The European Court of Justice (ECJ) has confirmed that a parent company can be held liable, jointly and severally, for the anti-competitive behaviour of its subsidiary, even if it has not itself participated in those activities.

The ECJ upheld a judgment of the Court of First Instance which, for its part, confirmed the Commission decision imposing a fine of EUR 20.99 million on Akzo Nobel NV, a producer of chemicals, and four of its subsidiaries for such cartel activities as price fixing, market sharing and agreeing actions against competitors with other members of the cartel (ECJ judgment of 10 September 2009 in case C-97/08P).

The ECJ’s judgment is substantiated by the applicability of EC competition law to “undertakings”, i.e., economic units which may consist of several legal persons. It is the economic unit which incurs responsibility for anti-competitive behaviour, and a parent company forms a single economic unit together with its subsidiaries. The ECJ ruled that in case of a 100% shareholding of a parent company in a subsidiary there is a rebuttable presumption that the parent company exercised decisive influence over the commercial policy of the subsidiary, and is therefore liable for its activities. It is then for the parent company to rebut such presumption by proving that the subsidiary acted independently.

Under the Latvian Competition Law, liability for anti-competitive behaviour is imposed on “market participant”, a term having the same meaning as “undertaking” under EC competition law. It follows that the Latvian Competition Council also could fine a parent company for the anti-competitive activities of its Latvian subsidiary.

Practices involved

Competition / Antitrust
Litigation & Dispute Resolution