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Parental Liability in the Setting of EU Antitrust Fines: Recent Case Law Provides Further Guidance

23 June 2011
Mayer Brown Article

Nathalie Jalabert Doury

Undertakings that violate either article 101 (anticompetitive agreements) or 102 (abuse of dominance) of the EU Treaty are subject to fines by the European Commission of up to 10 percent of their annual worldwide turnover.

The concept of an “undertaking” covers any entity engaged in an economic activity, regardless of its legal status, even if that economic unit consists of several persons: natural or legal. Where such an economic entity infringes the rules of competition, that entity is liable for that infringement.

In the context of groups, the maximum fine may be calculated on the basis of the turnover of the company that took part in the infringement or a company higher in the group to which it belongs. Moreover, all entities liable within the group will be held jointly and severally liable for payment of the fine.

Indeed, the EU Court of Justice has ruled that the European Commission may target a parent company if the parent exercises “decisive influence” over the subsidiary. Such decisive influence may be established (i) in concreto, notably where there is evidence that the parent company gives instruction to the subsidiary,  and (ii) on the basis of a rebuttable presumption where the parent company holds 100 percent of the shares of the subsidiary. It is then up to the companies concerned to rebut the presumption by evidencing the lack of exercise of control.

Considering the possibly dramatic impact of such decisions on the final amount of the fine, parental liability issues arise now in almost every case. A number of recent court decisions have clarified the applicable rules, providing a more precise view of the risk of increased fines within groups of companies.

One Hundred Percent-Held Subsidiaries: Probatio Diabolica or Reversal of the Burden of Proof?

The presumption of decisive influence applicable to 100 percent-held subsidiaries has been applied by the European Commission in numerous cases; this presumption has yet to be successfully rebutted by a company, either before the European Commission or before the courts.

The way the presumption is applied has attracted much criticism: the European Commission and the courts impose a high burden of proof on parent companies seeking to demonstrate a lack of decisive influence over their subsidiaries. This lack of a decisive influence—just like the lack of an infringement—is among the most difficult elements to establish, as it can only rely on negative elements, which never materialize like positive facts and actions.

Further, this presumption widely applies. The Court of Justice has confirmed in the Alliance One case1 that the presumption arising from 100 percent ownership of the capital can apply not only in cases where there is a direct relationship between the parent company and its subsidiary, but also in cases where that relationship is indirect (in that case three successive holding companies).

The presumption also applies to newly acquired activities within a group. In the Gas Insulated Switchgear case,2 corporate parent Areva argued that it could not be held liable for the first period after acquiring the company in question as Areva did not have the expertise in the sector and kept most of the management in place, only recruiting a new member of the board, so far unrelated to the group. The General Court rejected these assertions as not supported by evidence. The General Court also held that it could not rule out that the external recruitment allowed Areva to equip itself with the expertise and organization necessary to enable the company to exercise joint control.

Numerous companies have argued that the standard of proof makes the presumption impossible to rebut, amounting to a true “probatio diabolica.” So far, the Court of Justice has maintained its case law.3 However, in the Thyssen case,4 Advocate General Bot for the first time called into question this presumption and whether it amounted to a reversal of the burden of proof that would necessarily impair defense rights. Advocate General Bot suggested that the presumption should have to be corroborated by other facts that prove that the parent company exercised decisive influence over its subsidiary. So far, the Court has not followed that suggestion.

In the General Quimica case,5 the Court of Justice reviewed in depth the General Court’s judgment on the arguments presented by the parent company to rebut the presumption. First, the parent company claimed that it had given the subsidiary very clear instructions to end any anticompetitive practice, and the fact that this instruction was not applied evidenced the lack of decisive influence. The General Court ruled to the contrary, finding that the parent company’s instruction was evidence of the exercise of influence, and rapidly set aside a number of other arguments. On appeal, the Court of Justice  annulled this part of the judgment on the ground of insufficient motivation and also criticized the General Court for insufficiently assessing the various elements brought forward by the claimant. However, at the end, the Court of Justice remanded the judgment, based on a more detailed motivation.

Several additional important judgments are anticipated in the coming months on the same issue. Notably, in the Monochloracetic acid case,6 Elf Aquitaine claims that the European Commission and the General Court wrongfully applied the presumption to a pure holding company, only coordinating the investments within a decentralized group.

The Evidence of Decisive Influence

The conduct of a subsidiary may also be attributed to the parent company where that subsidiary, despite having a separate legal personality, carries out, in all material respects, the instructions given to it by the parent company, rather than acting on its own in the market. In such cases, regard is particularly given to the economic, organizational and legal links between those two legal entities.

The Commission cannot merely find that the parent company is in a position to exercise decisive influence over the conduct of its subsidiary. Rather, the Commission must also check whether that influence was actually exercised, it being noted that such evidence is not necessarily to be found in the specific area in which the infringement occurred.7

Criteria that are taken into consideration include:

Appointment of managers coming from the group and/or exercising group functions aside from the management of the subsidiary;

Approval of precise annual budgets by the parent company;

Evidence that the business plans of the subsidiary had been amended on the basis of suggestions by the parent company;

Communication for prior approval by the parent company of draft plans made by the subsidiary; and

Provision of detailed day-to-day management information to the parent company.

The Court of Justice has further stressed that the mere fact that the group has a decentralized structure and/or that the subsidiary has a dedicated local management and its own resources does not prove, in itself, that the company decides upon its conduct independently of its parent company.8

Holding Companies

In the Alliance One case,9 the General Court clarified which companies within the group can be held liable for exercising decisive influence. According to the court, the company or companies found to have exercised a decisive influence shall not include holding companies, which have no activity on their own and which have purely financial interests in the company engaged in the infringement.

Therefore, such companies are not to be held jointly and severally liable for the payment of the fine.

This judgment was adopted in a case where the European Commission had established in concreto the exercise of decisive influence, and it remains to be seen whether the Court of Justice would extend that requirement to the 100 percent shareholding presumption.

Parental Liability in the Context of Joint Ventures

The recent case law has also established that responsibility for an infringement can be attributed to one or several parent companies of a full-function joint venture.

For the purpose of merger control rules, a full-function joint venture is defined as a jointly controlled undertaking “performing on a lasting basis all the functions of an autonomous economic entity.”10 Such full-function joint ventures therefore qualify as mergers that are likely to fall within the scope of the EU merger control rules. The joint control and autonomy condition aspects of the merger control rules would normally preclude the joint venture from carrying out, in all material aspects, the instruction of any controlling undertaking.

However, the General Court ruled in the Alliance One11 case that where an undertaking is under the control of two or more undertakings or persons, those controlling undertakings or persons are, by definition, able to exercise decisive influence over controlled undertaking. When there is evidence that such decisive influence was actually exercised (based on similar criteria as the ones detailed above for sole control), it is possible to hold the various undertakings or persons that exercise joint control liable for the unlawful conduct.


The EU parental-liability doctrine will probably continue to evolve and be refined—hopefully toward a stricter control on the criteria taken into account by the European Commission and a fair burden of proof allocation between the European Commission and companies. In the meantime, companies need to consider the doctrine when structuring a group and assessing the risk of antitrust fines.

  1. GCEU, 27 October 2010, Alliance One International v. European Commission, case T-24/05.
  2. GCEU 3 March 2011 Siemens v. European Commission e.a.,      case T-110/07 e.a.
  3. CJEU 10 September 2009, Akzo Nobel v. European Commission, case C-97/08P.
  4. CJEU 29 March 2011, Thyssen Krupp v. European Commission, case C-352/09 P.
  5. CJEU 20 January 2011 General Quimica v. European Commission, case C-90/09P.
  6. CJUE, Advocate General Opinion 17 February 2011, Elf Aquitaine v. European Commission, case C-521/09 P.
  7. GCEU, 27 October 2010, Alliance One International v. European Commission, case T-24/05.
  8. Ibid.
  9. Ibid.
  10. Article 3(b) of the Merger Regulation N°139/2004 and Jurisdictional Notice 2008/C 95/01.
  11. GCEU 27 October 2010, Alliance One International v. European Commission, case T-24/05.

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