Tuesday, November 24, 2009
Posted by D. Daniel Sokol
David Eggert (Handong International Law School) & Jingbo Hou (Handong International Law School) explain Liability of a Parent for the Antitrust Violations of a Subsidiary Under Asian Antitrust Law.
ABSTRACT: On September 10, 2009, the European Court of Justice (the highest court in the European Union) issued its much-anticipated decision in Akzo Nobel. N.V., and held that a parent company’s 100 percent ownership of a subsidiary automatically creates a presumption that the parent company controlled the actions of the subsidiary and is therefore liable for the antitrust violations of the subsidiary. Although this presumption of control is rebuttable, the court held that it had not been rebutted in the Akzo case. The issue was of special relevance in Akzo because the European Commission had imposed a fine upon Akzo (which had not been shown to have directly participated in a price-fixing conspiracy) and certain subsidiaries (which had been shown to have directly participated). Under European law, the maximum fine is bounded by 10 percent of the “turnover” (revenues) of the offending undertaking in the immediately preceding year. Since the turnover of Akzo Nobel was significantly larger than the turnover of the particular subsidiaries involved, this resulted in a much larger fine than otherwise could have been imposed. In reaching its conclusion, the Court relied heavily upon the concept of “undertaking” as developed in the law interpreting Sections 81 and 82 of the Treaty of Rome.
TheAkzo decision establishes a clear distinction between United States and European law on the issue of parental liability for the antitrust actions of a subsidiary. As a general rule, mere 100 percent ownership of a subsidiary will not be sufficient to impute liability upon a parent for the actions of a subsidiary; nor does it create a presumption that the parent exercises the degree of control over the subsidiary necessary to impose liability upon the parent for the subsidiary’s actions.
Given this conflict between EC and U.S. law, this article summarizes the applicable law on the issue of parental liability for the competition law violations of subsidiaries in three Asian countries—China, Korea, and Japan—and tries to anticipate whether the Akzo decision is likely to have a significant impact upon the development of the law in those jurisdictions.