Through the “single economic unit” doctrine a parent and a subsidiary can be considered a sole undertaking, for the purposes of competition law infringements. In Sumal (case C-882/19) the CJEU had already confirmed that the concept of parent and subsidiaries being considered one undertaking is not only the case for an undertaking’s liability for an administrative fine but also any liability arising through private damages actions. Albeit, requiring that in order for the subsidiary to be held liable it would need to have engaged in activities connected to the subject matter of the infringement by its parent.
In Volvo and MOL the CJEU has clarified that while this doctrine applies in a substantive sense, it does not apply as regards procedural aspects for private antitrust damages actions.
MOL (C-425/22) – courts in the country of a non-injured parent company do not have jurisdiction
In MOL, the applicant argued that the concept of an economic unit should not vary depending on whether the undertaking concerned is a plaintiff or a defendant – and that if a defendant undertaking (consisting of a parent and subsidiary) are seen as a single economic unit, a plaintiff undertaking (consisting of a parent and subsidiary) should also be seen as one economic unit. It is therefore argued, that the place of the registered office of the parent company of the plaintiff should be considered as the ‘place where the damage occurred’ for the purposes of Article 7(2) of Recast Brussels I Regulation, even if the direct damage was exclusively suffered by the company’s subsidiaries.
The CJEU clarified that the concept of the ‘place where the harmful event occurred’ does not include the registered office of a parent company seeking damages for harm suffered exclusively by its subsidiaries. It emphasised that the principles of proximity and predictability in jurisdiction rules, as well as the need for consistency between the forum and the applicable law, do not support applying the concept of economic unit in this context. Earlier case law suggests that the courts of the Member State where the affected market is located are the most appropriate to assess actions for damages. Additionally, a company engaged in anticompetitive conduct can reasonably expect to be sued in the jurisdiction where its actions have distorted competition. Therefore, even if the parent company and its subsidiaries are considered a single economic unit, the relevant jurisdiction remains where the subsidiaries experienced the direct damage.
Volvo (C-632/22) - summons must be served at the address of the defendant subsidiary
In Volvo, the referring court asked whether a parent company can validly be served with a summons at the address of its subsidiary, given that they form a single economic unit.
The CJEU noted that while a parent company can be held liable for competition law infringements by its subsidiary if they form a single economic unit, such an economic unit does not have its own legal personality. Therefore, an action for damages must be brought against the specific legal entity within the economic unit, and not the unit itself.
The CJEU emphasised that serving documents to a subsidiary could potentially hinder the parent company’s timely preparation for defence. To ensure the right to a fair trial and proper cross-border judicial procedures, documents intended for the parent company cannot be served at the subsidiary’s address. Therefore, the CJEU concluded that a parent company must be served documents directly and not through its subsidiary, even if they form a single economic unit.
Comment
These cases are an important clarification for defendant undertakings. They mean that plaintiffs cannot pick and choose any jurisdiction in which a company has a parent or subsidiaries but must deal directly with the entity/entities that have caused any harm. Moreover, the jurisdiction must be tied to that in which the harm has occurred by a subsidiary and not the jurisdiction where the undertaking suffering harm is head-quartered. This clarification creates a more precise and predictable legal framework for bringing damage claims, potentially reducing the strategic use of jurisdictional rules to leverage the outcome for plaintiffs.
Written by Adriana Brincat and Carmen Pennanen
