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Brussels, 10 th September 2009

Antitrust: Commission welcomes Court judgment in Akzo Nobel case

The European Commission welcomes the judgment by the European Court of Justice (Case C- 97/08) dismissing in its entirety Akzo Nobel's appeal of a 2007 judgment of the Court of First Instance (Case T-112/05). The 2007 judgment had confirmed a Commission decision of 2004 (see IP/04/1454 ) imposing a fine for cartel activities regarding choline chloride, a feed additive, not only on certain Akzo Nobel subsidiaries that directly participated in the cartel but also, jointly and severally, on the group's parent company Akzo Nobel NV. Today’s judgment is important because it confirms the Commission finding that a parent company may be held liable for anti-competitive behaviour of its subsidiaries even if did not itself participate in those activities. The Court confirmed that what matters is whether a parent company forms a single economic unit together with its subsidiaries. The Court ruled that a 100% shareholding of a parent company in a subsidiary creates a rebuttable presumption that the parent company exercised decisive influence over the commercial policy of the subsidiary, no other elements being necessary to establish the presumption. The parent company cannot rebut the presumption merely because the subsidiary was capable of independent day-to-day market conduct. The Court confirmed that account must also be taken of other relevant factors such as economic, organisational and legal links between the parent company and the subsidiary, as the Commission did in its Decision. The appeal was consequently dismissed.

On 9 December 2004, the Commission fined Akzo Nobel NV and four of its subsidiaries jointly and severally €20.99 million for price fixing, market sharing and agreeing actions against competitors in a cartel with other chemical producers in the EEA market of choline chloride, a feed additive (see IP/04/1454 ). On 12 December 2007, the CFI rejected Akzo Nobel's appeal in its entirety and confirmed all aspects of the Commission decision. Today the Court of Justice has upheld the Court of First Instance judgment.

The Court of Justice held that Community competition law refers to the activities of "undertakings". Such economic units may consist of several legal persons. It is, however, the undertaking that has committed the infringement and that incurs responsibility, even if the Decision has to be addressed to legal entities. Thus, the fact that a parent company and its subsidiary constitute a single undertaking enables the Commission to address a decision imposing fines to the parent company, without having to establish the personal involvement of the latter in the infringement. To hold the parent company liable it is sufficient for the Commission to prove that the subsidiary is wholly owned by the parent company in order to create a rebuttable presumption that the parent company exercises a decisive influence over the commercial policy of the subsidiary.

The Commission does not have to prove any other elements than the shareholding. It then falls on the parent company to show that its subsidiary acted independently on the market. The conduct of the subsidiary on the market is only one element in this respect, next to other relevant organisational, economic and legal links between the parent company and the subsidiary. The Court of Justice also confirmed that the Court of First Instance had committed no error of law as regards the sphere in which the parent company exercised influence over its subsidiary. The appeal was dismissed in its entirety.

Court of First Instance ruling

In its ruling in Case T-112/05, the Court of First Instance rejected Akzo's action by upholding the principles applied by the Commission in the case. In particular, the Court of First Instance accepted that where a parent company holds 100% of the capital of a subsidiary which has engaged in anti-competitive conduct, there is a rebuttable presumption that the parent company exercises decisive influence on its subsidiary’s conduct. It is for the parent company to rebut that presumption by placing before the Court any evidence relating to the economic and legal organisational links between its subsidiary and itself which in its view is capable of demonstrating that they do not constitute a single economic entity. Failing such test, the parent company shall respond jointly and severally with its subsidiaries for their participation in a cartel.

Commission Decision

The case concerned a cartel which operated in the 1990s between the main European producers (and initially US producers) of choline chloride, a chemical used in the feed additive industry. The European members of the cartel agreed between themselves prices and price increases, in general, for particular national markets and for individual customers. They also allocated individual customers and market shares between themselves and agreed to control distributors and converters of the product, to avoid outside competition. The Commission started an investigation after receiving a leniency application. In its Decision of 9 December 2004 (see IP/04/1454 ), the Commission considered the cartel a very serious infringement of Article 81 of the Treaty and imposed fines on the European members of the cartel, Akzo Nobel, BASF and UCB. The US producers participating in the cartel were not fined as they stopped participating in the cartel more than five years before the Commission's investigation began. The level of the fine for Akzo Nobel was set to take account of the economic strength of the whole undertaking.

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