On 11 August 2014, the European Commission published details of a challenge made against the Commission in the high voltage power cables cartel case. The cartel case relates to the €302 million fine levied against 11 producers of high voltage power cables for operating a market sharing cartel. Specifically, Pirelli, a parent company at the time of Prysmian, was levied with a fine €104,613,000 under joint and several liability with Prysmian. As Pirelli was considered by the Commission to be in a position of decisive influence and control of Prysmian, they were held liable under the Akzo Nobel case precedent of parent company liability. Our previous post on this case can be found here.
Pirelli has not acquiesced quietly to the fine and have challenged the Commission seeking that either their liability is annulled or that creditors pursue Prysmian as the perpetrator, before pursuing Pirelli as a liable parent. Pirelli’s case to the General Court is as follows:
• Perhaps Pirelli’s strongest argument is that its rights of defence has been bypassed. It did not have access to evidence when the fine was levied on Prysmian and so has been harboured with liability it had no opportunity to challenge;
• that the conditions of the parental liability presumption have not been met; and
• that the Commission has breached the principle of proportionality by extending parental liability to Pirelli.
In our view and under the same logic as the rights of defence argument above, Pirelli could argue that the Akzo Nobel precedent is unfair in not allowing rights of defence whatsoever for parent companies. They are found liable merely under reason of economic ownership and presumed control and influence. No evidence has to be produced that such influence was exercised and that the cartel behaviour was encouraged or even recognised by the parent. This was an argument put by the defence in the Akzo Nobel case before the European Court of Justice.
Many have since believed the ECJ to have erred in law when the ECJ did not consider parent company liability to be a form of strict liability. However, regardless of the perceived inequality of parent company liability, if the Pirelli challenge is to succeed it will likely be on procedural grounds rather than substantive ones. It is highly unlikely that the Commission will reverse their precedent from the Akzo Nobel case as it allows the Commission flexibility in retrieving the cash from fines from parent companies with deep pockets. It also acts a powerful incentive throughout the EU for competition compliance and a compliance culture to filter down through organisations and their subsidiaries when owners know they may be held liable for the anti-competitive actions of their subsidiaries.
It is understood that Prysmian alongside many of the other parties found liable are also lodging appeals to the fines before the General Court. A link to the official journal entry on Pirelli can be found here.