Oops, I Did It Again – or Maybe Not: May a Parent Company Be Held Recidivist on Account of a Subsidiary’s Past Antitrust Offense?

February 12, 2015

In December 2014, the EU General Court (GC) issued its ruling in Eni SpA v Commission. The GC’s ruling largely confirms the findings made earlier in the year in Saint-Gobain Glass France and Others v Commission.  Read together, the two rulings provide further clarity as to whether the presumption of economic unity between a parent company and its (nearly) 100% owned subsidiary may be applied in assessing the existence of recidivism, as an aggravating factor in the calculation of the fine to be imposed.

Run-up to the GC’s Ruling

In 2008, the European Commission (EC) adopted a decision by which it found that Eni SpA (Eni), alongside various other undertakings, had participated in a cartel on the candle waxes market.  In that decision, the EC noted that, prior or during ENI’s participation in the candle waxes cartel, two of ENI’s subsidiaries had been addressees of EC decisions in other cartel investigations: (i) Anic SpA (Anic) in the polypropylene cartel investigation and (ii) Enichem SpA (Enichem) in the PVC II cartel investigation.  On this account, the EC considered that ENI was deemed to be an addressee of the EC decisions in the polypropylene and PVC II cartel investigations and, therefore, a recidivist (i.e. a repeat offender).  As a result, the EC increased Eni’s fine by 60%, in line with point 28 of its Guidelines on Fines.

Eni lodged an appeal with the GC, arguing that it had never before been the addressee of an EC decision in a cartel investigation.  It noted that the proceedings which culminated in the adoption of the EC decisions in polypropylene and PVC II were against Anic and Enichem, respectively.  Eni had not participated in any capacity in those proceedings and was nowhere mentioned in those EC decisions.  The EC counter-argued that, as Eni held (nearly) 100% of Anic and Enichem, the EC could presume that Eni exercised decisive influence over their conduct.  It was up to Eni to produce evidence in order to reverse this presumption.

The GC’s Take on All of This

The GC conceded that, under well-established case-law, the EC may presume that the parent company exercised decisive influence over the conduct of the subsidiary that committed the antitrust infringement, where the parent company holds (nearly) 100% of the subsidiary.  On this basis, the EC may consider the parent company to be wholly responsible for the payment of the fine imposed on the subsidiary unless the parent company adduces sufficient evidence that it and the subsidiary do not constitute a single economic entity.

At the same time, however, the GC stressed that recent case-law (such as Elf Aquitaine v Commission) underlines how important it is to examine the arguments presented by the parent company in order to rebut this presumption.  The GC noted that Eni had not been an addressee of the EC decisions in polypropylene and PVC II.  As a result, Eni did not have the opportunity to produce evidence in the context of those proceedings, in order to rebut the presumption on which the EC based itself (years later, in the context of the candle waxes cartel investigation) to prove Eni’s recidivism.

The GC ruled that, in assessing the existence of recidivism, the EC may not attribute responsibility to a parent company for an older infringement, for which it (i) had received no statement of objections and (ii) was not sanctioned.  While a parent company may be aware of a previous EC decision addressed to one of its (nearly) 100% owned subsidiaries, such prior knowledge is insufficient to remedy the absence of a determination in the previous EC decision that the parent company and the subsidiary form a single economic unit, so that the responsibility for the previous infringement is imputed to the parent company.

On the basis of these considerations, the GC found that Eni’s rights of defence were infringed and annulled the EC decision to the extent that the EC had increased Eni’s fine by 60% on account of recidivism.  Eni’s fine was therefore lowered from € 29,120,000 to € 18,200,000.

Why Does the GC’s Ruling Matter?

The GC’s ruling in Michelin v Commission back in 2003 appeared to endorse the application of the parental liability presumption in the context of assessing the existence of recidivism.  In Michelin v Commission, a subsidiary of the Michelin group was found to be recidivist on account of a past infringement by another subsidiary of the Michelin group – despite the fact that their parent company had not been an addressee of the older EC decision.  In Eni SpA v Commission, the GC clarifies that its ruling in Michelin v Commission should be read in light of the applicant’s specific argumentation in that case: the applicant had not contended that the rights of defence of the parent company had been infringed, due to an alleged retroactive attribution of responsibility to the parent company for a past infringement committed by its subsidiary.  Fortunately, Eni steered the GC to the right direction.

The GC’s ruling in Eni SpA v Commission is good news for large corporate groups.  It provides them with more legal certainty as to when they may be held to be repeat offenders of EU antitrust rules.  The EC may not just pull out of its drawer an older-than-dirt infringement decision addressed to one of their (nearly) 100% owned subsidiaries and, on that basis, augment their fine by up to 100% on account of recidivism.  The rights of defence take precedence over deterrence considerations and require that parent companies be given the opportunity to rebut the parental liability presumption (difficult as this may be – see our previous detailed note in LexisNexis) before recidivism can be held against them.