More Rights for Cartel-Victims – ECJ Decision re Group Restructuring

Until the 9th amendment to the German Act against Restraints of Competition ("GWB") members of a cartel had the (legal) opportunity to avoid (possibly very high) fines by performing group restructuring measures. In 2017 with the 9th amendment to the GWB, finally, this loophole was closed. Along with closing this loophole the 9th amendment to the GWB transposed the Directive on certain rules governing action for damages for infringements of the competition law by the European Parliament. Now, the so called "Rechtsverletzer" is liable for damages.

Due to this wording it was – not only in Germany – in discussion who would be liable if the "Rechtsverletzer", due to group restructuring measures for example, ceased to exist. Finally, the European Court of Justice had to engage with this subject and passed on March 14, 2019, a judgement (Case 724/17).

Background: The asphalt cartel in Finland

Between 1994 and 2002 a cartel was active in the asphalt market in the whole region of Finland, dividing the market, arranging prices and coordinating the submission of tenders. Members of this cartel were inter alia Lemminkäinen Oyj, Sata-Asfaltti Oy, Interasfaltti Oy, Asfalttineliö Oy and Asfaltti-Tekra Oy.

Beginning in the year of 2000, various group restructuring measures and liquidation procedures took place, so that many of the initial cartel members no longer existed at the time the proceedings regarding remuneration of cartel damages initiated by the City of Vantaa was pending at the Finnish Courts.

Release from liability due to group restructuring measures?

Now, the European Court of Justice had to assess the consequences of the nonexistence of Finnish regulations about the attribution of the liability for cartel damages based on European Law if the cartel member ceased to exist. Hence, the European Court of Justice had to decide whether the liable entity must be determined in accordance with national or European law and, if the latter, if the European definition of an "undertaking" is applicable.

The Definition of an Undertaking: European law it is

The European Court of Justice came to a very clear conclusion: National legislators may set rules for the modality of the exercise of the right to claim cartel damages and must respect the European principles of equivalence and effectiveness. The definition of entities which are required to compensate for such damages, however, does not confer on the Member States the power to carry out that determination. Hence, Article 101 Para. 1 TJEU defines who and which entity is liable for cartel damages.

In accordance with Article 101 Para. 1 TJEU the European Court of Justice defines "undertaking" as any entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed. That concept, the European Court of Justice goes on to say, must be understood as designating an economic unit even if in law that economic unit consists of several persons, natural or legal.

In order to guarantee the effectiveness of European prohibition on cartels (Effet Utile), so the European Court of Justice, a member of a cartel cannot escape its liability through group restructuring measures. It is therefore not contrary to the principle of individual liability to impute liability for an infringement to a company which has taken over the company which committed the infringement in case the latter has ceased to exist.

Substantial impacts on practice
With its decision the European Court of Justice stated explicitly, that group restructuring measures will not release the "undertaking" from being liable for cartel damages – even independently from national law, because European law defines which entity is required to compensate for cartel damages.

Hence, the European Court of Justice strengthens the legal rights of cartel-victims tremendously.