It is settled law that the fact that a subsidiary has separate legal personality is not sufficient to exclude the possibility of its anti-competitive conduct being imputed to the parent company. The European Court of Justice (“CJEU“) has created a rebuttable presumption to the effect that a parent company holding substantially all of its subsidiary’s shares is presumed to control the latter’s decisions (CJEU, Oct. 25, 1983, case 107/82, AEG; CJEU, Sept. 10, 2009, case 97/08, Akzo Nobel; CJEU, Sept. 10, 2011, case 520/09, Arkema). To overcome the presumption, the parent company must prove that its subsidiary self-determines its actions on the market as an autonomous legal entity and not pursuant to instructions from its parent.
This burden of proof is hard to meet both under EU and French law. The CJEU has held that it is not sufficient to establish that the parent company is a non-operational holding company (CJEU, Sept. 9, 2011, case 521/09, Elf Aquitaine SA), nor that there are no common directors between the two companies (General Court of the European Union, July 9, 2011, case 190/06, Total and Elf Aquitaine), nor that the two companies operate on different markets (General Court of the European Union, July 9, 2011, case 190/06, Total and Elf Aquitaine).
Thus, it was foreseeable that the French Supreme Court on October 18, 2017 (case n° 16-19120, Mobilitas) would confirm the decision of the French Competition Authority (“FCA“) to sanction both a subsidiary company and its 99.6% parent by a EUR 158,450 fine (jointly and severally with its subsidiary to the extent of EUR 142,600) due to competition law infringement, even though the parent company demonstrated that:
- The parent company was a non-operational holding company;
- The subsidiary company director was empowered with the broadest authority to run the company without depending on the parent company;
- The parent company’s sole mission consisted of approving the annual accounts of its subsidiary, without any discussion related to strategic, commercial, organizational, or logistical matters;
- Both companies were geographically separated;
- The subsidiary company managed its recruitment of staff by itself;
- None of the parent company’s directors or shareholders traveled to the subsidiary’s territory (Martinique) for the last couple of years;
- The parent company and its subsidiary operated on different markets;
- The subsidiary’s manager was the only person legally entrusted with running the business and had a real control of the management of the subsidiary in terms of cost management and price fixing;
- The two companies did not communicate about their affiliation; and
- The subsidiary company opted not to challenge the FCA’s infringement proceedings, unlike the holding company.
In light of this impressive catalog of factual circumstances, which was nonetheless held to be insufficient, it is difficult to imagine the possible factual arguments that could lead the CJEU or the national courts not to hold parent companies liable for their subsidiaries’ infringements of competition law. The French Supreme Court did nevertheless open the door to a possible future argument by alluding to the importance for the parent and subsidiaries each to have their own legal department.