Parental Liability in Competition Law: What Justification?

Seminar/Forum

Parental Liability in Competition Law: What Justification?

In an era in which competition law and enforcement are increasingly focused on the conduct of large and complex corporate groups, often operating in multiple jurisdictions, the basis on which parent companies should be liable for the actions of their subsidiaries has emerged as an important topic for consideration. This presentation acknowledges this fact and provides insights into why and how parental liability can be useful as an enforcement doctrine in competition law. For this purpose, it employs a case-study methodology and focuses on the European Commission’s (controversial) approach to parental liability in the enforcement of EU competition law.

In contrast to a number of jurisdictions with mature competition regimes, the European Commission regularly imposes fines upon parent companies for the competition law violations of their subsidiaries. The Commission’s approach has been particularly controversial because it allows for fines to be imposed even when the parent company has not actually engaged in any identifiable way in the anticompetitive conduct, did not have any awareness of the anticompetitive behaviour and has in fact done all that it reasonably can in the circumstances to disincentivise the subsidiary from engaging in unlawful practices.

The EU-level approach is justified on the basis that it helps to deter anticompetitive behaviour. Other jurisdictions have taken note of the Commission’s stance and have adopted similar approaches to parental liability in their own competition regimes. Given this context, the presentation aims to analyse whether the deterrence-based justification for the imposition of parental liability in the context of EU competition law enforcement is indeed a robust one.

In order to achieve this aim, it first examines the extent to which holding the parent company liable for the infringement committed by the subsidiary is necessary in theory to achieve the deterrence of anticompetitive conduct. Following on from this analysis, it argues that, despite the (imperfect) theoretical link that can be established between parental liability and the deterrence of anticompetitive behaviour, it does not follow that the current approach in EU competition law is acceptable in principle. In particular, it identifies a serious limitation of in the EU-level’s approach to deterring antitrust violations through the doctrine of parental liability: its disregard for the concept of ‘wrongdoing’ on behalf of the parent. On this basis, the presentation proposes, rationalises and critiques an alternative approach to parental liability for the enforcement of competition law.

The alternative approach would allow for parental liability in certain circumstances (in order to achieve deterrence) but would do so in a manner that injects a degree of ‘wrongdoing’ into the analysis of the parent’s conduct. The alternative approach to parental liability arguably represents a more legitimate approach to competition law enforcement than that currently adopted at EU level and suggests a model that other jurisdictions should consider.

Presenter

  • Professor Peter Whelan
    Professor Peter Whelan, University of Leeds