Are parent companies presumed to be jointly and severally liable with an infringing subsidiary?

Cartels

Turkey Small Flag Turkey

The Board has a consistent approach to fine the legal entity which was involved in cartel behaviour rather than fining the parent company as a whole.

Article 3 of the Competition Law defines the undertakings as natural and legal persons who produce, market and sell goods or services in the market, and entities which can decide independently and constitute an economic entity. Therefore, it can be argued that it technically leaves the impression that the Board is empowered to go up to the ultimate parent for calculation of turnover rather than solely focusing on the local turnover of the entity that actually violates the Competition Law. In this regard, for instance, there have been certain decisions of the Board whereby the parent companies of a joint venture were found liable instead of the joint venture itself (Waste Paper; 13-42/538-238, 08.07.2013).

That said, in practice, the Board does not tend to calculate the revenue by taking into consideration the whole group’s (i.e. undertaking) revenue, and imposes monetary fines on the basis of the actual infringing legal entity’s (infringing subsidiary’s) revenue (e.g. Automotive Decision, 11-24/464-139, 18.04.2011; Cement Decision, 12-17/499-140, 06.04.2012; Financial Institutions Decision 17-39/636-276, 28.11.2017).

Australia Small Flag Australia

There is no presumption of parental joint and several liability, however, if a corporation is a party to a CAU, related bodies corporate are taken to be a party to that CAU.

Mexico Small Flag Mexico

Parent liability is not presumed under Mexican antitrust laws and therefore parent entities may only be fined to the extent such entities themselves are found to have breached antitrust laws.

Brazil Small Flag Brazil

Yes, the Brazilian Antitrust Law provides that the companies and entities of an economic group shall be jointly and severally liable when at least one of them engages in violations of the economic order.

Finland Small Flag Finland

Yes, in principle the FCCA applies the parental liability doctrine as established by EU decision practice. The principle has also been confirmed in the decision practice of the Market Court and the Supreme Administrative Court.

Canada Small Flag Canada

There is no provision in the Act which provides for the liability of the parent company for the actions of its Canadian subsidiary, absent evidence of the parent company’s knowledge of and complicity in the cartel.

China Small Flag China

No law expressly requires that a parent company shall be jointly and severally liable for the monopoly conducts of its subsidiary, nor there has been any case where a parent company was so hold liable for the monopoly conducts of its subsidiary.

Article 19 of the Draft Guidelines on Calculation provides that, ‘although as a rule the AMEA shall impose punishment against the undertaking that directly carries out monopolistic acts, it may punish the parent company of the undertaking if the parent company has a decisive influence on the implementation of monopolistic acts by the undertaking’. It remains unclear whether the foregoing provisions will be maintained in the final text.

United States Small Flag United States

Generally, a corporate parent is not liable for the acts of its subsidiary and a parent and its subsidiary are not considered single entities for the purposes of criminal or civil liability. However, in certain situations it is possible for the actions of the subsidiary to be imputed to the corporate parent. A parent could be liable if it participated in the unlawful cartel activity or if the subsidiary could be considered the ‘alter ego’ of the parent. US courts have found that a subsidiary is considered an ‘alter ego’ of its parent where: (1) there is such a unity of interest and lack of respect given to separate identity of parent and subsidiary that personalities and assets of parent and subsidiary are indistinct, and (2) adherence to the corporate fiction sanctions fraud, promotes injustice, or leads to an evasion of legal obligations.

Japan Small Flag Japan

No. The infringing party will be solely responsible for the surcharges and fines.

Malaysia Small Flag Malaysia

Parent companies are not presumed to be jointly and severally liable with an infringing subsidiary. However if the parent company and its subsidiaries form a single economic unit within which the subsidiaries do not enjoy real autonomy in determining their actions on the market, the parent company and its subsidiary may be considered as a single enterprise or a single entity under the CA and therefore subject to the penalties jointly and severalty as such. In such a case the revenue of the parent company will be taken into account for the purpose of the maximum penalty mentioned above.

Switzerland Small Flag Switzerland

If the company is controlled by another entity, the unlawful practice is attributed to the controlling entity, which is jointly and severally liable with its subsidiary, if it is actually able to control the subsidiary and de facto exercises such control.

Israel Small Flag Israel

The Competition Law does not allow, in general, to "pierce the corporate veil" between companies, but Section 48 of the Competition Law stipulates that the manager of the company shall be deemed to have committed a violation of the Competition Law, unless he proves that he undertook all measures to prevent violation of the provisions of the Competition Law.

Spain Small Flag Spain

Article 61(2) of the Competition Act 2007 sets out that an undertaking’s conduct is equally imputable to any persons controlling it, unless its economic behaviour is not determined by the latter. Article 71(2)(b) of the Competition Act 2007 extends this provision to actions for damages (see below).

On these grounds, the parental liability doctrine under Spanish competition law mirrors that in CJEU case law, i.e. the concept of an undertaking as an economic unit under competition rules allows for the dissociation of liability for the conduct from commission thereof and, thus, for the rebuttable presumption that controlling entities are jointly and severally liable for infringements committed by their subsidiaries (see judgment by the Administrative Chamber of the Supreme Court in appeal 7/2015 [2017] Repsol, S.A., which refers to the CJEU’s judgment of 19 September 2009,C-97/08, Akzo Nobel NV and Others v Commission). Therefore, unless the parent company is considered to be the infringer (and not just liable for its subsidiary’s conduct) its turnover will not be taken into account for the calculation of the fines.

Romania Small Flag Romania

Although an undertaking is directly and personally responsible for its own activity, there is a recent tendency to apply the fine to the turnover of the entire group. This is due to the willingness to consider that a national subsidiary could not have acted otherwise than with the approval or under the guidance of its parent company / group and due to the increase value of the resulting fine.

United Kingdom Small Flag United Kingdom

The conduct of a subsidiary may be imputed to a parent company where the subsidiary carries out in all material respects the instructions given to it by the parent company. For wholly-owned subsidiaries, there is a rebuttable presumption that a parent company exercises decisive influence over the subsidiary.

EU Small Flag EU

The Commission is able to impose fines on a parent company without having to establish its involvement in the infringement if, having regard to the economic, organisational and legal links, the subsidiary does not behave independently in the market. Whilst there is a rebuttable presumption that this is the case in the context of 100 per cent. shareholdings, lesser shareholdings can also suffice for these purposes, depending on the level of influence exercised by the parent.

Argentina Small Flag Argentina

Parent companies are not presumed to be jointly and severally liable with an infringing subsidiary. However, joint and several liability may be extended to parent companies when the action or omission of their duties of control, supervision or surveillance have contributed, encouraged or allowed the commission of the infraction.

Norway Small Flag Norway

Whether a parent company may be jointly and severally liable with an infringing subsidiary will depend on whether the parent company and its subsidiary form a single economic unit and therefore form a single undertaking. The regulation of parent liability is presumed by the NCA to be in accordance with EU competition law.

Belgium Small Flag Belgium

The approach adopted by the BCA is in line with the approach of the European Commission.

Greece Small Flag Greece

The HCC, echoing the CJEU’s case law on this matter, distinguishes between cases where parent companies have 100% shareholding in the subsidiary and those where they do not have, but there could be evidence of exercise of control over the subsidiary. In the first case, the HCC differentiates slightly from the rebuttable presumption applied by the CJEU that the parent company exercises control over the subsidiary, considering the parent company to be jointly and severally liable with the infringing – totally owned – subsidiary only if additional evidence are presented in this regard. In case the parent company does not have total ownership of the subsidiary, in order to be found jointly and severally liable, the HCC shall have to prove that the subsidiary was actually operating under the decisive influence of the parent company.

India Small Flag India

Based on the facts of the case, the CCI can hold the parent companies to be jointly and severally liable with their infringing subsidiaries. However, the CCI has not yet done so.

Sweden Small Flag Sweden

A parent company can be held jointly and severally liable with an infringing subsidiary if the subsidiary does not behave independently on the market when taking economic, organisational and legal links into account. With regard to wholly-owned subsidiaries, there is a rebuttable presumption that a parent company exercises decisive influence over the subsidiary and is thus liable for the conduct of its subsidiary.

Cyprus Small Flag Cyprus

Yes. The CPC applies the parental liability doctrine as confirmed in its decision practice.

UAE Small Flag UAE

In accordance with the UAE Corporate System, a branch office is legally regarded as part of its parent company and does not have a separate corporate or legal identity from that of its parent company, while the Subsidiary is regarded as an actual separate legal entity from the parent company. Consequently, the parent company of the branch office is fully responsible for any liability of the branch while the parent company will not be liable for the actions of the subsidiary.

With respect to Competition Law in the UAE, please note that the same has explicitly stated that the provisions of the Law shall be applied on any natural or legal person practicing an economic activity or any persons associated therewith or any combination of these persons regardless of its legal form. Therefore, the provisions of the Competition Law in UAE granted powers to the Minister and the Competition Committee to investigate and involve any individuals or entities associated with the individuals or entities which violated the provisions of the Competition Law.

Updated: May 8, 2019