UK: England and Wales: anti-competitive acts, corporate groups and the imputation of knowledge

Judgment was given by the Court of Appeal in KME Yorkshire Ltd. v Toshiba Carrier UK Ltd. [2012] EWCA Civ 1190 last week. The case concerned an unsuccessful appeal against the trial judge's decision (at [2011] EWHC 2665 (Ch)) to dismiss an application to strike out a claim for damages for breach of the anti-cartel provisions in Article 101 of the Treaty on the Functioning of the European Union. The judgment contains some interesting discussion, albeit obiter, on the circumstances in which the anti-competitive acts of a parent company can be imputed to its subsidiary companies in the context of Article 101. Etherton LJ (with whom Tomlinson and Ward LJJ agreed) observed (at paras. [37] to [39]):

... it is clear that, save in a case where the parent company exercises "a decisive influence" (in the language of EU jurisprudence) over its subsidiary or the same is true of a non-parent member of the group over another member, there is no scope for imputation of knowledge, intent or unlawful conduct.

The jurisprudence on this aspect is, in my view, plain and settled. Article 101 is concerned with agreements, decisions and concerted practices by and between undertakings. An undertaking for this purpose is any entity engaged in economic activity, regardless of its legal status and the way in which it is financed. Furthermore, in this context the concept of an undertaking includes an economic unit which may consist of more than one legal or natural person, such as a group of companies. Where, for example, a company does not decide independently on its own conduct on the market, but in all material respects carries out the instructions given to it by its parent company, having regard to the economic, organisational and legal links between them, the unlawful conduct of the subsidiary will be imputed to the parent company. In such a situation, in the language of EU jurisprudence, the parent exercises a "decisive influence" over its subsidiary. The subsidiary is not absolved from its own personal responsibility, but its parent company is liable because in that situation they form a single economic entity for the purposes of Article 101. In EU jurisprudence, the (rebuttable) presumption is that a parent company exercises a decisive influence over the market conduct of a wholly owned subsidiary and that they therefore constitute a single undertaking within Article 101 ... By contrast, the mere fact that the share capital of two commercial companies is held by the same person or the same family is insufficient in itself to establish that those two companies are an economic unit with the result that, for the purposes of Article 101, the actions of one company can be attributed to the other."