finnish companies. In each case, after acquiring the target, the buyer wound the target up, acquired its business and continued that business’ economic activity.

The Supreme Administrative Court of Finland imposed penalties not only on the four cartel companies, but also on the three buyer companies. One of the customers who had purchased the cartelised asphalt then sued those companies for damages. The issue of liability for damages was contested, and the Finnish Court referred the matter to the ECJ for clarification.

In short, the ECJ said that the EU principle of “economic continuity” applied. In this case, where the shares in the cartel companies had been acquired by other companies which had continued the cartel companies’ commercial activities, the buyers could be liable for the damage caused by the cartel.

The case is a reminder of how important it is generally to conduct thorough due diligence on a target before acquiring it and (in particular) to flush out any historic anti-trust and cartel activity.