Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

The ECJ rules on parenthood (General Química v Commission)

with 2 comments

The ECJ issued a Judgment yesterday in the General Química-Repsol case in which it partly upheld and partly annulled  the General Court´s judgment dismissing the appeals against the Commission decision in the rubber chemicals cartel.

In its Judgment the Court provides some guidance on the operation of the iuris tantum presumption pursuant to which the exercise of decisive influence of a parent company over the conduct of its subsidiaries (and, accordingly, the responsibility of the parent for the wrongdoing of its subsidiary) can be presumed, always subject to rebuttal,  in case of 100% ownership.

The Commission and the General Court had held that the infringement commmited by General Química (GQ) could be attributed to the owner of the totality of its shares: Repsol Química (RQ), and -climbing one additional step up the ladder- to Repsol YPF, who, in turn,  was the owner of the totality of RQ´s shares.

Leaving aside some of the details and specificities of the case, and focusing on the general application of this Judgment to future cases,  the ECJ has ruled that :

(i) The operation of the presumption shall not be dependent upon the existence of additional evidence on the exercise of decisive influence over the conduct of the subsidiary; on the contrary, it will be triggered automatically in cases of 100% ownership (paragraphs 41 and 42);

(ii) The General Court did not adequately motivate some of its conclusions (recitals 58-63) and failed to examine in detail the evidence submitted by the appellants to demonstrate the commercial and operational independence of GQ in relation to RQ (recitals 75 and 76), this being precisely one of the relevant factors with which the presumption could have been rebutted (recital 77). Consequently, the Judgment holds that “the General Court committed an error of law in affirming, in paragraph 74 of the judgment under appeal, that the arguments raised in order to establish such independence could not succeed ‘in the light of the case-law cited’, without carrying out a concrete examination of the factors raised by the appellants” (recital 79).

After having set aside part of the General Court´Judgment, the ECJ itself undertakes the task of giving final Judgment on the matter, and rules that:

a )  the mere fact, first, that RQ was made aware of the infringement only after an inspection of GQ´s premises and, second, that it did not participate directly in that infringement or encourage it to be committed is not such as to show that those two companies do not constitute a single economic unit. Such a fact is not sufficient to rebut the presumption that RQ actually exercised decisive influence over GQ’s conduct

b)  Although it was true that certain documents submitted by the appellants show that many of GQ’s management and administrative competencies had been delegated to the executives of that company, other evidence in the file showed, by contrast, the existence of significant interference on the part of RQ in several aspects of GQ’s strategy and commercial policy.

The Judgment attributes particular importance to several facts:  Firstly, it notes that RQ’s board of directors intervened significantly in matters concerning the sale of real estate and shareholding in other companies.  Secondly, it underlines that GQ’s sole director designated by RQ constituted a link between those two companies, by which the information concerning sales, production and financial results were communicated to RQ.  Thirdly, the ECJ explains that the fact that information was provided on the implementation stage of strategic and commercial plans constitutes an additional indication that RQ exercised control over the decisions drawn up and executed by GQ’s executives.

At the end of the day, the ECJ has reminded the General Court of its obligation to assess and motivate with greater care its conclusions on the elements put forward by companies attempting to rebut the presumption on the exercise of decisive influence. But at the same time it has validated the Commission´s decision on the basis of a reasoning that, in the face of conflicting evidence, seems inclined to favor the Commission´s discretion. 

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Also, and totally unrelated, I leave you a link to an article discussing whether lawyering can be compatible with work/life balance (it´s also interesting to check the first comment, positing that quality of life in accounting firms is due to the oligopolistic nature of that market). As I´ve said before, unless law firms become more progressive on the quality-of-life front they risk disencouraging the brightest people (their only asset) to choose this job or to continue working at it. 

Have a great weekend!

Written by Alfonso Lamadrid

21 January 2011 at 7:14 pm

Posted in Uncategorized

2 Responses

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  1. […] the past few days both Nicolas and I have commented on the Tomra and General Química Judgments. Both cases can be useful starting points for a quizz (we´ve got a special prize for […]

  2. […] The ECJ rules on parenthood (General Química v Commission … […]

    Quimica | Sektion31

    30 January 2011 at 4:21 pm


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