Tuesday, May 15, 2012
Posted by D. Daniel Sokol
Laura Atlee (Steptoe & Johnson) asks Joint Venture…Subsidiary…What’s the Difference for Cartel Liability and Fines?
ABSTRACT: Parent liability in cartel infringement proceedings has been the focus of quite a number of our commentaries. Starting with the Akzo ruling, the EU Courts have tightened the noose around each and every parent company's financial neck. When a parent company has a 100 percent shareholding in a subsidiary it is presumed (although it can in theory be rebutted) that: (i) the parent company has decisive influence over the subsidiary and (ii) the parent company in fact exercises this decisive influence over the subsidiary's conduct. The Commission has expanded the presumption to include shareholdings that are something less than 100 percent, although it is unclear how elastic the presumption will ultimately be.
Why is this "decisive influence" test so important? It means that the two companies are part of the same "undertaking" and that, in turn, means inter alia that the base amount of the fine for infringing Article 101 of the Treaty on the Functioning of the European Union ("TFEU") includes both the parent's and subsidiary's turnovers and that both can be held jointly and severally liable for any fine the European Commission (the "Commission") imposes.
Having been so successful with wholly-owned subsidiaries, the Commission has recently decided to try its luck with joint ventures. Based on Dow and DuPont, it currently appears that parent companies will also be held liable for their joint ventures' transgressions.