SOURCE: Monthly Case-law Digest - October 2021
Reference for a preliminary ruling – Competition – Compensation for harm caused by a practice prohibited under Article 101(1) TFEU – Determination of the undertakings liable to provide compensation – Action for compensation directed against the subsidiary of a parent company and brought following a decision finding only that the parent company participated in a cartel – Concept of an ‘undertaking’ – Concept of ‘economic unit’
Between 1997 and 1999, the company Sumal SL acquired two trucks from Mercedes Benz Trucks España (‘MBTE’), which is a subsidiary of the Daimler group, whose parent company is Daimler AG. By a decision of 19 July 2016, the Commission found an infringement, by Daimler AG, of EU law rules prohibiting cartels in that Daimler had concluded, between January 1997 and January 2011, arrangements with 14 other European truck producers on pricing and gross price increases for trucks in the European Economic Area (EEA).
Following that decision, Sumal brought an action for damages against MBTE, seeking payment of the sum of EUR 22 204.35 for loss resulting from that cartel. Sumal’s action was nevertheless rejected by the Juzgado de lo Mercantil no 07 de Barcelona (Commercial Court No 7 of Barcelona, Spain) on the ground that MBTE was not referred to in the Commission’s decision. Sumal brought an appeal against that judgment before the Audiencia Provincial de Barcelona (Provincial Court of Barcelona, Spain). In that context, that court wonders whether and, if so, under what conditions, an action for damages may be brought against a subsidiary following a Commission decision finding anticompetitive practices by the parent company. Thus, that court decided to stay the proceedings and refer that question to the Court by way of a reference for a preliminary ruling.
By its judgment delivered by the Grand Chamber, the Court sets out the conditions under which victims of an anticompetitive practice by a company punished by the Commission are entitled to engage, by way of an action for damages brought before the national courts, the civil liability of the punished company’s subsidiary companies, which are not referred to in the Commission decision.
Findings of the Court
In accordance with settled case-law, any person is entitled to claim compensation from ‘undertakings’ which have participated in a cartel or practices prohibited under Article 101 TFEU for the harm caused by those anticompetitive practices. Even if such actions for damages are brought before the national courts, the determination of which entity is required to provide compensation for the harm caused is governed directly by EU law.
Given that such actions for damages are an integral part of the system for enforcement of EU competition rules, in the same way as their enforcement by public authorities, the concept of an ‘undertaking’, within the meaning of Article 101 TFEU, cannot have a different meaning in the context of the imposition of fines by the Commission on ‘undertakings’ (public enforcement) and in actions for damages brought against those ‘undertakings’ before the national courts (private enforcement). According to the Court’s case-law, the concept of an ‘undertaking’, within the meaning of Article 101 TFEU, covers any entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed, and thus designates an economic unit even if in law that unit consists of several persons, natural or legal.
Where it is established that a company belonging to such an economic unit has infringed Article 101(1) TFEU such that the ‘undertaking’ of which it is part has committed an infringement of that provision, the concept of an ‘undertaking’ and, through it, that of ‘economic unit’, gives rise to the joint and several liability across the entities of which the economic unit is made up at the time that the infringement was committed. In that regard, the Court observes, moreover, that the concept of an ‘undertaking’, used in Article 101 TFEU, is a functional concept, as the economic unit of which it is constituted must be identified having regard to the subject matter of the agreement at issue.
Thus, where the existence of an infringement of Article 101(1) TFEU has been established as regards a parent company, it is possible for the victim of that infringement to seek to engage the civil liability of a subsidiary of that parent company on the condition that the victim proves that, having regard to, first, the economic, organisational and legal links that connect the two legal entities and, second, the existence of a specific link between the economic activity of that subsidiary and the subject matter of the infringement for which the parent company was held to be responsible, that subsidiary, together with its parent company, constituted an economic unit.
It follows that, in circumstances such as those at issue in the main proceedings, in order to bring an action for damages against MBTE as a subsidiary of Daimler AG, Sumal must establish, in principle, that the anticompetitive agreement concluded by Daimler AG concerns the same products as those marketed by MBTE. In so doing, Sumal would show that it is precisely the economic unit of which MBTE, together with its parent company, forms part that constitutes the undertaking which in fact committed the infringement found earlier by the Commission pursuant to Article 101(1) TFEU.
However, in the context of such an action for damages brought against a subsidiary company of a parent company which has been found to have infringed Article 101 TFEU, before the national court concerned, that subsidiary company must dispose of all the means necessary for the effective exercise of its rights of the defence, in particular so as to be able to dispute that it belongs to the same undertaking as its parent company. That said, where an action for damages relies, as in the present case, on a finding by the Commission of an infringement of Article 101(1) TFEU in a decision addressed to a parent company of the defendant subsidiary company, the latter cannot challenge, before the national court, the existence of an infringement thus found by the Commission. Indeed, Article 16(1) of Regulation No 1/2003 provides that national courts cannot take decisions running counter to the decision adopted by the Commission.
By contrast, in a situation where the Commission has not made a finding of conduct amounting to an infringement in a decision adopted under Article 101 TFEU, the subsidiary company is naturally entitled to dispute not only that it belongs to the same ‘undertaking’ as the parent company, but also the very existence of the infringement alleged against the parent company. In that regard, the Court states, moreover, that the possibility for a national court of making a finding of the subsidiary company’s liability for the harm caused is not excluded merely because, as the case may be, the Commission has not adopted any decision or that the decision in which it found that there was an infringement did not impose an administrative penalty on that company.
Therefore, Article 101(1) TFEU precludes a national law which provides for the possibility of imputing liability for one company’s conduct to another company only in circumstances where the second company controls the first company.
SOURCE: Monthly Case-law Digest - January 2021
Reference for a preliminary ruling – Competition – Penalties imposed by the national competition authority – Limitation period – Actions interrupting the limitation period – National legislation precluding, after the initiation of an investigation, the possibility that subsequent action for the purpose of proceedings or investigation may interrupt the new limitation period – Principle that national law must be interpreted in conformity with EU law – Regulation (EC) No 1/2003 – Article 25(3) – Scope – Article 4(3) TEU – Article 101 TFEU – Principle of effectiveness
On 7 September 2009, the Consiliul Concurenţei (Competition Authority, Romania) commenced an investigation on the retail food market against several undertakings, including Whiteland Import Export SRL (‘Whiteland’), in order to ascertain whether those undertakings had infringed the rules of competition law, in particular those laid down in Article 101 TFEU. The undertakings were accused of having concluded anticompetitive agreements between 2006 and 2009 aimed at distorting and impeding competition on the relevant market, by fixing the selling and resale price of the suppliers’ products. By decision of 14 April 2015, the Competition Authority imposed fines on them. Finding that, under the national rules applicable, the limitation period had expired when the Competition Authority adopted its decision, the Curtea de Apel București (Court of Appeal, Bucharest, Romania), hearing an action brought by Whiteland, annulled that decision in so far as it concerned that company. After finding that the limitation period had started to run on 15 July 2009, the date on which the infringement of which Whiteland was accused had ended, that court held that the decision of 7 September 2009 to initiate the investigation had interrupted the limitation period and caused a new limitation period to start to run, expiring on 7 September 2014. It stated that, under a strict interpretation of the national rules governing limitation periods, the measures taken by the Competition Authority after the decision to initiate the investigation were not capable of interrupting the new limitation period and, therefore, that decision is the last action of that authority which is capable of interrupting that period. In addition, that same court held that Article 25(3) of Regulation No 1/2003, concerning the interruption of the limitation period, applied only to the European Commission and did not govern limitation periods for the imposition of fines by national competition authorities It is in that context that the Înalta Curte de Casație și Justiție (High Court of Cassation and Justice, Romania, ‘the referring court’), hearing an appeal brought by the Competition Authority against the judgment of the Curtea de Apel București (Court of Appeal, Bucharest), asked the Court of Justice, in essence, whether national courts are required to apply Article 25(3) of Regulation No 1/2003 to the time-barring of a national competition authority’s powers to impose penalties for infringements of EU competition law.
The referring court also requested the Court of Justice to clarify, in essence, whether Article 4(3) TEU and Article 101 TFEU, read in the light of the principle of effectiveness, must be interpreted as precluding national legislation, as interpreted by the national courts having jurisdiction, according to which the decision to initiate an investigation, adopted by the national competition authority, concerning an infringement of EU competition law rules, is the final action of that authority which may have the effect of interrupting the limitation period relating to its power to impose penalties and excludes any subsequent action, for the purpose of proceedings or the investigation, from interrupting that period.
Findings of the Court
As regards the first question, the Court states that national courts are not required to apply Article 25(3) of Regulation No 1/2003 to the time-barring of a national competition authority’s powers to impose penalties for infringements of EU competition law. In that regard, it points out that, in the present case, the possible relevance of Article 25(3) of Regulation No 1/2003 – according to which any action taken by the Commission or by the competition authority of a Member State for the purpose of the investigation or proceedings in respect of an infringement is to interrupt the limitation period for the imposition of fines or periodic penalty payments – depends entirely on whether that provision is applicable to the factual situation in the main proceedings. The Court finds that, in the light of the context of which that provision forms part and its purpose, the provision governs only the powers available to the Commission in relation to penalties. It follows that that same provision does not lay down limitation rules relating to the national competition authorities’ powers to impose penalties. As regards the second question, the Court notes, at the outset, that, in the absence of binding regulation under EU law on the subject, it is for Member States to establish and apply national rules on limitation periods for the imposition of penalties by national competition authorities, including the procedures for suspension and/or interruption. However, the establishment and application of those rules may not render the implementation of EU law impossible in practice or excessively difficult. Consequently, for the purposes of not detracting from the full and uniform application of EU law and not introducing or maintaining in force measures which may render ineffective the competition rules applicable to undertakings, the Court makes clear that Member States must ensure that national rules laying down limitation periods are devised in such a way as to strike a balance between, on the one hand, the objectives of providing legal certainty and ensuring that cases are dealt with within a reasonable time as general principles of EU law and, on the other, the effective and efficient application of Articles 101 and 102 TFEU, in order to safeguard the public interest in preventing the operation of the internal market being distorted by agreements or practices harmful to competition.
The Court notes that account must be taken of the specific features of competition law cases and in particular of the fact that those cases require, in principle, a complex factual and economic analysis. Consequently, national legislation laying down the date from which the limitation period starts to run, the duration of that period and the rules for suspending or interrupting it must be adapted to the specific features of competition law and the objectives of applying the rules of that law by the persons concerned, so as not to prejudice the full effectiveness of the EU competition law rules. The Court also finds that national rules on limitation which, for reasons inherent to them, are systematically an obstacle to the imposition of effective and dissuasive penalties for infringements of EU competition law are liable to render application of the rules of that law impossible in practice or excessively difficult. In the present case, according to a strict interpretation of the national rules governing limitation periods at the material time – adopted in some of the national case-law, and in particular by the Curtea de Apel București (Court of Appeal, Bucharest) in the context of the main proceedings – the decision to initiate an investigation for the purpose of proceedings or investigation in respect of an infringement of the rules of competition law is the final action of the national competition authority which may have the effect of interrupting the limitation period relating to its power to impose penalties; none of the actions subsequently taken for the purpose of the investigation or proceedings in respect of the infringement can interrupt that period, even if the taking of such forms of action would constitute an important stage in the investigation and show that authority’s willingness to prosecute the infringement.
In those circumstances, the Court concludes that such a strict interpretation of the national legislation appears likely to compromise the effective application of the rules of EU law by national competition authorities. Indeed, such an interpretation, totally prohibiting the limitation period from being interrupted by action taken subsequently in the course of the investigation, could present a systemic risk that acts constituting infringements of EU law may go unpunished. It is, however, for the referring court to determine whether that is the case here. If that should prove to be the case, the Court finds that it is for the referring court to interpret the national legislation at issue so far as at all possible in the light of EU law, and particularly the rules of EU competition law, as interpreted by the Court, or, as necessary, disapplying that legislation. In that regard, the Court notes that the question whether a national provision must be disapplied, in so far as it conflicts with EU law, arises only if no interpretation of that provision in conformity with EU law proves possible. However, in the present case, it is apparent from the order for reference that such an interpretation appears possible, which it is, however, for the referring court ultimately to ascertain.