Antitrust & Competition Policy Blog

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

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Tuesday, April 24, 2012

Fines against Parent Companies in EU Antitrust Law: Setting Incentives for ‘Best Practice Compliance.'

Posted by D. Daniel Sokol

Karl Hofstetter (Schindler Holding AG and University of Zurich) and Melanie Ludescher (Schindler) have an interesting article 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 EUR 1 billion 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 fi nds at least arguable support in the case law 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 fi ning 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 therefore be based on fault. Absent any direct involvement in the antitrust violations of the top representatives of a corporation, fault on the part of the company should be defined as a deficiency in its compliance organization. ‘Best Practice Compliance’ should, therefore, take centre stage in an optimally designed antitrust fi ning policy. As a result, the amount of fi nes against companies, but also the question of whether a parent company bears co-responsibility 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/2012/04/posted-by-d-daniel-sokol-karl-hofstetter-schindler-holding-ag-and-university-of-zurich-and-melanie-ludescher-schindler.html

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