Hamilton Perspectives Nyhetsbrev

European Court of Justice defines liability in damages for successor companies

In a re­cent judg­ment the European Court of Justice (“ECJ”) has shed light on an ac­qui­rer’s po­ten­ti­al li­a­bi­li­ty for da­ma­ges re­sul­ting from an ac­qui­red ac­ti­vi­ty’s pre­vious in­fringe­ments of com­pe­ti­tion law.

Between 1994 and 2002, a num­ber of com­pa­ni­es ac­ti­ve in the Finnish asphalt mar­ket had be­en en­ga­ged in a car­tel ar­range­ment. In 2004, th­ree of the­se com­pa­ni­es we­re ac­qui­red by ot­her par­ti­es ac­ti­ve in the sa­me mar­ket (“the Acquiring par­ti­es”); they we­re then wound up and their ac­ti­vi­ti­es trans­fer­red to the re­specti­ve Acquiring par­ty. The sa­me ye­ar, the Finnish com­pe­ti­tion aut­ho­ri­ty im­po­sed fi­nes on the Acquiring par­ti­es re­la­ting to in­ter alia the in­fringe­ments com­mitted by the ac­qui­red bu­si­nes­ses.

In 2009 a pur­cha­ser of asphalt lod­ged a claim in da­ma­ges be­fo­re the Finnish courts against a num­ber of com­pa­ni­es, in­clu­ding the Acquiring par­ti­es, for in­ju­ry suf­fe­red as a re­sult of the in­fringe­ments, in­clu­ding in­fringe­ments com­mitted by the ac­qui­red bu­si­nes­ses. The Acquiring par­ti­es ar­gu­ed that they we­re not li­ab­le in da­ma­ges for the con­duct of the lat­ter com­pa­ni­es.

It may be recal­led that the­re is an established practice in EU com­pe­ti­tion law as re­gards a suc­ces­sor’s li­a­bi­li­ty for fi­nes im­po­sed for in­fringe­ments of com­pe­ti­tion law. In a si­tu­a­tion as that at is­sue, whe­re the com­pa­ny that has com­mitted an in­fringe­ment is sub­se­quent­ly ac­qui­red and ce­a­ses to ex­ist as an in­de­pen­dent en­ti­ty, the ac­qui­rer is de­e­med to ha­ve as­su­med the in­fring­er’s as­sets and li­a­bi­li­ti­es, in­clu­ding the li­a­bi­li­ty for com­pe­ti­tion law fi­nes. Indeed, the Finnish com­pe­ti­tion aut­ho­ri­ty ap­pe­ars to ha­ve ap­pli­ed this ca­se law when im­po­sing fi­nes for the car­tel at is­sue.

The key is­sue of the ca­se be­fo­re the ECJ was thus whet­her one should ap­p­ly the sa­me prin­ciples of suc­ces­sor li­a­bi­li­ty in the con­text of li­a­bi­li­ty for da­ma­ges in ac­tions be­fo­re na­tio­nal courts.

The ECJ, sei­zed of a re­quest for a pre­li­mi­na­ry ru­ling from the Finnish Supreme Court, an­swers that ques­tion in the af­fir­ma­ti­ve. The Court starts by recal­ling the in­te­rest of the full ef­fecti­ve­ness of EU com­pe­ti­tion law, and the ab­i­li­ty of an in­di­vi­du­al to claim da­ma­ges as a co­rol­la­ry the­re­to. It finds, wit­hout furt­her ado, that the ques­tion of which en­ti­ty is li­ab­le in da­ma­ges for bre­aches of com­pe­ti­tion law is a ques­tion of EU, rat­her than na­tio­nal, law. On this ba­sis, the Court finds that a com­pa­ny is li­ab­le in da­ma­ges for in­fringe­ments com­mitted by a bu­si­ness that has be­en ac­qui­red and sub­se­quent­ly ce­a­sed to ex­ist.

The par­ti­es’ ar­gu­ment that such re­a­so­ning re­flects the ca­se law on li­a­bi­li­ty for fi­nes un­der EU law and should not be ap­pli­cab­le to da­ma­ges ac­tions at a na­tio­nal le­vel is brushed asi­de on the ba­sis that ac­tions for da­ma­ges con­tri­bu­te to ef­fecti­ve com­pe­ti­tion, as part of the sy­stem for en­for­ce­ment of EU com­pe­ti­tion ru­les.

On this ba­sis, the ECJ finds that in a ca­se such as that un­der con­si­de­ra­tion an ac­qui­ring par­ty is li­ab­le in da­ma­ges for the in­fringe­ments com­mitted by the ac­qui­red bu­si­ness.

The ECJ’s con­clu­sion po­ten­ti­al­ly ex­tends an ac­qui­rer’s risk of be­ing found li­ab­le not on­ly for fi­nes, but al­so for da­ma­ges, re­la­ting to in­fringe­ments com­mitted by the tar­get. It al­so ra­i­ses the ques­tion whet­her, in a ca­se whe­re the ac­qui­red bu­si­ness would con­ti­nue to ex­ist, the ECJ would follow a si­mi­lar lo­gic and ap­p­ly its ca­se law on pa­rent com­pa­ny li­a­bi­li­ty, i.e. that the pa­rent com­pa­ny would sha­re li­a­bi­li­ty in da­ma­ges with its sub­si­di­a­ry: such a con­clu­sion could be con­tro­ver­si­al from the per­specti­ve of na­tio­nal laws.

In practi­cal terms, the judg­ment recalls the need for ca­re­ful due di­li­gence of tar­gets and ca­re­ful­ly draf­ted trans­ac­tion docu­men­ta­tion.

 

(Case C-724/17, Vantann kau­pun­ki ./. Skanska Industrial Solutions Oy, NCC Industry Oy, Asfaltmix Oy, judg­ment of 14 March 2019)