Liability of Sister Companies and Subsidiaries in European Competition Law
Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 182 (2018), 8
25 Pages Posted: 3 Jun 2019 Last revised: 8 Dec 2019
Date Written: March 19, 2019
In recent years, cartel infringements have led to fines and damage claims by injured parties running into billions. In view of that, the question of liability is of great significance. In European competition law, the undertaking is subject to both prohibitions of certain conduct (Art. 101 et seq. TFEU) as well as sanctions for infringements of these prohibitions (Art. 23 Regulation 1/2003). Art. 1 para. 1 of the Cartel Damages Directive (Directive on certain rules governing actions for damages under national law for infringements of the competition law provisions (2014/104/EU)) also addresses the undertaking when imposing liability for damages. The Competition Appeal Tribunal ruled in its MasterCard decision that liability for damages extends to all legal entities that have exercised a decisive influence over the infringing persons, applying the notion of “undertaking” as developed by the ECJ. Furthermore, several other Member States of the European Union have endorsed group liability or at least parental liability on this basis, including France, Spain, Portugal and Austria. Recently, the European Court of Justice (ECJ) has held in its Skanska decision (C-724/17) that the notion of “undertaking” determines the persons liable, both for the purpose of imposition of fines and for the purpose of civil liability.
Hence, the decisive factor regarding liability is the notion of “undertaking”. According to settled case law of the European Court of Justice (ECJ), an undertaking encompasses every entity engaged in an economic activity, which may consist of several legally independent entities, provided that these independent entities form an economic unit. Within the scope of this economic unit, an innocent parent company is generally liable for the cartel infringements of its subsidiaries. Whether an innocent subsidiary is vice versa liable for its parent company or whether sister companies are liable for each other has not yet been examined in detail. This paper aims to close this gap – also with a view to the recent referral of this question to the ECJ (Audiencia Provincial de Barcelona, sec. 15a, order of 24 October 2019, Rollo no 775/2019 – Sumal v Mercedes Benz Trucks España). A close examination of the ECJ’s reasoning regarding group liability reveals that group liability under competition law, i.e. the joint liability of the parent company and its subsidiaries, derives from the unity of action of the undertaking (‘joint action triggers joint liability’). In this respect, the existence of a decisive influence is not relevant; the criterion of decisive influence merely serves to determine whether there is an economic unit. If there is an economic unit, this leads to joint liability amongst all the constituent entities of this economic unit. As a result, an innocent subsidiary is also liable for the parent company or sister companies if they belong to the same economic unit.
Keywords: group liability, liability of sister companies, private enforcement, public enforcement, cartel damage claims, competition law
JEL Classification: K21, K29
Suggested Citation: Suggested Citation