Brussels Brief - February, 2011



Parental Liability – Another Piece in the Puzzle

General Química v Commission

In recent years, the highest courts in the European Union have consistently held that parent companies may be held liable for infringements of competition law committed by their subsidiaries – even if the parent did not participate in the infringement. Not only may a parent company be found liable for such infringements, liability is automatically imputed to the parent if the subsidiary is wholly owned. And, while EU courts have ruled that a parent company faced the presumption of liability for the conduct of its wholly owned subsidiary can rebut the presumption, no case exists in which a parent company has actually done so.

This has led to an understandable concern that the so-called “rebuttable” presumption of liability for parents of wholly owned subsidiaries was, in fact, irrebutable. A decision issued on 21 January 2011 by the European Court of Justice (ECJ), however, has helped to clarify the issue. In particular, the ECJ clarified that, even though a parent company may be presumed to be liable for the conduct of its wholly-owned subsidiary (whether directly or indirectly held), the parent company may also adduce evidence to rebut this presumption. This decision, styled Case C-90/09, General Química and Others v. Commission, [2011] ECR I-0000, involved an appeal against a fine imputed to a parent company for the conduct of its subsidiaries in the European Commission’s decision in the Rubber Chemicals cartel case. (See Case COMP/F/38.443, Rubber Chemicals, Commission Decision of 21 December 2005). In particular, the parent, (Repsol YPF SA), its direct, wholly-owned subsidiary (Repsol Química SA “Repsol Química”)) and an indirect wholly owned subsidiary (General Química) argued that imputing liability to a parent company/-ies for the conduct of Repsol-Indirect Sub in effect introduced a strict liability regime, which is contrary to the principle of personal responsibility.

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