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Explore the concept of parental liability in EU law, focusing on decisive influence, the notion of "undertaking," and implications for fines and recidivism. Learn how the Commission holds parent companies accountable for their subsidiaries' infringements.
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ICN webinaronparentalliability20 September 2017 Tímea PálosCaseHandler – DG Competition, CartelsDirectorate
The concept of parental liability in EU law The concept was developed by case law The Commission must show that the parent company had the capability of exercising decisive influence over the subsidiary that committed the infringement; and the parent company in fact exercised this power (ICI judgement).
The concept of decisive influence "Where the 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. Account must be taken, in particular, to the "economic, organisational and legal links" between them. There is a rebuttablepresumption of decisive influence over subsidiaries owned by 100% (or almost 100%). The presumption can be reversed by the parent company by adducing sufficient evidence.
The concept of "undertaking" I. The EU Treaty (Articles 101 and 102 TFEU) applies to infringements committed by "undertakings". An undertaking is an "economic unit consisting of a unitary organization of personal,tangible and intangible elements which pursues a specific economic aim on a long-term basis and can contribute to the commission of an infringement". A single economic unit can consist of several legal entities (i.e. companies): parents and subsidiaries.
The concept of "undertaking"II. If a parent company exercises decisive influence over its subsidiary, they form a single economic unit/undertaking. The Commission is entitled to hold the parent company liable for the infringement committed by its subsidiary. Parent company and subsidiary are held jointly and severally liable for the infringement. The Commission's settled practice is to hold parents liable for the illegal conduct of their subsidiaries.
The concept of "undertaking"III. The Commission identifies the legal entities that directly participated in the infringement ("direct participants"); and exercised decisive influence over the direct participants (parents). The Commission normally pursues the ultimate ("top") parent and ignores intermediate companies. The Commission has discretion to attribute liability.
Example A subsidiary participated directly in an infringement. If it is owned 100% (or almost 100%) by its parent company – the presumption of decisive influence applies. The parent can adduce factual evidence that this was not the case. If it is owned significantly less than 100%, the Commission has to prove decisive influence based on the facts. Final decision: subsidiary: liability for direct participation parent: parental liability both: joint and several liability for the payment of the fine.
The consequences of parental liability If there was decisive influence, joint and several liability for the fine seems to be justified. More effective recovery of the fine. The legal "cap" for the fine is 10% of the total worldwide turnover of the undertaking – potentially higher fines can be imposed. Deterrence multiplier can be applied on basis of turnover of parent. The risk of finding recidivism increases (recidivism uplift). Facilitates private damages actions.
