Keywords

Summary



Keywords

1. Competition – European Union rules – Infringements – Attribution – Parent company and subsidiaries – Criteria for assessment

(Arts 81 EC and 82 EC; Council Regulation No 1/2003, Art. 23(2))

2. Competition – Administrative procedure – Observance of the rights of the defence – Statement of objections – Necessary content

(Arts 81 EC, 82 EC and 85 EC; Council Regulation No 1/2003, Art. 27(1))

3. Competition – Administrative procedure – Observance of the rights of the defence – Infringement as a result of an error committed by the Commission – Conditions

(Arts 81 EC, 82 EC and 85 EC)

4. Competition – Fines – Amount – Determination – Maximum amount – Calculation – Turnover to be taken into consideration

(Arts 81 EC and 82 EC; Council Regulation No 1/2003, Art. 23(2))

5. Competition – European Union rules – Infringements – Attribution – Legal person responsible for the running of the undertaking at the time of the infringement – Exceptions

(Art. 81(1) EC)

6. Competition – Fines – Amount – Determination – Criteria – Deterrent effect – Observance of the principle of proportionality

(Arts 81 EC and 82 EC; Council Regulation No 1/2003, Art. 23)

7. Competition – Fines – Amount – Determination – Criteria – Deterrent effect – Application of a multiplier

(Arts 81 EC and 82 EC; Council Regulations No 17, Art. 15(2), and No 1/2003, Art. 23; Commission Notice 98/C 9/03, Section 1A, fourth para.)

Summary

1. In competition matters, where a subsidiary is wholly owned by the parent company, the Commission is entitled to presume that the parent exercises decisive influence over the conduct of that subsidiary, and is not required to adduce additional evidence establishing that the parent company actually exercised such influence or was aware of the infringement or of that subsidiary’s involvement in the infringement. It is a rebuttable presumption, which can be set aside in the face of evidence to the contrary. It is therefore for the parent company, regarded by the Commission as jointly and severally liable for payment of the fine imposed on its subsidiary, to rebut that presumption by adducing evidence capable of establishing that its subsidiary decides independently upon its course of action in the market and that those two companies do not therefore constitute a single economic entity. If the parent company fails to do so, the exercise of control is demonstrated by the fact that the presumption arising from 100% ownership of a subsidiary is not rebutted.

In order to assess whether a subsidiary decides independently upon its own conduct on the market, account must be taken of all the relevant factors relating to the economic, organisational and legal links between the subsidiary and the parent company, which may vary according to the specific features of each case.

The fact that a subsidiary has its own local management and its own resources does not prove, in itself, that that company decides upon its conduct on the market independently of its parent company. The entrustment of day-to-day business to the local management of a wholly‑owned subsidiary is a common practice and is not therefore capable of proving that subsidiaries have real independence. Indeed, in vertically‑integrated groups, the division of tasks between subsidiaries and their parent companies is a normal practice, which is not capable of rebutting the presumption that the parent companies in fact exercise decisive influence over the conduct of the subsidiaries.

(see paras 125-126, 130-131)

2. Respect for the rights of the defence in the conduct of administrative procedures relating to competition policy requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged and on the documents used by the Commission to support its claim that there has been an infringement of the Treaty. Article 27(1) of Regulation No 1/2003 reflects that principle in so far as it provides that the parties are to be sent a statement of objections which must clearly set out all the essential matters on which the Commission relies at that stage of the procedure, to enable the parties concerned properly to identify the conduct complained of by the Commission and to defend themselves properly before the Commission adopts a final decision. That obligation is satisfied if the final decision does not allege that the persons concerned have committed infringements other than those referred to in the statement of objections and takes into consideration only facts on which the persons concerned have had the opportunity of stating their views.

However, that may be done summarily and the final decision is not necessarily required to be a replica of the statement of objections, since the statement is a preparatory document containing assessments of fact and of law which are purely provisional in nature. Thus, it is permissible for the Commission to supplement the statement of objections in the light of the replies of the parties, whose arguments show that they have actually been able to exercise their rights of defence. The Commission may also, in the light of the administrative procedure, revise or supplement its arguments of fact or law in support of its objections.

(see paras 179-181)

3. In the administrative procedure applying the competition rules, the taking into account of an argument put forward by an undertaking during the procedure, without it having been given the opportunity to express an opinion in that respect before the adoption of the final decision, cannot as such constitute an infringement of its rights of defence.

In that regard, the rights of the defence are infringed where it is possible that the outcome of the administrative procedure conducted by the Commission might have been different as a result of an error committed by it. An undertaking establishes that there has been such an infringement where it adequately demonstrates, not that the Commission’s decision would have been different in content, but rather that it would have been better able to ensure its defence had there been no error, for example because it would have been able to use for its defence documents to which it was denied access during the administrative procedure.

(see paras 182-183)

4. The upper limit of 10% of turnover laid down in Article 23(2) of Regulation No 1/2003 must be calculated on the basis of the total turnover of all the companies constituting the economic entity acting as an undertaking for the purposes of Article 81 EC, since only the total turnover of the component companies can constitute an indication of the size and economic power of the undertaking in question.

(see paras 210-211)

5. It falls, in principle, to the legal or natural person managing the undertaking in question when the infringement was committed to answer for that infringement, even if, when the decision finding the infringement was adopted, another person had assumed responsibility for operating the undertaking.

When an entity that committed an infringement of the competition rules is subject to a legal or organisational change, that change does not necessarily create a new undertaking free of liability for its predecessor’s infringements of the competition rules, when, from an economic point of view, the two are identical.

For the effective enforcement of competition law it may become necessary, by way of exception, to attribute a cartel to the new operator of the entity which participated in the cartel, in a situation where that new entity may, in economic terms, be regarded as the successor to the original operator.

That ‘economic continuity’ test applies in specific circumstances, such as where the legal person responsible for running the undertaking has ceased to exist in law after the infringement has been committed.

When an undertaking ceases to exist upon being merged with a purchaser, the latter takes on its assets and liabilities, including its liabilities for infringements of competition law. In such cases, the liability for the infringement committed by the undertaking taken over may be attributed to the purchaser.

The principle of personal liability is not called into question by the principle of economic continuity in cases where an undertaking involved in the cartel has been transferred to an independent third party and there is no structural link between the initial operator and the new operator.

(see paras 215-218, 220-221)

6. The purpose of the penalties laid down in Article 23 of Regulation No 1/2003 is to suppress illegal activities and to prevent any recurrence. Deterrence is therefore one objective of the fine.

The need to ensure that the fine has a sufficient deterrent effect requires that the amount of the fine be adjusted in order to take account of the desired impact on the undertaking on which it is imposed, so that the fine is not rendered negligible, or on the other hand excessive, notably by reference to the financial capacity of the undertaking in question, in accordance with the requirements resulting from, first, the need to ensure that the fine is effective and, second, respect for the principle of proportionality.

(see paras 234-235)

7. The application of a deterrent multiplier when calculating the penalties provided for in Article 23 of Regulation No 1/2003 presupposes that the objective characteristics of the participants in the infringement, such as their size and economic resources, are taken into account. In that regard, the very wording of the fourth paragraph of Section 1A of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 supports that proposition, inasmuch as the taking into consideration of the factors which justify the application of a deterrence factor is effected irrespective of the nature of the infringement, its actual impact on the market and the size of the geographic market.

Where a parent company and its subsidiary constitute a single undertaking under Article 81 EC, the Commission takes account of the total turnover of the parent company in order to calculate the multiplier, and not solely that of the subsidiaries concerned.

Where the economic entity has subsequently broken up, each addressee of the Commission’s decision is entitled to have the ceiling of 10% of its turnover applied individually to it. An undertaking’s overall resources must be assessed, so as properly to achieve the objective of deterrence, in accordance with the principle of proportionality, at the date when the fine is imposed.

(see paras 243, 252, 255, 257)