Liability of a subsidiary for infringement of competition law?
The victim of an infringement of Union competition law committed by a parent company can claim compensation for the resulting damage from its subsidiary.
To do so, it must prove that the two companies formed an economic unit at the time of the infringement.
Between 1997 and 1999, Sumal SL acquired two trucks from Mercedes Benz Trucks España SL (MBTE), a subsidiary of the Daimler Group, whose parent company is Daimler AG.
By decision of 19 July 2016 (Decision C(2016) 4673 final relating to a proceeding under Article 101 [TFEU] and Article 53 of the EEA Agreement (Case AT.39824 - Trucks), a summary of which was published in the Official Journal of the European Union of 6 April 2017 - OJ 2017 C 108, p. 6), the European Commission found that Daimler AG had infringed the rules of Union law on the prohibition of cartels (Article 101 TFEU and Article 53 of the EEA Agreement) by entering into agreements with 14 other European truck manufacturers between January 1997 and January 2011 on prices and increases in gross list prices for trucks in the European Economic Area (EEA).
Following this decision, Sumal brought an action for damages against MBTE, claiming payment of €22 204.35 for the harm resulting from this cartel. However, Sumal's claim was dismissed by the Juzgado de lo Mercantil n° 07 de Barcelona (Commercial Court No. 7 of Barcelona, Spain) on the grounds that MBTE was not affected by the Commission's decision.
Sumal appealed this ruling to the Audiencia Provincial de Barcelona (Barcelona Provincial Court, Spain). Against that background, the referring court wonders whether, and if so under what conditions, an action for damages may be brought against a subsidiary of a parent company following a Commission decision finding that that company had engaged in anti-competitive conduct. That court therefore decided to stay the proceedings and refer that question to the Court of Justice for a preliminary ruling.
In its judgment delivered by the Grand Chamber, the Court sets out the conditions under which the victims of anti-competitive conduct by a company sanctioned by the Commission are entitled, in actions for damages before national courts, to invoke the civil liability of subsidiaries of the sanctioned company which are not affected by the Commission's decision.
Assessment by the Court of Justice
According to settled case-law, any person may seek compensation from "undertakings" which have participated in a cartel or conduct prohibited by Article 101 TFEU for the harm caused by those anti-competitive practices. Even if such actions for damages are brought before national courts, the determination of the entity obliged to compensate the damage caused is directly governed by Union law.
Since these actions for damages are as much an integral part of the system for implementing the Union competition rules as their implementation by the public authorities, the term 'undertaking' within the meaning of Article 101 TFEU cannot have a different meaning in the context of the imposition of fines by the Commission on 'undertakings' (public enforcement) and in the context of actions for damages brought against those 'undertakings' before the national courts (private enforcement).
However, according to the case-law, the term "undertaking" within the meaning of Article 101 TFEU covers any entity engaged in an economic activity, regardless of its legal form and the way in which it is financed, and thus designates an economic entity even if it is legally composed of several natural or legal persons.
Where it is established that a company forming part of such an economic unit has infringed Article 101(1) TFEU in such a way that the 'undertaking' of which it forms part has committed the infringement of that provision, the concept of 'undertaking' and, therefore, the concept of 'economic unit' give rise, as a matter of law, to joint and several liability on the part of the entities forming the economic unit at the time when the infringement was committed.
In that regard, the Court also notes that the concept of 'undertaking' used in Article 101 TFEU is a functional concept in which the economic unit constituting the undertaking must be determined from the point of view of the subject-matter of the agreement in question.
If the existence of an infringement of Art. 101 para. 1 TFEU on the part of a parent company, the victim of that infringement is thus free to hold one of its subsidiaries civilly liable instead of the parent company, provided that the victim proves, first, that, in view of the economic, organisational and legal links between those two legal entities and, second, that there is a concrete link between the economic activity of that subsidiary and the subject-matter of the infringement for which the parent company was held liable, that subsidiary formed an economic unit with its parent company.
Consequently, in circumstances such as those at issue in the main proceedings, in order to bring an action for damages against MBTE as a subsidiary of Daimler AG, Sumal must, in principle, prove that the anti-competitive agreement entered into by Daimler AG concerns the same products marketed by MBTE. Sumal would thus prove that the very economic entity to which MBTE belongs together with its parent company constitutes the undertaking which committed the infringement found by the Commission under Article 101(1) TFEU.
However, in the context of such an action for damages against the subsidiary of a parent company found to have infringed Article 101 TFEU, the subsidiary must have before the national court concerned all the means necessary for the proper exercise of its rights of defence, in particular to be able to contest its affiliation to the same undertaking as its parent company.
However, where, as in the present case, an action for damages is based on a finding of an infringement of Article 101(1) TFEU by the Commission in a decision addressed to the parent company of the defendant subsidiary, the subsidiary cannot contest the existence of the infringement found by the Commission before the national court. Under Article 16(1) of Council Regulation No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles  and [102 TFEU] (OJ 2003 L 1, p. 1), national courts may not adopt decisions which are contrary to the Commission's decision.
If, on the other hand, the Commission has not established unlawful conduct on the part of the parent company in a decision under Article 101 TFEU, the subsidiary is naturally entitled to contest not only its membership of the same 'undertaking' as the parent company, but also the existence of the infringement with which the latter is charged.
In that regard, the Court also makes it clear that the possibility for the national court to find that the subsidiary is liable for the damage caused is not excluded merely because, where appropriate, the Commission has not adopted a decision or because the decision by which it found the infringement did not impose an administrative sanction on that company.
Therefore, Article 101(1) TFEU precludes national legislation which provides for the possibility of attributing liability for the conduct of one company to another company only where the second company controls the first.
Source: ECJ Press Release No. 174/2021 v. 06.10.2021
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