It is trite law that a parent company will be liable for antitrust infringements committed by a subsidiary where the parent exercises “decisive influence” over the conduct of the subsidiary. Earlier this year the Court of Justice of the European Union (“CJEU”) illustrated just how difficult it will be for a company to rebut the presumption of “decisive influence” in the context of a wholly-owned subsidiary (see Kieron Beal’s post here). In two decisions published on Thursday last week, the CJEU pushed the boundaries of parental liability even further, holding that parent companies may be liable for infringements committed by their joint venture companies.
This further affirmation that antitrust liability truly is a “family affair” is likely to have significant and far-reaching implications for the shareholders of such joint ventures.
The two decisions — Case C-172/12 P, EI du Pont de Nemours and others v Commission and Case C-179/12 P, Dow Chemical Company v Commission — relate to the Commission’s imposition of fines on EI DuPont and Dow Chemicals for participating in a price-fixing and market-sharing cartel in the chloroprene rubber market. EI DuPont and Dow Chemicals were held to be jointly and severally liable for the conduct of their 50-50 joint venture, DuPont Dow Elastomers LLC (“DDE”), on the basis that they each exercised “decisive influence” over it.
The CJEU upheld the decisions of the Commission and General Court. Two features of the judgment are particularly noteworthy.
First, the CJEU acknowledged that its analysis meant that, for the purposes of establishing liability for participation in the infringement, the joint venture company and its two parent companies would be considered to be a single economic unit and therefore a single undertaking. The extent to which that analysis opens the door for joint venture partners to be treated as a single undertaking for other purposes is bound to be the subject of future debate.
Secondly, the CJEU cast further light on how it is that two companies could each independently exercise decisive influence over their joint venture. In particular, it rejected the argument that a 50-50 joint venture cannot, by definition, be under the “decisive influence” of one of its shareholders simply because certain strategic decisions may be subject to the other shareholder’s right of veto.
Rather, the CJEU underlined the fact that the General Court did not find the existence of “decisive influence” solely on the basis of the possibility that the parent companies could exercise joint control over DDE. Instead, it relied on a wider assessment of the economic, organisational and legal factors that tied DDE to both of its two parent companies – and in particular, their involvement in the Members’ Committee of the joint venture, which was responsible for supervising the business of DDE and approving certain matters pertaining to its strategic management. Hence, the CJEU made clear that even if a parent company is unable, by reason of the ownership structure of the joint venture, to impose certain decisions on the joint venture, it remains possible for the parent to exercise “decisive influence”.
The implications of the decisions are far-reaching.
Both the Commission and the CJEU have now made it resoundingly clear that it will difficult for parent companies to escape liability for the conduct of its subsidiaries and joint venture companies. The fact that a joint venture incorporates a veto right will not preclude the possibility that the Commission will find “decisive influence” by reference to a wider assessment of economic, organisational and legal factors that tie such a joint venture to its respective parent companies. The decisions thus send a strong message to companies operating in the EU to ensure that competition compliance programmes are rolled out not only to their subsidiaries, but also to their joint venture companies.