On 21 July 2016, the Court of Justice issued a preliminary ruling in which it found that a company cannot be held liable for anti-competitive practices committed by an independent outside contractor if it was not aware of and could not have reasonably foreseen those practices.
The request for a preliminary ruling was made in the context of national proceedings against a Latvian competition authority decision imposing fines on companies for bid-rigging. Their conduct was found to revolve around an independent outside contractor, MMD lietas ("MMD"), that manipulated bids by mutually adjusting the parties' tenders. On administrative appeal, the Latvian administrative court annulled the fine imposed on one of the parties, Pārtikas kompānija ("Pārtikas"), after Pārtikas successfully argued that it was not aware of the relevant practices and had not been involved in coordination between MMD and the other tendering companies.
On final appeal, the Latvian Supreme Court asked the Court of Justice if, under Article 101 Treaty on the Functioning of the European Union ("TFEU"), a company could be held liable for anti-competitive conduct of a third-party contractor, in absence of proof of that company's awareness of the conduct.
The Court of Justice held that "where a service provider offers, in return for payment, services on a given market on an independent basis, that provider must be regarded, for the purpose of applying rules aimed at penalising anti-competitive conduct, as a separate undertaking from those to which it provides services." Therefore, the acts of a third-party contractor cannot be automatically attributed to such an undertaking.
The Court of Justice held that an undertaking may, in principle, be held liable for anti-competitive conduct of a third-party service provider, if one of three conditions is met:
- The contractor was in fact acting under the control of the undertaking concerned;
- The undertaking was aware of the anti-competitive objectives pursued by the contractor and its competitors, and intended to contribute to them by its own conduct, or;
- The undertaking could reasonably have foreseen the anti-competitive acts of the contractor and its competitors, and was prepared to accept the risks concerned.
The ruling clarifies that the wide liability for anticompetitive conduct in violation of Article 101 TFEU does not extend so far that it assumes a default liability of undertakings for anticompetitive acts committed by independent outside contractors. However, it remains to be seen how European and national courts will assess evidence that could indicate undertaking's awareness of, or their ability to foresee, anti-competitive acts of outside contractors.
This article was published in the Competition Law Newsletter of August 2016. Other articles in this newsletter:
- Court of Justice clarifies the legality of royalty payments in the event of revocation or non-infringement of the licensed patent
- General Court confirms fines imposed on the basis of economic continuity in maritime hose cartel
- European Commission imposes record cartel fine on truck manufacturers for price fixing
- European Commission deems support measures in favour of Dutch football clubs in line with State aid rules
- Dutch District Court ruled that parent companies cannot be held liable for damages arising from antitrust infringements committed by their subsidiaries
- ACM lowered fines in the pepper cartel case
- Dutch Supreme Court confirms the availability of a passing-on defence in antitrust damages litigation
- Brussels Court of Appeal rules that concerted lobbying efforts of cement producers do not breach competition law
- Belgian competition authority upholds licence refusal to football club White Star
Source: Competition Law Newsletter August 2016