Individualization of penalties is a fundamental principle of criminal and antitrust law. In our EU & Competition Law update of May 2014, we underlined that the French Supreme Court considered that the mere fact that a company which engaged in anti-competitive practices belonged to a corporate group was not sufficient ground to deem that other group companies played a role in, and should be sanctioned for, such anti-competitive practices.
The European Court of Justice (“ECJ”), in its decision C-597/13 of 17 September 2015, resolved, on final appeal, a case in which two French companies in the same group had been fined jointly and severally for having participated in a cartel concerning the market for paraffin and slack waxes.
In this case, the European Commission had found Total S.A., the French parent, and its subsidiary Total France, jointly and severally liable even though the parent had not actually participated in the cartel. The Commission based its decision on the fact that Total S.A., which held a 98% stake in Total France and admittedly had a “role of institutional coordination and control of strategic orientations”, did not overcome the presumption that it had exercised a “decisive influence” over the commercial policy of its subsidiary. Both companies appealed the decision.
In two judgements of 13 September 2013 (T-548/08 and T-566/08), the General EU Court of First Instance upheld the decision of the European Commission as regards the joint and several liability, but reduced the fine imposed on Total France to take into account a shorter period of time in which the latter participated in the cartel. On the other hand, the fine imposed on Total S.A. was left unchanged, thus raising the question, on appeal, as to whether, given that the liability of the parent company derived from the actions of its subsidiary, the General Court could reduce the fine in one case and not the other.
The ECJ found that the General Court “erred in law” in not having regard to the degree of the parent company’s actual participation in the cartel. The ECJ considered that the liability of a parent company must be capped at that of its subsidiary when its liability “is purely derivative of that of its subsidiary”. Therefore, even though the ECJ left unchanged the European Commission’s finding that Total S.A. did not overcome the presumption that it exercised a “decisive influence” over Total France, and therefore maintained the two companies’ joint and several liability, the ECJ held that Total S.A. must benefit from the same fine reduction as granted to Total France.