What’s Good for Competition Law Is Not Good for Brussels I bis: CJEU Rejects Concept of Economic Unit in MOL v Mercedes Benz Group

In competition law, a parent company is liable for any infringements of EU competition law by its subsidiary (see CJEU Case C-516/15 P, Akzo Nobel, para 51–57). Both are considered ‘a single economic unity’, notwithstanding their separate legal personalities (id para 53). The question whether this theory also works in the context of Brussels Ibis was decided by the CJEU in the recent decision MOL v Mercedes Benz Group.

Facts of the Case

The Mercedes Benz Group was a member of the famous truck cartel, which had distorted prices in several Member States for years, as the Commission had determined in infringement proceedings under Article 101 TFEU. The claimant, MOL, is a Hungarian company with subsidiaries in several Member States. The subsidiaries – but not MOL itself – had bought trucks from the defendant at distorted prices. MOL brought a follow-on claim for the damage suffered because of the overpayment by its subsidiaries against Mercedes Benz Group before a Hungarian court.

Legal Issue

To justify the jurisdiction of the Hungarian court, claimant MOL relied on the economic unit theory from competition law (para 13 et seq). In its opinion, this theory should also be applied for purposes of determining jurisdiction and ‘in reverse’, i.e. not only when the cartel defendant is a group of companies but also when the cartel victims are a group. As the sole controlling company of the group, it would be directly concerned by the subsidiaries’ losses. Therefore, harm in the sense of Article 7(2) Brussels I bis would occur at its registered seat.

Decision

The CJEU – following the Advocate General – rejects MOL’s interpretation. Only the subsidiaries who had bought the trucks have directly suffered damage. The losses of MOL as the parent company would be no more than an indirect consequence of the subsidiaries’ harm and would thus not suffice as a basis of jurisdiction under Article 7(2) Brussels Ibis.

The CJEU sees the ‘economic unit’ theory at odds with the objectives of proximity and predictability of the competent court underlying the rules on jurisdiction (para 37). The courts of the Member States in which the affected market is located would be best placed to assess the damage resulting from anti-competitive conduct and the defendant to such actions could also reasonably expect to be sued there (para 38).

Moreover, applying the theory of the economic unit to jurisdiction would also run counter to the consistency between the forum and the applicable law (para 40). For competition law infringements, the damage is deemed to occur on the affected market (see Case C-30/20 Volvo para 31), which is also the relevant criterion for determining the applicable law under Article 6(3) Rome II Regulation. This parallel (in German: Gleichlauf) between the forum and applicable law would be broken if the group’s parent company was allowed to bring the claim in the state of its registered seat, whose law would not apply.

As the CJEU stresses, its rejection of the theory of the economic unit does not prevent the parent company of the group from asserting their right to compensation. They can always bring proceedings for the entire damage at the domicile of the perpetrator of the infringement (para 42). They can also bring individual claims at the place where they had purchased the affected goods, or, in case they had bought them in several jurisdictions, at the place of their registered seat (para 43).

Assessment

While seemingly justified at first sight, the arguments of the CJEU do not withstand closer scrutiny. The courts at the place where goods have been bought at inflated prices are not especially well placed to rule on follow-on claims, in which the Commission has already determined the infringing behaviour. The only point these courts could verify more easily than others is whether the goods have indeed been bought at the alleged price. However, this question is rarely disputed in such cases. Moreover, if goods have been purchased in several Member States, jurisdiction falls to the courts at the registered seat of the subsidiary anyway, as the CJEU has ruled in Volvo para 42. These courts may not be much better placed than the courts at the place of the registered seat of the parent company to decide the case.

The Court overemphasises the importance of the predictability of the competent court by the defendant a bit. Whoever engages in a transnational cartel must expect to be sued in any state where the market was distorted. If this includes the seat country of the parent company – as it did in the truck cartel case –, jurisdiction of the courts there is foreseeable. While actor sequitur forum rei is a central pillar of EU PIL, the defendant’s right to be sued at its seat is not sacrosanct and suffers many exceptions, inter alia in Article 7 Brussels Ibis. Also, a cartel participant has no right that claims against it are brought piecemeal in different Member State courts.

It is surprising that the CJEU stresses the parallel between the forum and the applicable law. While it correctly points to Recital 7 Rome II, it has in the past played down the importance of this Recital by stating:

that does not mean, however, that the provisions of Regulation No 44/2001 must for that reason be interpreted in the light of the provisions of Regulation No 864/2007. The objective of consistency cannot, in any event, lead to the provisions of Regulation No 44/2001 being interpreted in a manner which is unconnected to the scheme and objectives pursued by that regulation (see Case C-45/13, Kainz v Pantherwerke, para 20).

That decision concerned Article 5 Rome II Regulation, but it is unclear why the same reasoning should not apply to Article 6 Rome II Regulation as well.

Perhaps the weakest of the CJEU’s arguments is that the cartel victims can sue the perpetrator for the entire damage at its domicile. This possibility always exists, of course. But efficient competition law enforcement looks different than forcing the victim to go to the courts at the perpetrator’s domicile.

Still, the decision of the CJEU is correct. The Brussels Ibis Regulation – as it currently stands – is geared towards individual claims brought by individual parties themselves. Only in rare and specific cases has this fundamental principle been overcome (mainly in Article 8 No 1 Brussels Ibis). This individual structure would be turned on its head by allowing parent companies to bring claims for their subsidiaries at their seat. The economic unit theory is specific to competition law, where separate legal personalities matter less than economic realities. It cannot be replicated in procedural law with its strict concepts of proper parties and standing to sue. At least, such a change would require a legislative change of the Regulation.

This split legal interpretation of competition law and private international law does not burden the parent companies whose subsidiaries are victims of anti-competitive behaviour too much. They have to run their subsidiaries under the corporate law of different Member States, apply different labour laws, follow different tax procedures, perform contracts there etc. It does not seem too much to ask them to also bring cartel claims for their subsidiaries in different Member States.

— Many thanks to Paul Eichmüller and Felix Krysa for helpful comments.