European Court of
Justice holds that a Parent Company can be liable for antitrust violations of a
joint venture company
In
the following case, the European Court of Justice (ECJ) upholds parent company
liability for Dow and DuPont in matters of the Chloroprene Rubber Cartel (Case No. 38629). On September 26,
2013, the ECJ dismissed appeals by The Dow Chemical Company and E.I. du Pont de
Nemours and Company of the European Commission decision in the Chloroprene
Rubber Cartel case.
A
summary of the Judgment follows.
In
its appeal, EI du Pont de Nemours and Company (‘EI DuPont’) asks the Court, [1]
to set aside the judgment of the General Court of the European Union of 2
February 2012 in Case T-76/08 … and, secondly, [2] to annul the fine imposed on
it by that decision.
[…]
3. “EI DuPont is the ultimate parent company of the DuPont group and has its
headquarters in the United States. DuPont Performance Elastomers LLC (‘DPE
LLC’) is a wholly-owned subsidiary of EI DuPont, and DuPont Performance
Elastomers SA (‘DPE SA’’) is a wholly-owned subsidiary of DPE LLC. EI DuPont
was the first undertaking to develop chloroprene rubber (‘CR’).”
“It
remained active on the CR market until 1 April 1996, when it transferred all
its activities in the elastomers sector to DuPont Dow Elastomers LLC (‘DDE’), a
joint venture held in equal shares by EI DuPont and The Dow Chemical Company
(‘Dow’). On 1 July 2005 EI DuPont acquired the 50% share held by Dow in DDE.
DDE then became a wholly-owned subsidiary of EI DuPont and was renamed DPE LLC.
DPE LLC’s regional office for Europe is DPE SA, a wholly-owned subsidiary of
DPE LLC.”
4.
“On 27 March 2003 the Commission of the European Communities carried out
inspections at the premises of, inter alia, Dow Deutschland Inc. On 21 November
2003, DDE applied for leniency in accordance with the Commission notice on
immunity from fines and reduction of fines in cartel cases (OJ 2002 C 45, p.
3).”
5.
“On 13 March 2007, the European Commission sent a statement of objections to 12
undertakings, including EI DuPont. On 5 December 2007, the Commission adopted
an initial decision in which it took the view that, between 1993 and 2002
several producers of CR had participated in a single and continuous
infringement of Article 81 EC and Article 53 of the European Economic Area
Agreement of 2 May 1992 (OJ 1994, L 1, p. 3), covering the entire territory of
the European Economic Area (EEA), consisting of agreements and concerted
practices aimed at agreeing upon the allocation and the stabilisation of
markets, market shares and sales quotas for CR, coordinating and implementing
several price increases, agreeing upon minimum prices, allocating customers and
exchanging competitively sensitive information. Those producers met on a
regular basis several times a year in bilateral, trilateral and multilateral
meetings.”
6.
“In that decision, the Commission imputed liability for the cartel, in
particular, to EI DuPont, DPE LLC, DPE SA and Dow, and ordered those
undertakings to bring that infringement immediately to an end in so far as they
had not already done so, and to refrain immediately from any restrictive
practice having the same or similar object or effect.” […]
9.
“As the participation in the infringement had lasted for nine years for EI
DuPont, and six years and one month for DPE LLC, DPE SA and Dow, the
Commission, in application of point 24 of the Guidelines on the method of
setting fines, multiplied the starting amounts of the fines determined by
reference to the value of sales by nine for EI DuPont, and by six and a half
for DPE LLC, DPE SA and Dow.” […]
11.
“Furthermore, the Commission considered that EI DuPont and Dow, as the parent
companies of the joint venture DDE, should be held jointly and severally liable
for the behaviour of that joint venture during the period from 1 April 1996 to
13 May 2002. In addition, it found that, as the successors to DDE, the entities
DPE LLC and DPE SA should also be held jointly and severally liable for DDE’s
conduct during that period, because, after the infringement was ended, they
took over its activities on the CR market.”
12.
“In the light of those factors, the basic amount of the fine to be imposed on
EI DuPont was fixed at EUR 79 million, of which EUR 59 million was to be paid
jointly and severally with DPE LLC, DPE SA and Dow.” […]
The
procedure before the General Court and the judgment under appeal included the
following.
18.
“By application lodged at the Registry of the General Court on 15 February
2008, EI DuPont brought an action for annulment of Article 1(b) of the decision
of 5 December 2007, in so far as it concluded that EI DuPont participated in
the infringement, and of Article 2(b) of that decision requiring it to pay a
fine, and, in the alternative, a reduction of the amount of the fine imposed on
it by that decision. In that regard, it must be noted that in its reply EI
DuPont reformulated its claims, pleas in law and arguments in the light of the
amendments made by the Commission to the decision of 5 December 2007 by its
amending decision of 23 June 2008. Therefore, that application was regarded as
being directed against the decision of 5 December 2007, as amended; that is to
say, the decision at issue.”
19.
“In support of its action, EI DuPont raised six pleas in law. The first three,
the only grounds which are relevant for the purposes of this appeal, alleged:
(1) incorrect imputation of the infringement to EI DuPont during the period
from 1 April 1996 to 13 May 2002 (‘the DDE period’); (2) breach of the rules on
limitation; and (3) lack of a legitimate interest on the Commission’s part in
addressing a decision to EI DuPont.”
20.
“By its first plea, EI DuPont criticised in particular the Commission for
finding that it had participated in the cartel during the DDE period and for
wrongly holding it jointly and severally liable for DDE’s participation in that
cartel during that period. Specifically, the Commission did not prove that EI
DuPont had exercised decisive influence over DDE.”
21.
“In that regard, the General Court pointed out, in paragraph 64 of the judgment
under appeal, that EI DuPont did not contest its participation in a cartel in
breach of Article 81 EC between 13 May 1993 and 31 March 1996. Similarly, it is
clear from paragraph 64 that EI DuPont also did not contest DDE’s involvement
in a cartel in breach of Article 81 EC during the DDE period, or the fact that
that infringement was imputed to DPE LLC and DPE SA as the successors in title
to DDE.”
22.
“In paragraphs 70 to 73 of the judgment under appeal, the General Court
reviewed the tests used by the Commission in the decision at issue to
demonstrate that DDE’s parent companies did in fact exercise decisive influence
over its conduct on the CR market.”
23.
“The General Court stated in paragraph 74 of the judgment under appeal that, in
the light of all the economic, legal and organisational links between EI DuPont
and DDE, the Commission did not err in finding that EI DuPont, as one of DDE’s
two parent companies, had exercised decisive influence over its conduct on the
CR market.”
“The
Commission did not therefore err in finding that EI DuPont and DDE formed a
single undertaking for the purposes of Article 81 EC and in holding EI DuPont
jointly and severally liable for DDE’s conduct during the DDE period.”
24.
“In paragraphs 76 to 82 of the judgment under appeal, the General Court
dismissed EI DuPont’s arguments which could have called into question its
finding concerning EI DuPont’s exercise of decisive influence over DDE.
Consequently, in paragraph 83 of the judgment under appeal, the General Court
dismissed the first plea in law.”
25.
“By its second plea in law, EI DuPont alleged that the Commission infringed the
rules on limitation periods by imposing on it a fine for the period from 13 May
1993 to 31 March 1996 (the period before the DDE period). It argued that
imposing such a fine, in the circumstances of this case, contravened the principles
of legal certainty and legitimate expectations as the limitation period of five
years expired on 31 March 2001.”
26.
“In dismissing that plea as unfounded, the General Court stated in paragraphs
87 and 88 of the judgment under appeal that it was clear from the analysis of
the first plea that the Commission had rightly taken the view that EI DuPont
should be held jointly and severally liable for DDE’s conduct during the DDE
period. In addition it stated that the applicants, including EI DuPont, had not
contested the characterisation of the infringement committed between 13 May
1993 and 13 May 2002 as single and continuous.”
“The
General Court therefore concluded that, contrary to what the applicants argued,
the infringement committed by DDE did not end on 31 March (or 1 April) 1996 and
that the Commission could therefore impose a fine on EI DuPont for the entire
period during which that infringement was committed, including the period
before the DDE period.”
27.
“By its third plea, EI DuPont claimed that, since the right of the Commission
to impose a fine was time-barred, the Commission had to demonstrate that it had
a legitimate interest in adopting a decision against EI DuPont.”
28.
“The third plea was dismissed as unfounded in paragraphs 91 to 93 of the
judgment under appeal. The General Court held in particular in paragraph 92 of
that judgment that the Commission could impose a fine on EI DuPont for the
entire period in which the infringement was committed, including the period
before the DDE period. Therefore, in the opinion of the General Court, the
Commission did not have to demonstrate that it had a legitimate interest in
adopting a decision against EI DuPont.”
29.
“Having rejected the fourth to sixth pleas in law as being similarly unfounded,
the General Court dismissed the action in its entirety.”
30.
“EI DuPont claims that the Court of Justice should: - set aside the judgment
under appeal; and - order the Commission to pay the costs.” […]
32.
“EI DuPont puts forward three grounds in support of its appeal. By the first
ground of appeal, it claims: [1] that the General Court erred in law in
imputing to it the infringement committed by DDE for the DDE period and in
relation to its joint and several liability with Dow. By the second ground of
appeal, [2] it contests the finding in the judgment under appeal that the
Commission was not prevented, on account of the limitation period, from
imposing fines on EI DuPont for the period before the DDE period; that is to
say, from 13 May 1993 to 31 March 1996. The third ground of appeal [3] alleges
an error of law committed by the General Court in that it did not find that the
Commission had failed to demonstrate that it had a legitimate interest in
taking a decision against EI DuPont.”
The
first ground of appeal: error of law committed by the General Court in that it
imputed the infringement to EI DuPont and held it jointly and severally liable
with Dow
[…]
38. “As regards the admissibility of the first ground of appeal, it must be
stated that, contrary to what the Commission contends, EI DuPont does not
dispute the General Court’s findings of fact, but the inferences in law drawn
by the General Court from those findings in relation to DDE’s lack of autonomy
in order to determine the actual exercise of decisive influence. It follows
that this ground of appeal is admissible.”
39.
“With regard to the substance, EI DuPont claims, in essence, that by confirming
in paragraph 74 of the judgment under appeal that EI DuPont had exercised
decisive influence over DDE’s conduct on the CR market, the General Court erred
in law with regard to the imputation of the infringement jointly and severally
with Dow during the DDE period.”
40.
“In that regard, it is clear from paragraphs 74 and 79 of the judgment under appeal
that the General Court held that EI DuPont formed a single undertaking with DDE
by reason of the decisive influence which it exercised over DDE’s conduct on
that market.”
41.
“It should be pointed out first of all that, in accordance with the settled
case-law of the Court of Justice, the conduct of a subsidiary can be imputed to
its parent company, in particular where, although it has separate legal
personality, that subsidiary does not decide independently on its own conduct
on the market, but carries out, in all material respects, the instructions
given to it by the parent company, regard being had in particular to the
economic, organisational and legal links between those two legal entities (See
Case C-97/08 P Akzo Nobel and Others v Commission [2009] ECR I-8237, paragraphs
58 and 72, and Joined Cases C-628/10 P and C- 14/11 P Alliance One
International and Standard Commercial Tobacco v. Commission and Commission v
Alliance One International and Others [2012] ECR I-0000, paragraph 43).”
42.
“In such a situation, because the parent company and its subsidiary form a
single economic unit and therefore form a single undertaking for the purposes
of Article 81 EC, the Commission may address a decision imposing fines to the
parent company, without having to establish the personal involvement of the
latter in the infringement …”
43.
“The Court of Justice has also stipulated that account must be taken of all the
relevant factors relating to the economic, organisational and legal links which
tie the subsidiary to the parent company, which may vary from case to case and
cannot, therefore, be set out in an exhaustive list (see, to that effect, Akzo
Nobel and Others v Commission, paragraph 74, and Case C-521/09 P and Elf
Aquitaine v Commission [2011] ECR I- 8947, paragraph 58).”
44.
“In paragraphs 58 to 60 of the judgment under appeal, the General Court
therefore cited the case-law setting out the test for imputing to a parent
company the competition infringement committed by its subsidiary. It rightly
found that, in order to be able to impute the conduct of a subsidiary to the
parent company, the Commission cannot merely find that the parent company is in
a position to exercise decisive influence over the conduct of its subsidiary,
but must also check whether that influence was actually exercised (see, to that
effect, Case 107/82AEG-Telefunken v Commission [1983] ECR 3151, paragraph 50).”
45.
“It should be noted in that regard that the rule that it is necessary to check
whether the parent company actually exercised decisive influence over its
subsidiary applies only where the subsidiary is not wholly owned by its parent
company. According to the settled case-law of the Court of Justice, where the
entire capital of the subsidiary is owned, there is no longer any requirement
to carry out such a check since, in those circumstances, there is a presumption
of decisive influence on the part of the parent company, which has the burden
of rebutting that presumption (see Alliance One International and Standard
Commercial Tobacco v. Commission [passim] and Commission v. Alliance One
International and Others, paragraphs 46 and 47 and the case-law cited).”
46.
“More specifically, with regard to the claim that the General Court
misconstrued the term ‘a single undertaking’, it must be stated that, in
paragraph 58 of the judgment under appeal, the General Court pointed out that,
according to the settled case-law of the Court of Justice, in competition law
the term ‘undertaking’ must be understood as designating an economic unit for
the purposes of the subject-matter of the agreement in question, even if in law
that economic unit consists of several persons, natural or legal (Case-170/83
Hydrotherm Gerätebau [1984] ECR 2999, paragraph 11; Case C-217/05 Confederación
Española de Empresarios de Estaciones de Servicio [2006] ECR I-11987, paragraph
40; and Akzo Nobel and Others v. Commission, paragraph 55).”
47.
“Where two parent companies each have a 50% shareholding in the joint venture
which committed an infringement of the rules of competition law, it is only for
the purposes of establishing liability for participation in the infringement of
that law and only in so far as the Commission has demonstrated, on the basis of
factual evidence, that both parent companies did in fact exercise decisive
influence over the joint venture, that those three entities can be considered
to form a single economic unit and therefore form a single undertaking for the
purposes of Article 81 EC.”
48.
“It must therefore be held that, as regards the verification process of the
assessment carried out by the Commission, the General Court did not misconstrue
the term ‘a single undertaking’.”
49.
“EI DuPont, in support of its first ground of appeal, also relies on other
arguments, …first, that it cannot exercise decisive influence over DDE bearing
in mind that DDE has separate legal personality from that of the parent
companies; and secondly, that, since the joint control exercised by parent
companies over their full-function joint venture gives them only a negative
power to block the latter’s strategic decisions, that control cannot imply the
existence of the parent company’s decisive influence over the subsidiary.”
“In
that regard, it must be noted that the General Court did not find the existence
of EI DuPont’s decisive influence over the subsidiary solely on the basis of
the possibility that the parent companies could exercise joint control over
that subsidiary, but that it relied on its own assessment of the economic,
organisational and legal factors which tied DDE to its two parent companies, as
determined by the Commission in its decision of 5 December 2007.”
50.
“In that regard, suffice it to state that, since the Commission found that Dow
exercised a decisive influence over DDE’s conduct on the basis of factors
which, unless they have been distorted, cannot be called into question on
appeal, those claims must be held to be unfounded.”
51.
“As regards EI DuPont’s argument, … that the fact that parent companies are
deemed to exercise joint control in accordance with the EC Merger Regulation
does not mean that they incur liability under Article 81 EC by reason of the
conduct of the joint venture, it must be pointed out that, as is clear from the
case-law cited …above, the evidence of such influence must be assessed having
regard to all the economic, organisational and legal links between the
subsidiary and the parent company.”
52.
“In this case, the General Court concluded from all the evidence, in particular
the control exercised by DDE’s two parent companies over its strategic business
decisions, that those companies did in fact exercise decisive influence.
Accordingly, it rightly pointed out in paragraph 78 of the judgment under
appeal that the autonomy which a joint venture enjoys within the meaning of Article
3(4) of the EC Merger Regulation does not mean that that joint venture also
enjoys autonomy in relation to adopting strategic decisions, and that it is
therefore not under the decisive influence of its parent companies for the
purposes of Article 81 EC.”
53.
“Consequently, it must be stated that, contrary to what EI DuPont claims, the
General Court’s finding in … the judgment under appeal relating to the single
nature of the undertaking in the light of competition law, is not incompatible
with the EC Merger Regulation, and therefore does not lead to a misleading and
inconsistent application of competition law.”
54.
“It follows that the first ground relied on by EI DuPont in support of its
appeal must be rejected as unfounded.”
The
second ground of appeal: error of law committed by the General Court in that it
held that the Commission was not prevented, on account of the limitation
period, from imposing fines on EI DuPont for the period from 13 May 1993 to 1
April 1996
57.
“It must be stated at the outset that the plea of inadmissibility raised by the
Commission in relation to the second ground relied on by EI DuPont in support
of its appeal, alleging that EI DuPont merely reproduced the arguments put
before the General Court, cannot be upheld.”
58.
“In that regard, it must be noted that, where a party challenges the
interpretation or application of European Union law by the General Court, the
points of law examined at first instance may be discussed again in the course
of an appeal. Indeed, if a party could not base its appeal on pleas in law and
arguments already relied on before the General Court, an appeal would be
deprived of part of its purpose (Case C-234/02 P European Ombudsman v. Lamberts
[2004] ECR I-2803, paragraph 75, and Joined Cases C-514/07 P, C-528/07 P and
C-532/07 P Sweden and Others v API and Commission [2010] ECR I-8533, paragraph
116).”
59.
“With regard to the substance, it must be pointed out that that ground of
appeal is based on the assumption that the first ground of appeal would be
upheld in the absence of any proof that the DuPont group was involved in the
cartel during the DDE period. [I]t is clear from the analysis of the first
ground of appeal, however, that the reasoning followed by the General Court in
paragraphs 64 to 83 of the judgment under appeal is not vitiated by any error
of law.”
60.
“Consequently, the General Court did not err in law by holding in paragraph 87
of the judgment under appeal that the limitation period had not expired when
the Commission imposed the fine on EI DuPont.”
61.
“The second ground relied on by EI DuPont in support of its appeal must
therefore be rejected as unfounded.”
The
third ground of appeal: error of law committed by the General Court in that it
did not find that the Commission had failed to demonstrate that it had a
legitimate interest in taking a decision against EI DuPont
64.
“As regards the admissibility of the third ground of appeal, it must be pointed
out that, as is clear from the settled case-law of the Court of Justice cited
in paragraph 58 above, this ground must be declared admissible because, through
it, EI DuPont alleges that the General Court incorrectly interpreted European
Union law.”
65.
“With regard to the substance, the third ground is also based on the assumption
that the first and second grounds relied on in support of this appeal would be
upheld. It amounts to a claim that, since the Commission could not impose a
fine on EI DuPont on account of the limitation period, it had to demonstrate a
legitimate interest in adopting a decision against EI DuPont.”
66.
“Since the first and second grounds of appeal have been rejected, it
necessarily follows that the third ground of appeal must be rejected as
unfounded.”
67.
“As none of the grounds relied on by EI DuPont in support of its appeal can be
upheld, the appeal must be dismissed in its entirety.”
“On
those grounds, the Court (Ninth Chamber) hereby: 1. Dismisses the appeal; 2.
Orders EI du Pont de Nemours and Company to pay the costs. [Signatures].”
Citation: E.I. du Pont de
Nemours v Commission, JUDGMENT OF THE EUROPEAN UNION COURT OF JUSTICE (Ninth
Chamber) of 26 September 2013 in Case C-172/12; Celex No. 612CJ0172, European
Court Reports 2013 page _____ (regarding Infringement of Article 81 EC).
*** K. Todd Wallace is an attorney at Wallace Meyaski in New Orleans. He has nearly 20 years of experience in the legal and business professions with established excellence in trial advocacy, negotiation, strategic and initiative planning, government relations, mergers and acquisitions, and team building. See http://www.walmey.com/our-attorneys/k-todd-wallace/
