In context

Parental liability for competition law violations of a 50/50 joint venture upheld

November 11, 2013
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In context

It’s wise to include non-wholly owned subsidiaries and joint ventures in your competition compliance programme, considering that the EU Court has confirmed  the liability of parent companies for competition law violations of their 50/50 joint ventures.

According to settled case law, the conduct of a subsidiary may be imputed to a parent company in particular where, although having a separate legal personality, that 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 company. This applies because the parent company and its subsidiary form a single economic unit and therefore form a single undertaking within the meaning of the cartel prohibition laid down in Article 101 TFEU. In regard of wholly owned subsidiaries, the EU Court of Justice has taken this one step further by establishing a rebuttable presumption that the parent company exercises a decisive influence over the subsidiary.

 

The case law above was used by the European Commission to hold El du Pont de Nemours and Company and The Dow Chemical Company jointly and severally liable for the participation of their 50/50 full-function joint venture DDE in the chloroprene rubber cartel. It seems hard to argue that joint ventures that have been set up and function as undertakings independent from their shareholders constitute a single economic unit with their shareholders. But that is precisely what the Court of Justice did in this ruling. The Court ruled that where two parent companies each have a 50% shareholding in a joint venture which committed a competition law infringement, these three entities can be considered to form a single economic unit for the purposes of establishing liability for participation in the cartel infringement, provided the Commission has demonstrated, on the basis of factual evidence, that both parent companies did in fact exercise decisive influence over the joint venture. The ruling provides a fair warning to keep an eye on competition law when concluding joint venture arrangements and to include joint ventures in your company’s competition compliance programme.

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