Background

The question as to whether a mother company should be held liable for the anticompetitive practices of its controlled subsidiary, in particular where such subsidiary is 100% held, or whether this should only be a rebuttable presumption, has always been controversial. 

In practice, it is difficult to define what facts should be accepted as valid arguments to exclude the parental liability and to determine what the duties of the European Commission (the "Commission") are vis-à-vis the arguments put forward by a parent company during a cartel case.

The European Court of Justice (the "ECJ") had previously stated that, in the specific case where a parent company has a 100% shareholding in a subsidiary which has infringed the competition rules of the European Union, first, the parent company can exercise a decisive influence on the conduct of the subsidiary and, second, there is a rebuttable presumption that the parent company does in fact exercise such a decisive influence[1].

Both the General Court of the European Union (the "General Court") and the ECJ have recently affirmed that the presumption that a parent company exercises decisive influence over its 100% subsidiary does not relieve the Commission of its duties to give proper reasoning for its decisions.

The General Court's Decision in the Grolsch Case

On September 15, 2011, the General Court[2] annulled the €31.7 million fine against Grolsch imposed by the Commission in 2007 for its alleged participation in a cartel on the Dutch beer market between February 1996 and November 1999.  In such decision, the General Court held that the Commission confused the parent company with the group and that it omitted to motivate the reasons why it considered that the subsidiary's conduct should be attributed to its parent company. 

As there was no evidence of a direct participation of Grolsch in the cartel conduct, the General Court considered that the Commission failed to state the legal, organizational or economic links that would have justified such parental liability.  In so doing, the Commission denied Grolsch the opportunity to rebuttal the presumption of having exercised a decisive influence over its 100% held subsidiary, and prevented the General Court from exercising its power of review in that regard.

The ECJ's Decision in the Elf Aquitaine / Arkema Cases

In a decision issued on September 29, 2011, the ECJ[3] delivered a similar message setting aside a judgment of the General Court and the Commission cartel decision in so far as it imputed to Elf Aquitaine the anticompetitive conduct of its subsidiary Arkema, and imposed a €45 million fine on Elf Aquitaine. 

The ECJ noted that the Commission decision was based exclusively, with regard to certain addressees, on the presumption of the actual exercise of a decisive influence over the conduct of a subsidiary. As a consequence, the Commission was in any event required - if that presumption was not to be rendered irrebuttable in practice - to set out adequate reasons why the facts or law relied upon were not sufficient in its opinion to rebut that presumption. The Commission's duty to give reasons for its decisions in this regard results inter alia from the rebuttable nature of the presumption, and rebuttal of such a presumption requires interested parties to adduce evidence of lack of economic, organizational and legal links between the companies concerned. 

The ECJ found that the Commission's series of assertions and negations in its decision was not such as to enable Elf Aquitaine to ascertain the matters justifying the measure adopted or to enable the General Court of having jurisdiction to exercise its power of review.  According to the ECJ, the Commission had not given sufficiently reasoned answers to several of the arguments put forward by Elf Aquitaine in order to establish that Arkema determined its conduct on the market independently. 

The ECJ noted that such motivation was all the more required since the Commission changed its approach in the decision at stake compared to an earlier decision relating to cartels[4] in which it had considered that Elf Aquitaine and Arkema were part of the same 'undertaking', for the purposes of European Union competition law.

Principles Applicable to Parental Liability Following Such Decisions

The decisions of the General Court and ECJ are aimed at preserving the possibility for a parent company to demonstrate the independent conduct of its subsidiary in the market.

As a consequence of the rebuttable presumption that the parent company exercises decisive influence over its subsidiary, the onus of proof borne by the Commission is made easier.  This is justified by the fact that the holding of the majority or all the share capital of a subsidiary is a criteria suggesting that the parent company does exert a certain control and influence over the decisions taken by its subsidiary.  

However, such presumption must be rebuttable - even though this is an extremely difficult exercise - in order to comply in particular with the principles of presumption of innocence, personal liability, legal certainty and rights of defence.  As a result, the parent company must keep the effective possibility to demonstrate, on the basis of serious and convincing arguments, that it does not exercises decisive influence over the conduct of its subsidiary despite its majority shareholding. 

Provided that the parent company puts forward such serious arguments challenging the presumption alleged by the Commission, the latter has the duty to examine such arguments and to give sufficiently reasoned answers in response.  The rationale behind this reasoning is that such discussion of the defendant's arguments by the Commission in its decision is required in order for the General Court to be in a position to effectively exercise its power of review.