In February 2012, the EU General Court gave some answers
Parts of the Bible suggest that the sins of the fathers are visited on their offspring. In competition law, it is often the other way around. Where a subsidiary company has infringed competition law, the parent company is, under EU competition law at least, regarded as liable provided that the parent had “decisive influence” over the subsidiary – ie, where the subsidiary does not decide independently on its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent entity. In most cases, a parent will be presumed to have such decisive influence. It is very difficult to rebut this presumption, although it seems that where a holding company’s interest is “purely financial” (for example, where it is an intermediate holding company between the ultimate parent and the infringing subsidiary) this can be a ground for non-liability5.
Two new judgments of the EU General Court – dated February 2012, and (like the judgment referred to in the previous section) arising out of the illegal pricefixing and market-sharing agreements on “chloroprene rubber”6 – have addressed the extent to which the parents of a joint venture are liable for the JV’s infringement. The judgments held that:
- In a 50/50 joint venture, liability for the conduct of the JV may be attributed, jointly and severally, to each of its parent companies, in particular where the JV carries out, in all material respects, the instructions given to it by its parent companies. In this particular case, evidence of this arose from the parent companies’ power to influence the general market behaviour of the JV through a supervisory committee on which highlevel executives of both parents sat, and which approved the strategic direction of the JV and the appointment and dismissal of its management.
- The fact that the joint venture is a “full-function” joint venture within the meaning of the EU Merger Regulation – ie, performing on a lasting basis all the functions of an “autonomous economic entity” – did not remove this liability.
A related issue was considered in a judgment of the German Supreme Court in August 20117. It held that, under German competition law, where a subsidiary in breach is subsequently acquired by another company, the new parent company has no liability for the subsidiary’s infringement; liability would only arise if the acquired company continued to exist as it did before the acquisition, meaning that (i) the assets of the former entity are used in the same or a similar way as before the acquisition and (ii) they constitute an essential part of the total assets of the merged entity.
Recently, the President of the German competition authority (Bundeskartellamt) suggested that it may re-allocate cartel investigations to the European Commission to avoid this loophole under German law and to prevent companies under investigation from restructuring to avoid any competition law penalties.