The liability of a subsidiary for a competition law infringement by the parent company

In case C-882/19 (Sumal v Mercedes Benz Trucks España), the Court of Justice of the European Union (“the Court of Justice”) addressed the question of the liability of a subsidiary for an infringement of article 101 TFEU committed by the parent company. 

The request for a preliminary ruling was raised further to a Commission decision which had found that Daimler (the parent company of Mercedes Benz Trucks España) had participated together with 14 other European truck producers in a cartel consisting of collusive arrangements on pricing and gross price increases for trucks in the European Economic Area (“EEA”). 

Following that decision, Sumal - a company which had acquired trucks from Mercedes Benz Trucks España - brought an action for damages against that company before the Commercial Court of Barcelona. This Court rejected the action on the ground that “Mercedes Benz Trucks España could not be sued by means of that action since Daimler, which alone is referred in the Commission decision, must be regarded as solely responsible for the infringement concerned”. 

Sumal filed an appeal against that judgment. In the context of that appeal, the referring court asked to the Court of Justice whether the liability of a parent company can be extended to its subsidiary on the basis of the doctrine of the single economic unit and whether a provision of national law providing for an extension of liability to the subsidiary only where the parent company exercises control over the subsidiary is compatible with the Court’s case-law. 

In its judgment of 6 October 2021, the Court of Justice recalls that the concept of “economic unit” automatically entails the application of joint and several liability to the entities of which the economic unit is made up at the time of the infringement. 

According to the Court, it follows that “in the context of an action for damages based on an infringement of Article 101 TFEU found by the Commission in a decision, a legal entity which is not designated in that decision as having committed the infringement of competition law may nevertheless be held liable on that basis due to conduct amounting to an infringement committed by another legal entity, where those two entities both form part of the same economic unit and thus constitute an undertaking which is the perpetrator of the infringement within the meaning of that Article 101 TFEU”. 

The Court concludes that “where the existence of an infringement of Article 101(1) TFEU has been established as regards the parent company, it is possible for the victim of that infringement to seek to invoke the civil liability of a subsidiary of that parent company rather than that of the parent company”. In order for that action to succeed, the party claiming damages will have to prove that: 1°) the subsidiary and its parent company together constitute an economic unit and that 2°) there is a specific link between the economic activity of the subsidiary and the subject matter of the infringement for which the parent company has been held liable. 

Logically, the Court of Justice also confirms that “Article 101(1) TFEU must be interpreted as precluding a national law which provides for the possibility of imputing liability for one company’s conduct to another company only in circumstances where the second company controls the first company”

This judgment is an additional milestone in the Court’s case law facilitating claims for damages for infringement of competition law.