Group Liability for Cartel Damages—The Consequences of the CJEU’s Skanska decision
It is settled case law of the Court of Justice of the European Union (CJEU) that parent companies can be fined for competition law infringements committed by their subsidiaries and that successor companies can be fined for their predecessors. In its Skanska decision (C–724/17), the CJEU has extended this judicature into private law, holding a successor company liable in tort for its predecessor and clearly indicating that parent companies are liable for their subsidiaries as well.
My recent article ‘Private Law Liability of the Undertaking Pursuant to Art. 101 TFEU’ analyses this decision, highlights a whole number of questions raised by it and attempts first answers.
Can a parent company be held liable for torts committed by a subsidiary? Company law scholars would answer that—absent specific circumstances that warrant a piercing of the corporate veil—a parent company cannot be held liable for its subsidiaries’ actions. Even though competition law scholars, by contrast, have become used to parental liability for competition law fines, many have disputed that this parental liability also extends to cartel damages claims in tort. In its Skanska decision (C–724/17), the CJEU has now clarified that it does.
Thus, under competition law, there is parental liability for cartel damages claims. Hence, a parent company that has a decisive influence and exercises this influence over a subsidiary (so that parent and subsidiary form, in competition law terms, an ‘economic unit’) is liable in tort for competition law infringements committed by that subsidiary. As argued more extensively in another article of mine, ‘Liability of Sister Companies and Subsidiaries in European Competition Law’, this form of liability should be understood more broadly as group liability, meaning that once the decisive influence is established, there is not only liability of the parent for the subsidiary’s actions but also liability of the subsidiary for the parent’s and for other subsidiaries’. Liability thus extends to all constituent members of the economic unit.
In its Skanska decision (C–724/17) the CJEU derives group liability from the notion of ‘undertaking’ in European competition law and holds that the person(s) liable have to be determined by direct application of article 101 of the Treaty on the Functioning of the European Union (TFEU). This raises the very important question as to the delimitation between European and national law. It needs to be determined whether cartel damages claims have to be considered as claims under European law only, as hybrid claims (part national law, part European law), or as claims under national law the specifics of which are partially determined by European law. AG Kokott and AG Wahl advocate a European law qualification that could ultimately lead to the establishment of some sort of European common tort law for cartel damages claims. Such a European law qualification would, however, overwrite important provisions of the Cartel Damages Directive (2014/104/EU) and petrify European law by preventing the European legislator from taking action in this area. That is why the article argues that the claims should be qualified as claims under national law with national law partially being determined by European law requirements. Article 103 TFEU provides a normative basis for this.
Under European 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’ (CJEU, Skanska, C–724/17, para 36). But even though the undertaking is—by definition—to be understood independently of its legal form, holding the undertaking liable entails attributing to it (at least partial) legal capacity. Therefore, the article argues that the undertaking as such has legal capacity for the purposes of competition law and that, with respect to German law, this is properly perceived doctrinally under civil law as a partnership. The liability of the constituent legal entities of the undertaking also results from the qualification of the undertaking as a partnership. Even if one wanted to establish liability (also) directly on the basis of European law, the classification of the undertaking as a partnership remains significant for recourse claims within the economic unit, for information claims between the constituent legal entities of the economic unit, for questions of compliance, liability in the event of changes within the economic unit and, at least partially, also for the liability of the legal successor.
Finally, accepting the undertaking to have legal capacity under competition law leads to the realisation that the undertaking can not only be liable for cartel damages claims but that it can also, as a victim of cartel infringements, be entitled to claim compensation.
Christian Kersting is a Professor of Law at Heinrich Heine University Düsseldorf, Germany.
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