On 26 September 2013, the highest EU Court issued two important judgments, Dow and EI DuPont. These judgments confirm that a parent company can be held liable and fined by the European Commission (“Commission”) for the antitrust infringement of its 50:50 JV in the EU. In so stating, the EU Court endorsed the current hardened approach of the Commission and the General Court, which seeks to attribute antitrust liability to parent companies wherever possible.
In years past, JVs were in principle classified as separate undertakings (with the once-off exception of Avebe). According to the Commission’s decisional practice, they should not be grouped together with their controlling parents, particularly for the purpose of attributing liability and collecting fines (e.g., Ijsselcentrale, Gosme/ Martell, Rubber Chemicals). The situation changed with the Commission’s decision in Chloroprene Rubber, where it was held that both parent companies of a 50:50 JV should be held jointly and severally liable for the JV’s conduct.
The recent judgments confirmed the Chloroprene Rubber approach. The Court found that the 50:50 JV formed a single economic entity with each of its parents and thus, each parent company should be held jointly liable for the JV’s behaviour. The Court noted that this can be the case “only in so far as the Commission has demonstrated… that both parent companies did in fact exercise decisive influence over the JV…” (Dow, para. 58) . Merely showing that the parent companies were in a position to exercise decisive influence is not enough.
However, in practice, it is not difficult at all for the Commission to show that parent companies exercised such decisive influence. The Court did not accept the fundamental argument that parent companies do not actually influence the JV, because joint control by definition only gives them a “negative” power to block decisions, but not to impose them (para. 60). Further, the fact that a JV is full-function and (under the EU Merger Regulation) performs all the tasks of an autonomous economic entity was also not regarded relevant to the question of decisive influence. According to the Court, decisive influence is about broader strategy and does not relate to autonomy on day-to-day operations (Dow, para. 65).
In the life sciences sector, the creation of 50:50 JVs is common, e.g., for research collaboration, in which case the two parties share skills, expertise or resources which neither has on its own. What can the companies do to avoid being held liable for antitrust infringements of 50:50 JVs they have created? Not much. In Dow and EI Dupont, the fact that the parents had carried out an investigation to examine whether the JV participated in a cartel was even used against them, as an indication of decisive influence. The safest way to take is to make sure that the JV does not get involved in an antitrust infringement in the first place. Companies should thus put in place effective compliance programmes, which should be implemented throughout the corporate group, including JVs and controlling minority shareholdings.