Confirmation that silence can constitute participation in a cartel

Published On 03/02/2012 | By Tamara Hunter | Cartels, Enforcement, Litigation

On 2 February 2012, the European Union General Court rejected appeals brought by The Dow Chemical Company, EI du Pont de Nemours and Company, and Denki Kagaku Kogyo Kabushiki Kaisha (and a number of their subsidiaries) in relation to findings of the European Commission that the companies had, with others, engaged in cartel conduct in the chloroprene rubber sector.

In their separate appeals, the companies had asked the Court to annul the EC’s findings that the companies participated in the cartel and to overturn or reduce the fines (together more than €240 million).

Some of the appellants argued that they had not participated in the cartel during certain periods because the actions were carried out by the companies’ jointly owned subsidiary.  In this regard, the companies pointed to an earlier decision of the EC, in which the EC had recognised that a joint venture could be presumed to be autonomous from its parent companies.  In particular, the companies questioned the EC’s failure to explain reasons for departing from its earlier decision.

The Court noted that companies cannot expect that a previous decision-making practice, that is capable of being varied when EU institutions exercise their discretion, will be maintained.  The obligation to state reasons does not mean that the EC has an obligation to set out reasons for reaching a different conclusion than in a previous case, even one concerning similar or identical situations or the same market participants.

The Court noted that European case law allows the conduct of a subsidiary to be imputed to its parent, “in particular where that subsidiary, despite having a separate legal personality, does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company.”  However, “in order to be able to impute the conduct of a subsidiary to a parent company, the Commission cannot merely find that the parent company is in a position to exercise decisive influence over the conduct of its subsidiary, but must also check whether that influence was actually exercised.”

The Court found that in this case, the EC had not erred in finding that the parents had exercised decisive influence over their joint venture entity.

Another company argued that the EC had not shown that the company had participated in the cartel, because although it had attended some cartel meetings, it did not share a common objective with the cartel participants, had been coerced to participate in the meetings, never agreed to market-sharing or price-fixing, and did not take account of anticompetitive information that would have been exchanged at the cartel meetings.

The Court found that silence during a meeting cannot be regarded as unambiguous disapproval, and that “a party which tacitly approves of an unlawful initiative, without publicly distancing itself from its content or reporting it to the administrative authorities, effectively encourages the continuation of the infringement and compromises its discovery.”  The Court decided that the company had participated in the meetings with knowledge of the participants’ common objective.

Photo credit: net_efekt / Foter.com / CC BY

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About The Author

is a Senior Associate in the competition litigation group at King & Wood Mallesons. Tamara has advised on the competition law aspects of commercial transactions and disputes and assisted clients to respond to investigations by the ACCC and other regulators in the Asia Pacific region.

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