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Competition Litigation

EU: Subsidiaries can be held liable for the actions of their parent companies says the EU’s highest court (this is a first)

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In a judgment handed down this week by its Grand Chamber, the European Court of Justice (“ECJ”) decided that, under certain circumstances, a subsidiary can be held liable for cartel activity engaged by its parent company. This judgment has potentially far-reaching consequences and may give an additional impetus to private damages litigation.

Background

On 24 October 2019, Sumal (an alleged victim of the Trucks cartel) brought a claim for damages in follow-on litigation in front of a Spanish Court. The claim was against Mercedes Benz Trucks España, a subsidiary of the German company Daimler AG to whom the infringement decision in the Trucks cartel was not addressed. Under the well-established single economic entity doctrine, parent companies can be held liable for their subsidiaries’ anticompetitive conduct under certain circumstances. However, the question of whether a subsidiary can be held liable for the anticompetitive conduct of its parent company has not been addressed before by the EU Courts.

The Spanish Court therefore referred several questions to the ECJ for a preliminary ruling. Essentially the ECJ was asked (i) whether the single economic entity doctrine allows holding a subsidiary liable for the damages caused by its parent company and, if so, (ii) which are the requirements for such extension of liability.

Judgment

The ECJ, siding with the Advocate General, answered that a subsidiary can be held liable for the damages caused by its parent company when they form part of a single economic unit. For that to happen the claimant (the victim of the cartel) needs to prove that:

  • There are economic, organisational and legal links that unite the parent company and the subsidiary. This probably means that the parent company must have the ability to exercise decisive influence over the market conduct of the subsidiary (although the Court was not particularly clear on that point).
  • There must be a specific a specific link between the economic activity of that subsidiary and the subject matter of the infringement for which the parent company was held to be responsible. This condition will be fulfilled when the claimant establishes, in principle, that the anti-competitive agreement concluded by the parent concerns the same products as those marketed/sold by the subsidiary.

The ECJ was clear that the claimant does not need to prove that the subsidiary has exercised ‘decisive influence’ over the parent company as is the case when liability is attributed to a parent company for the actions of its subsidiary. Actually the ECJ went further and said that Article 101(1) TFEU precludes a national law which provides for the possibility of imputing liability for one company’s conduct to another company only in circumstances where the second company controls the first company (Spain had such a law).

Why is this important/what are the implications?

The judgment makes it easier to bring damages claims over cartel activity by large multinationals and affords victims of infringements significant freedom of choice around which entity to bring a claim and where.  

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Francesca Richmond is a partner in the Baker McKenzie Dispute Resolution team based in London. Francesca specializes in the litigation and investigation of high value commercial and regulatory enforcement matters with a focus on class actions and mass torts litigation. Her practice spans ethics, governance and human rights in addition to litigation of antitrust, consumer and data privacy law.

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Frank Kroes is proficient in complex commercial litigation and national and international arbitration. Frank has extensive experience in general commercial litigation, securities litigation, class actions and competition litigation, and litigation before the Supreme Court. He represents clients from a wide variety of industry sectors before the state courts and in national and international arbitration administered by a range of leading arbitration institutes. His work also covers the energy, construction, chemicals, technology and financial sectors, class actions and competition litigation. Frank appears before the courts of all levels, including the Supreme Court and the European Court of Justice.

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Marcin Trepka is a partner and co-leader in Baker McKenzie's Warsaw office's Antitrust & Competition practice. He specializes in Polish and EU competition law as well as consumer law. He regularly represents clients before the competition authorities, Polish and EU courts of law and the Polish Supreme Court. In addition, Marcin is active in the development of international competition law policy. He serves as the Co-Chairman of the Cartels&Leniency Task Force of the ICC Commission on Competition in Paris. He also serves as the Non-Governmental Advisor to the International Competition Network. Marcin is consistently recommended as a leading competition lawyer in the Legal500, Chambers Europe and Who's Who Legal: Competition - Future Leaders legal directories.

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Paloma is a partner in the Madrid office. She has over two decades’ experience gained both in‐house in the Corporate Affairs and Regulatory department of a mobile operator in Spain and in private practice at a Spanish Competition boutique law firm. Paloma has been recommended as a leading professional by various legal directories, including Chambers Europe, Legal 500 and Who's Who Legal Iberia. According to Chambers & Partners, clients appreciate that Paloma is "dedicated, hardworking, and pays a lot of attention to detail" (Europe Guide, 2018). Paloma's practice is focused on Spanish and EU Competition law with a deep knowledge of regulation, in particular in the telecom and energy sectors. She has wide experience in antitrust infringement procedures and damages claims, compliance, internal audits and preventive counselling in a broad variety of sectors, working for private companies and public entities alike.

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Dr. Jonas S. Brueckner is a counsel in Baker McKenzie's Berlin office. He joined the Firm in 2014 and advises on antitrust and competition law. Prior to joining Baker McKenzie, Dr. Brueckner was a member of the Brussels-based antitrust team of another international law firm from 2010 to 2014, and a government official (Regierungsrat) at Germany's Federal Ministry of Economic Affairs in Berlin from 2009 to 2010. Dr. Brueckner advises clients on all aspects of European and German antitrust and competition law. He has in-depth experience in national and multinational merger control cases, as well as European and national cartel and antitrust proceedings. Dr. Brueckner has represented clients in antitrust and state aid litigation matters before the European Courts. He is experienced in conducting investigations, advising on compliance matters and dawn raids. His recent clients include German and international companies, particularly in the transport, food, chemical and automotive industries.

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Miriam is a senior associate in Baker McKenzie's Milan office and part of the Public Law, Environmental Law, Pharmaceuticals & Healthcare Law and Real Estate Team. Since joining the Firm in 2019, Miriam has acted on a number of complex, high value cross-border and domestic cases, with a focus on public procurement, environmental law and competition law issues. She is a tenured Associate Professor of Administrative Law at Bocconi University of Milan where she teaches Environmental Law, Administrative Law and Public Procurement Law. She also teaches at the Bocconi Master in Green Management, Energy and Corporate Social Responsibility (MAGER). In 2018 she was unanimously declared as Full Professor of Administrative Law by the Italian national scientific committee. Miriam regularly advises domestic and international clients on administrative law matters. These include environmental, energy, public procurement, infrastructure and real estate issues. She regularly assists clients before Italian Regional Administrative Courts in relation to administrative, environmental and competition law matters. She has also assisted a number of clients before the Italian Court of Audit.

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Andreas Traugott heads Baker McKenzie’s Competition Practice Group in the Vienna office. He practices on EU and Austrian competition law, state aid and regulatory matters. Andreas has significant experience advising domestic and international clients on all aspects of competition law. He focuses on merger control, licensing and distribution, IP law, restrictive practices, abuse of dominance, cartel investigations and state aid. Andreas regularly represents clients before the Austrian and European competition authorities.

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Andrea Cicala is a partner at Baker McKenzie's Milan office.

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Katia Boneva-Desmicht is a partner in Baker McKenzie's Litigation & Arbitration Practice Group in Paris. She has been a litigator for more than 10 years, particularly focusing on civil and commercial litigation. With her extensive experience and knowledge of French procedures and private international law, Ms. Boneva-Desmicht helps clients mitigate risk and navigate complex strategic issues and legal challenges. Ms. Boneva-Desmicht has significant practical experience advising leading industry players in a broad range of business sectors — including the banking, retail, luxury, pharmaceuticals, leisure, hospitality, and automotive industries — with respect to their risk and dispute management and defense before the French courts.

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