European General Court Confirms Parental Liability For Competition Law Infringements by 50:50 Joint Ventures

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The European General Court (GC) has confirmed a European Commission decision to hold chemical companies EI du Pont de Nemours and Dow Chemical jointly and severally liable for a fine imposed on their 50:50 joint venture (JV) for an infringement of European competition law (EI du Pont de Nemours and Company v Commission T-76/08 and The Dow Chemical Company v Commission T-77/08).  In light of this judgment, parent companies would be well advised to check that their 50:50 JVs are compliant with EU competition rules.

Parental Liability Under EU Competition Law

According to EU competition law, the anti-competitive behaviour of a subsidiary may be imputed to the parent company where the subsidiary does not decide independently on its own market conduct but carries out, in all material respects, instructions given to it by its parent company.  Thus, a subsidiary that is a legal entity separate from its parent company could be considered as part of the parent company’s group, if the parent company exercises a decisive influence on it.  In cases of wholly-owned subsidiaries, there is a rebuttable presumption not only that the parent company is able to, but that it does exercise a decisive influence.

In cases where the subsidiary is not wholly-owned, it is, however, for the Commission to show that the parent company is able to, and does, exercise a decisive influence.  Until now, it was not clear how the Commission would deal with full-function JVs, in particular 50:50 JVs that were controlled jointly by their parent companies, bearing in mind that “full function” means that the JV operates independently on the market.

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