Advocate General Urges European Court To Get Strict With Parents Of Misbehaving Subsidiaries
The European Court of Justice is being urged to get stricter with parents of misbehaving subsidiaries in an appeal that highlights the controversial issue of to what extent parent companies should be held liable for illegal cartel activities committed by their wholly-owned subsidiaries.
Juliane Kokott, the German Advocate General at the Court of Justice of the European Union, has submitted a brief to the European Court of Justice siding with the European Commission’s appeal of the judgment of the European General Court in European Commission v. Stichting Administratiekantoor Portielje and Gosselin Group NV. Kokott submitted the brief under the Court of Justice’s practice of accepting analysis from one of eight impartial advocate generals appointed by EU member states for precedent setting cases.
The Commission is appealing the General Court’s ruling that Stichting Administratiekantoor Portielje (“Portielje”) could not be held liable for the cartel activities of its subsidiary Gosselin Group NV (“Gosselin”) because the parent company neither participated in the economic activity at issue nor was involved in the management of the subsidiary.
The Commission had previously found that from 1984 to 2003 Gosselin and nine other Belgian companies had illegally utilized a cartel to fix prices and share the market for international moving services. After the Commission held that Portielje, as the parent company of Gosselin, was liable for the illegal cartel activities of its subsidiary, Portielje successfully appealed that ruling to the General Court.
The Commission is now appealing the General Court’s annulment of the Commission’s decision holding Portielje liable for the illegal cartel activities of its subsidiary. The Commission is arguing that responsibility under antitrust law depends entirely on whether the parent company and the subsidiary together form an undertaking within the meaning of European competition law and on whether that economic unit can be accused of participating in the cartel.
In siding with the Commission’s appeal, Kokott argues that the General Court misapplied the rebuttable presumption that a parent that owns virtually all the shares of a subsidiary exercises control of that subsidiary. “Since the parent company’s 100% (or almost 100%) shareholding in its subsidiary prima facie allows the conclusion that decisive influence is actually being exercised, it is for the parent company to rebut precisely that conclusion, adducing cogent evidence to the contrary,” Kokott stated.
Despite formal autonomy, Portielje owns 99 percent of Gosselin shares, and three members of Portielje’s board of directors also serve in the same capacity for Gosselin.
Kokott criticized the General Court for relying too heavily on Gosselin’s “company law,” under which Gosselin makes business decisions independently of its parent company, Portielje.
“It would, however, have been of decisive importance, leaving aside all the formal deliberations on company law, to examine the actual effects of the personal links between Portielje and Gosselin on everyday business,” Kokott wrote.
Kokott’s brief claims that the General Court also misinterpreted what constitutes an “entity” under competition law. Kokott argues that although Portielje did not participate in commercial activity, the company had a stake in the cartel’s economic goals.
“All such parent companies have an eminently economic interest in the specific activities of their respective subsidiaries on the market. To make a distinction between them in terms of responsibility under antitrust law would be contrary to the principle of equal treatment,” Kokott concluded.
The Advocate General recommends using internal memos and witness statements rather than the reliance on company law to help determine responsibility for antitrust violations in the future.
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