On 14 July 2016, the General Court ("GC") reset the fine that had been imposed on Parker Hannifin Manufacturing ("Parker ITR") and Parker-Hannifin Corp ("Parker-Hannifin") for participating in the marine hoses cartel. In this judgment – on referral from the Court of Justice – the GC largely confirmed the fines initially imposed by the Commission in 2009.
In this case, the central legal question concerns the liability of undertakings for an infringement, complicated by an internal transfer of the infringing assets and subsequent sale to third parties. In January 2002, ITR first transferred the assets of its rubber hose business to its 100% subsidiary ITR Rubber, which was subsequently acquired by Parker Hannifin and renamed Parker ITR. For the infringement prior to the acquisition date, the Commission fined Parker ITR because it was considered to be the economic successor of the marine hose business. Parker appealed to the GC, arguing that the principle of economic continuity cannot apply since Parker ITR had no structural links with ITR. The GC agreed and annulled the decision in so far as it found Parker ITR liable for the infringement prior to 1 January 2002.
However, on appeal, the Court of Justice ruled that the relevant structural links were those between ITR and ITR Rubber (and not the links with Parker), as these were the parties to the asset transfer. On the date of the internal asset transfer, such structural links did exist between ITR and ITR Rubber. Hence, the principle of economic continuity applies, unless Parker could rebut the presumption that ITR exercised decisive influence over ITR Rubber. The Court of Justice referred the case back to the GC to examine whether Parker had submitted sufficient evidence to rebut this presumption.
Parker argued before the GC that ITR Rubber had acted independently on the market, for which it brought forward three different grounds: (i) ITR Rubber had no economic activities until ITR's marine hose business was transferred, (ii) during the one-month interim period (between the asset transfer and acquisition) the SPA between ITR and Parker Hannifin prohibited ITR Rubber from taking any actions that would affect the interests of the buyer, and (iii) the interim period would be too short for ITR or Saiag to exercise control over ITR Rubber. However, the GC dismissed all three arguments, thereby reaffirming that in practice it is very difficult the rebut the presumption of decisive influence when there are structural links between two legal entities. As Parker did not succeed in demonstrating the absence of decisive influence, the principle of economic continuity applied. Consequently, the GC ruled that Parker ITR was liable for the infringing conduct of its predecessor ITR and reaffirmed the fine initially imposed by the Commission.
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