Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, December 16, 2009

Fines Against Parent Companies in EU Antitrust Law - Setting Incentives for "Best Practice Compliance"

Posted by D. Daniel Sokol

Karl Hofstetter, University of Zurich - School of Law and Melanie Ludescher, Legal Counsel - Schindler Group focus their research on Fines Against Parent Companies in EU Antitrust Law - Setting Incentives for "Best Practice Compliance".

ABSTRACT: Antitrust fines imposed by the European Commission have reached record levels and have scratched or passed the one billion Euro mark in several cases. This expansion was, inter alia, made possible by the Commission's practice to not only sanction responsible subsidiaries, but their parent companies as well. As a result, the fine cap which Community law sets at 10% of the annual sales of responsible undertakings has been ratcheted up significantly. This article maintains that the current practice of the European Commission, which finds at least partial support in the jurisprudence of the Community courts, ignores the fundamental concept of limited liability for subsidiary corporations. It also lacks a sound basis in EU antitrust law. Perhaps most important, the fining practice of the Commission does not do justice to its pursued goal of effectively preventing antitrust violations by corporate managers and employees. Antitrust fines against corporations, be they subsidiaries or parent companies, should primarily be aimed at deterrence and thereby take into account the principle of fault as embodied in Council Regulation No. 1/2003. Absent any direct involvement in the antitrust violations of the top representatives of a corporation, “fault” on the part of the company should primarily be defined as a deficiency in its compliance organisation. “Best Practice Compliance” should, therefore, take centerstage in an optimally designed antitrust fining policy. As a result, the amount of fines against companies, but also the question of whether a parent company should be coresponsible for antitrust violations by its subsidiaries, should primarily hinge on whether and to what extent “Best Practice Compliance” standards had been implemented.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/12/fines-against-parent-companies-in-eu-antitrust-law-setting-incentives-for-best-practice-compliance.html

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