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EUs Highest Court

EU's Highest Court Expands Cartel Damages Liability for Corporate Parents and Successors

In Short

The Development: The European Court of Justice ("ECJ") ruled that parent companies and economic successors can be held liable for damages caused by a subsidiary or acquired company in cartel cases. This significantly broadens the scope of corporate liability for EU antitrust violations.

The Implications: EU case law had already established joint and several liability for fines on parents and subsidiaries or their successors for cartel infringements. This decision extends the same principles of joint and several liability to private follow-on damage actions.

Looking Ahead: This outcome strengthens private antitrust enforcement and further exposes companies implicated in antitrust violations.

Background

In 2009, the Finnish Supreme Administrative Court fined several companies for participating in a cartel in the asphalt market in Finland, in breach of Article 101 of the Treaty of the Functioning of the EU ("TFEU") and the equivalent national provision. The cartel ran from 1994 to 2002. Toward the end of this period, several of the implicated companies were acquired. Relying on the principle of economic continuity, the Finnish court also fined the economic successors of the liquidated companies, even though they were not involved in the alleged cartel.

Following this ruling, the Finnish city of Vantaa initiated damage claims against the fined companies, including against the economic successors of the liquidated companies. Finnish law, however, provides that only the legal entity that caused the damage can be held liable. The case was brought before the Finnish Supreme Court, which sought the ECJ's view on whether persons liable for cartel damages should be determined on the basis of EU or national law.

EU and National Level Enforcement

Public enforcement of EU antitrust rules relies on the EU law-specific concept of an "undertaking." This broad concept refers to an economic unit, regardless of whether such unit comprises one or more natural or legal persons. Thus, a subsidiary's conduct can be attributed to a parent company that exercised decisive influence over it, regardless of whether the parent and subsidiary are distinct legal entities.

When the undertaking liable for the infringing behavior no longer exists, the principle of "economic continuity" can lead to corporate liability. Under this principle, the successor of a company involved in infringing behavior can be liable for the cartel behavior of the liquidated company when the two are identical from an economic standpoint.

Private enforcement of EU antitrust rules may also be pursued. Any person may claim compensation for damages arising from a cartel if a causal link exists between the damage suffered and the cartel infringement. However, private enforcement is a matter of national law such that each Member State must provide applicable rules under its own legal regime.

ECJ Ruling and Implications

EU law governs liability for payment of fines (including the joint and several liability of parents and successors), and each Member State's national laws govern tort claims against cartel perpetrators. In this case, the ECJ found, however, that the concept of an undertaking and principle of economic unity in Article 101 TFEU also apply to private cartel damage claims brought under national law. As a result, in damage claims based on a breach of the EU's Article 101 TFEU competition rules, private parties can seek damages from the legal entity that perpetrated the cartel, its successors, and its parent company at the time of the infringement.

The judgment is available here: Case C-724/17, Vantaa vs. Skanska Industrial Solutions and others, 14 March 2019

Three Key Takeaways

  1. The ECJ's extensive case law on the joint and several liability of parents and successors for the payment of fines now applies to the payment of damages.
  2. This ruling applies to damage claims based on Article 101 TFEU. By extension, it likely also applies to damage claims based on corresponding provisions of national laws, to the extent that national laws apply the same concept of undertaking as Article 101 TFEU.
  3. Given the enlarged scope of corporate liability, companies acquiring assets from liquidated entities must be particularly vigilant and should verify whether damage liability is attached to the assets.
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