Things occasionally have an air of unerring certainty about them. It will rain on the May Day bank holiday weekend. Tottenham will be pipped to fourth place in the Premier League on the last day of the season. Attempts to challenge a Commission finding that a group of companies constitute a single economic entity will fail. So it has proved for Eni SpA, in its failed appeal against the judgment of the General Court in Case T-39/07 Eni v. Commission [2011] ECR II-0000, GC.
In Case C-508/11 P Eni SpA v. Commission (judgment of 8 May 2013), the Court of Justice of the European Union (‘CJEU’) has confirmed how hard it is to rebut the rebuttable presumption that a parent company exercises decisive influence over a wholly-owned subsidiary. No surprises that the CJEU did not depart from the recent statements of principle in Case C-90/09 P General Química v. Commission [2011] ECR I-1; or Case C-654/11 P Transcatab v. Commission [2012] ECR I-0000. It is now trite law that the Commission may establish a single economic entity for the purposes of a finding of infringement in relation to a parent company and its subsidiaries where they form part of a single economic unit. Furthermore, that single economic unit will be treated as a composite undertaking for the purposes of the application of Article 101 TFEU. It is also a well-worn route for the Commission to point to the fact that a parent company holds all or almost all of the share capital in a subsidiary in order to engage the rebuttable presumption that the parent company exercises decisive control over the subsidiary. The sins of the corporate son or daughter are then visited on the parent. See, for example, Case C-289/11 P Legris Industries v. Commission [2012] ECR I-0000, CJEU at [46]. Furthermore, the presence of intermediary holding companies is not a bar to the attribution of responsibility. See Química supra at [88].
What marks out Eni SpA for comment is just how hard it is to escape the parent-trap. The Commission found that the corporate predecessors to two of Eni’s subsidiaries had participated in a cartel in synthetic rubbers from 1996 to 2002. Eni argued that it had never operated directly in the sector in question; that it had never had any management overlap between the parent company and the subsidiaries; that Eni had not had any information on the strategic and commercial plans of their subsidiaries; and that it had not been involved in setting annual sales volumes or prices. The General Court had not necessarily rejected these contentions, but focussed instead on the fact that Eni was the technical and financial coordinator for the group as a whole and that the chemical sector was an important part of the overall group. It also repeated the Commission’s observation that the hierarchical structure meant that the board of directors of Eni was ultimately responsible for the appointment of the managing directors of the subsidiaries.
The CJEU recognised that if the factors relied upon by Eni had been established before the General Court, then they would certainly have showed that the principal subsidiary “enjoyed a certain autonomy as regards its chemical activities.” But the CJEU went on to uphold the finding of a single economic entity despite this apparent concession. It is interesting to consider which factors the CJEU did not think would displace the finding that had been made. First, the fact that Eni was ‘merely’ a technical and financial coordinator or restricted its role to that of financial and investment assistance did not disturb the finding. The parent would still have budgetary control. Secondly, nor did the fact that Eni had never itself operated in the chemical sector. Thirdly, Eni was not able to dispute that it was possible to coordinate investments within the group even in the absence of any direct participation in the operational management of its subsidiaries. Fourthly, the absence of involvement in sales and prices in that particular sector did not change matters.
In short, the involvement of a parent company (even if it is very close to being a mere holding company) in any of the economic activities of a subsidiary will probably suffice to prevent the rebuttable presumption of decisive control being rebutted. The Commission is therefore freed from any need to make enquires that go significantly beyond the corporate structure of the company group in question. The burden is properly cast on the parent company to show that its children have fully fledged the nest. As the CJEU trenchantly said at [68], “the fact that it is difficult to prove the opposite in order to rebut a presumption does not imply, of itself, that it is in fact irrebuttable.” Nor was a rebuttable presumption that was difficult to rebut incompatible with Article 47 of the Charter of Fundamental Rights or Article 6 ECHR. Eni’s attempt to rely upon the common law concept of separate legal personality for corporate persons was summarily dismissed as “manifestly unfounded.” As was the attempt to rely upon anti-trust law and practice in the United States.
Does this matter in practice? After all, a parent company may well end up having to pick up the tab for any fine imposed on the subsidiary in any event, for commercial or financial reasons. The answer is yes. The difficulty for the parent company with an infringing, wholly owned (or substantially owned) subsidiary in proving the negative will often have very real practical impact, since the level of the fine will be premised on the scale of the group, rather than the subsidiary’s turnover.
Finally, another noteworthy feature of the Commission’s decision was that it increased the fine imposed on Eni to take into account the fact that “Eni” had been the addressee of two other Commission decisions in Polypropylene and PVC II. Here Eni fared better. The CJEU did not seemingly dissent from the proposition (derived from Case T-203/01 Michelin v. Commission [2003] ECR II-4071) that the fact that the cartelist is a recidivist could be an aggravating factor in calculating the level of the fine. But here the Commission had failed to explain sufficiently clearly how the corporate group (which had undergone some significant changes over time) had been involved in all three of the separate cartels relied upon by the Commission. That caused the General Court to annul that part of the Commission’s decision. The Commission’s cross-appeal was rejected as well.
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