The article deals with the many inconsistencies within the case law, with regards to the parent’s liability for the antitrust infringement committed by the subsidiary. The EU courts have stated that the antitrust infringements should be attributed personally to the undertaking and, at the same time, to the legal persons on whom fines may be imposed. They have established that the liability of the parent company derives from the fact that it forms a single undertaking and, at the same time, that this liability derives from the exercise of decisive influence of the parent over the subsidiary’s conduct. They have held that the parent and the subsidiary can be considered jointly and severally liable for the payment of a fine, but no EU rule or agreements between the companies provide such responsibility. EU judges have also stated that fundamental rights do not apply to those legal persons which form the undertaking but, at the same time, they verified if the presumption of innocence of the parent company could have been violated by its parental liability. Again, courts have found that the liability of the parent company derives from the subsidiary’s conduct, but also that the annulment of the fine to the latter does not necessarily reflect on the fine to be paid by the first. Finally, the case law is also uncertain with regards to the subjective element of the infringement, which impinges on the application of the Directive in the matter of actions for damages for the violation of competition law. The article concludes that the matter should be seriously reconsidered by the EU courts and suggests a possible solution.

SOMMARIO:

I. Who (and why) is liable for antitrust infringement? A puzzling picture. - II. The Akzo Nobel formula and its conceptual flaws - III. Possible explanations for the conceptual flaws within the Akzo Nobel formula - IV. The actual application of the Akzo Nobel formula - V. The respect of fundamental rights and the Akzo Nobel formula - VI. The parent’s liability in the framework of the Directive concerning the action for damages for antitrust infringements. - VII. Conclusions and a proposal: return to ICI? - NOTE

I. Who (and why) is liable for antitrust infringement? A puzzling picture.

It is common ground that a parent company can be considered liable for antitrust violations committed by its subsidiary. Moreover, in this case, the Commission may hold those companies jointly and severally liable for the payment of the fines imposed on them [1]. However, even if these principles are based on a well settled case law, dating back to the early Seventies, in the last years they have been subject to a mounting criticism before the EU courts by the companies concerned [2]. It is debatable if all this criticism is well grounded, but it must be recognized that, as soon as the relevant case law is more carefully analysed, many ambiguities, if not contradictions, emerge. For example, the EU courts have stated that the antitrust infringements should be attributed personally to the undertaking as an economic entity, but at the same time, they have affirmed that the infringement must be imputed to those legal persons on whom the fine may be imposed. The courts have established that the liability of the parent company derives from the fact that, together with its subsidiary, it forms part of a single undertaking, but also that this liability derives from the exercise of decisive influence of the parent over the subsidiary’s conduct. Judges have also held that the parent and the subsidiary can be considered jointly and severally liable for the payment of a fine, but no EU rule or agreements between the companies provide such responsibility. They have stated that fundamental rights do not apply to those legal persons which constitute the single undertaking, but at the same time, they did not fail to verify if the presumption of innocence of the parent company was violated by its parental liability. Again, courts have found that the liability of the parent company derives from the subsidiary’s conduct, but also that the annulment of the fine to the latter does not necessarily reflect on the fine to be paid by the first. Finally, the case law is also uncertain on the subjective element of the infringement and this impinges on the application of the recently adopted Directive upon actions for damages for the violation of competition law [3]. This article explores these issues and concludes that the matter should be, in many respects, seriously reconsidered by the EU courts, possibly going back to, and developing the jurisprudential approach followed in the past and today, too hastily left out.

II. The Akzo Nobel formula and its conceptual flaws

Although, as mentioned, much dated, the principle of the parent’s liability was subject to a comprehensive restatement in 2009 in the Akzo Nobel judgement [4]. Taking into consideration the constant reference made to it in the subsequent case law, this judgement must be considered the leading case in the field. The responsibility formula elaborated in Akzo Nobel is divided into the following three statements: A) the concept of an undertaking, in the context of an­titrust law, refers to an economic unit even if, in law, this consists of several natural or legal persons, and when «such economic entity infringes the competition rules, it falls, according to the principle of personal responsibility, to that entity to answer for that infringement» [5]; B) the infringement of competition law «must be imputed unequivocally to a legal person on whom fines may be imposed and the statement of objections must be addressed to that person» [6]; and finally C) «the conduct of a subsidiary may be imputed to the parent company in particular where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company, having regard in particular, to the economic, organizational and legal links between those two legal entities» [7]. Unless an unlikely distinction between “responsibility for the infringement” and “imputation of the infringement” can be drawn, this formula implies that both the undertaking in an economic sense and the legal persons forming part of that undertaking are accountable for the infringement. However, this legal formula shows at least three conceptual flaws: 1) it is incomprehensible how an undertaking that exists only “in the economic sense” can be held “personally” responsible and how, such an entity can actually face the consequences of an antitrust action; 2) equally obscure is the ground for the involvement of the legal entities in the infringement, since this is a “personal” responsibility of the undertaking; 3) finally, is not clear which is the nature of the liability of the parent company for an infringement committed by the subsidiary. Below I will examine in greater details these conceptual issues. a) As mentioned, [continua ..]

III. Possible explanations for the conceptual flaws within the Akzo Nobel formula

The possible explanations for the ambiguities mentioned above are to be found in the Court’s attempt to combine the Akzo Nobel case with different sets of precedents, referring to facts and legal contexts significantly different between them. Below I briefly examine the contexts from which the judgements that are explicitly quoted in the Akzo Nobel formula were originated. From such analysis it emerges that the Court made an inaccurate use of the previous case law. It is well known that, in particular in the context of international negotiations, a bit of ambigüité créative normally helps to find innovative and efficient solutions; however such a technique in judicial reasoning may lead to delusory results. a) The concept of undertaking in the economic sense, evoked in the first of the three statements of the Akzo Nobel formula (see above, para. II), according to which it designates an economic unit even if in law it consists of several natural and legal persons, was first developed in the Hydrotherm judgment [26]. The question at stake was the applicability of a block exemption regulation to an agreement formally concluded, on the one hand, by a legal person and, on the other, by two separate companies controlled by the same person, which was also part of the contract. The Court held that: «the term “undertaking” must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal» [27]. The Court concluded that, only one undertaking does exist where different parties have identical interests and are controlled by the same natural person, who also participates in the agreement, as in those circumstances, in fact, «competition between the persons participating together, as a single party, in the agreement in question is impossible» [28]. It is clear from this judgment that, the concept of «an economic unit for the purpose of the subject-matter of the agreement», within the scope of a block exemption regulation, has nothing to do with the issue of deciding which is the subject that must be imputed for the antitrust infringement within a group of companies tied by economic or legal links. I sense that in Akzo Nobel the Court simply avoided to [continua ..]

IV. The actual application of the Akzo Nobel formula

Leaving aside the theoretical problems and the not impeccable use of the judicial precedents, in this section I will analyse how theAkzo Nobel formula has been actually applied and what are the consequences. In this respect, three areas need to be explored: a) the assessment of the parent’s liability for the conduct of the subsidiary, b) the establishment of a joint and several liability between parent and subsidiary in the payment of the fines, and c) the effects on the parent of the annulment of the decision finding an infringement pronounced by the EU courts in favour of the subsidiary. a) It has been noted above, that in Akzo Nobel the Court provides two different explanations for the liability of the parent. On the one hand, it says – recalling the ICI precedent – that such liability derives from the parent’s own conduct, which is expressed in the instructions given to the subsidiary; on the other hand, it states that the liability of the parent comes from the fact that the company is part of the undertaking responsible for the violation. The first explanation presupposes a personal responsibility of the subsidiary (for misconduct) and parent (for the exercise of decisive influence); the second is based on the personal responsibility of the undertaking, which (in some mysterious ways, as we have seen) “radiates” over those legal persons who are part of the undertaking, which are not, as such, personally responsible. Regarding the conceptual issues arising from the fact that the liability is based upon the mere belonging to the undertaking, one should be relieved when remarking that, from a practical point of view, this theory does not have any real effect upon the identification of the guilty entity. In fact, both in Akzo Nobel and in all subsequent case law, in order to actually proceed to such identification, the Court has never retained as sufficient to establish that parent and subsidiary were part of the same guilty undertaking. By contrast, following in substance the ICIapproach, it has demanded the Commission to demonstrate that the parent gave instructions to the subsidiary and the subsidiary, carrying out these instructions, did not act independently on the market [39]. Only on the basis of this assessment the parent’s liability could have been established. In this area, therefore, the theory of the parent’s liability based upon [continua ..]

V. The respect of fundamental rights and the Akzo Nobel formula

a) Considering the accountability regime set in Akzo Nobel, it should be explored whether and under what conditions the entities involved in that regime enjoy the application of the fundamental rights guaranteed in the Union. In principle, it seems tricky to affirm that the fundamental rights may be applied to an economic abstraction, as in fact is the undertaking. The fact that the responsibility of the latter is “personal” does not seem to change the terms of the issue. For sure, in practice, the undertaking cannot personally bring a legal action in order to protect these rights. However, a rather different story should be told in relation to the legal or natural persons forming part of the undertaking, to whom the infringement is ultimately attributed. In respect to them, the EU Charter of Fundamental Rights – that refers to all “persons” generally intended – seems to unquestionably ensure the enjoyment of such rights. Confronted with such problem, the Court of justice has – again – taken equivocal positions. In Schindler [60] it acknowledged that the principle of personal responsibility had been recognized in the EU legislation, but only with respect to the notion of a company or a firm or a legal person as used in art. 54 TFEU and not in relation with the concept of undertaking used in the Treaties to indicate the person responsible for an antitrust infringement [61]. According to the Court, the principle, while is of particular importance especially with regards to the liability in the sphere of civil law, «it cannot be relevant for defining the perpetrator of an infringement of competition law, which is concerned with the actual conduct of undertakings» [62]. Besides being ambiguous – the Court does not clarify what are the consequences of the lack of relevance of the principle of personal responsibility – this statement seems very weakly justified. In fact, on the one hand, the fact that the principle of personal responsibility applies to the entities mentioned in art. 54, does not rule out that it can also be applied to the undertakings referred to in art. 101 and 102 TFEU. On the other hand, companies, firms or legal per­sons mentioned in art. 54 TFEU are the same, in hypothesis, as the ones forming part of the undertaking pursuant to the competition rules; therefore it is not clear why the principle of personal responsibility [continua ..]

VI. The parent’s liability in the framework of the Directive concerning the action for damages for antitrust infringements.

It is well known that the EU adopted, at the end of 2014, a Directive on certain rules governing actions for damages caused by antitrust violations in the Member States and the EU [92]. The Directive indeed contains provisions on the joint and several liability stemming from antitrust infringement. Art. 11 stipulates that Member States must provide that «undertakings which have infringed competition law through joint behaviour are jointly and severally liable for the harm caused by the infringement of competition law; with the effect that each of those undertakings is bound to compensate for the harm in full, and the injured party has the right to require full compensation from any of them until he has been fully compensated» [93]. The rule has two exceptions. The first in favour of small and medium-sized enterprises (SMEs) which, under certain conditions, are liable only to their own direct and indirect purchasers [94]. The second is in favour of the immunity recipient under the so called Leniency Note [95] which is jointly and severally liable only to its direct or indirect purchasers or providers, and to other injured parties only where full compensation cannot be obtained from the other undertakings that were involved in the same infringement of the competition law [96]. This rule cannot be confused with the accountability rule set in the Akzo Nobel formula, since it allows the establishment of a liability among the undertakings who have jointly infringed the antitrust law – as in cartel cases [97] – and it does not concern the liability among the natural or legal persons comprising the undertaking in economic terms. However, some important questions related to the implementation of the Directive actually enter into the area of the legal issues implied by the Akzo Nobel formula. The first refers to the possibility of imputing the liability for damages caused by an infringement committed by the subsidiary also to the parent company. In this regard the answer should be positive. Art. 2 of the Directive specifies that the concept of “infringer” refers to «an undertaking or association of undertakings which has committed an infringement of competition law», and there is no reason to doubt that the liability of the legal persons forming part of the undertaking arises in the case of an action for damages, according to [continua ..]

VII. Conclusions and a proposal: return to ICI?

The results of the analysis carried out can be summarized as follows. a) The accountability formula developed in Akzo Nobel shows a number of conceptual flaws that concern both the legal ground for the undertaking’s responsibility and the legal ground for the parent’s and subsidiary’s liability for an antitrust infringements; in relation to the latter, even the nature of their liability is unclear. b) The Akzo Nobel formula is derived from an inaccurate use by the Courts of the Union of certain previous judgements, by which they have combined the case presented in Akzo Nobel with a set of different precedents, referring to different legal context and relevant circumstances. c) The ambiguity of the Akzo Nobel formula has enabled the Court to find à la carte solutions for different problems. The theory of liability based on the belonging to the guilty undertaking did not produce any effect in relation to the parent’s liability, an issue in which the Court substantially continued to follow ICI case law. By contrast, regarding the issue of joint and several liability for the payment of the fines, the theory in question has filled the gap left by the lack of an explicit EU provision or an agreement between the parties which provide such liability. Finally, with respect to the legal proceedings, the liability based on the belonging to the undertaking did not produce any effect since the principle of ne ultra petita hampers its application to natural or legal persons. d) Additional ambiguities are found in the area of the ​protection of fundamental rights. Some judgments seem to deny that such rights apply to the natural or legal persons who are part of the company; other judgments expressly affirm that these rights apply. Basically, however, it does not appear that actual violations of the fundamental rights have been committed, since the parental liability presumption does not seem contrary to the presumption of innocence of the parent. e) Finally, due to the ambiguities regarding the issue of culpability of the parent company that can be found in Akzo Nobel, even the action for damages against the parent may rise some problems of interpretation. Taking into consideration these conclusions it seems possible to formulate a proposal for a revirement of the jurisprudence. I believe that, for the purpose of imputing the liability to the [continua ..]

NOTE