European Court of Justice confirms that liability for antitrust damages can follow corporate acquisitions

D&I Alert

Posted on

15 Mar



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Dittmar & Indrenius > Insight > European Court of Justice confirms that liability for antitrust damages can follow corporate acquisitions

On 14 March 2019, the European Court of Justice (“ECJ”) handed down a judgment that acquirer companies may be liable to pay damages for the anticompetitive conduct of acquired companies. The reason is that in EU competition law liability can be attached to the assets of the infringer (i.e., the ‘undertaking’) and not to the legal entity. The judgment deals with a situation where the acquirer had taken over and continued the commercial activities of the acquired company, and the acquired company had ceased to exist, leaving the acquirer as the only viable defendant.

Before this judgment, the ECJ has only applied this principle of economic continuity to fines imposed by competition authorities. Attributing liability for antitrust damages to an undertaking instead of a legal entity may expand in unexpected ways the legal exposure of companies in a company group that are considered to be part of the same undertaking and increase possibilities for forum shopping by claimants.


In 2009, the Finnish Supreme Administrative Court found that seven companies had formed a cartel in the Finnish asphalt paving market in breach of national competition law and Art. 101 of the Treaty on the Functioning of the European Union (“TFEU”), and imposed record fines of EUR 83 million. Following the judgment, several municipalities and the Finnish state filed claims for damages.

Among the companies found to have participated in the cartel were Sata-Asfaltti Oy, Interasfaltti Oy and Asfalttineliö Oy. These cartel companies were acquired by Skanska Industrial Solutions Oy, NCC Industry Oy and Asfaltmix Oy. The new owners were fined by the Supreme Administrative Court for the conduct of the cartel companies they had acquired, whether the new owners had participated in the cartel or not.

The new owners transferred the assets of the cartel companies to themselves, continued the business activities of the cartel companies, and liquidated the empty cartel companies. A number of municipalities claimed damages from the new owners, arguing that they had to bear liability for the harm caused by the cartel companies they had acquired. The new owners denied liability by arguing that they were separate legal entities from the cartel companies they had acquired, and that the damages claims should have been directed at the liquidated cartel companies and/or their previous owners.

Following contradictory judgments from the District Court and Court of Appeal, the Finnish Supreme Court on 19 December 2017 filed a request for a preliminary ruling from the ECJ asking whether the parties liable for antitrust damages are determined on the basis of national law or EU law, and whether in a private law action for damages a company which has continued the economic activity of a cartel participant may be liable to pay compensation for harm caused by a breach of Article 101 TFEU.

The ECJ’s judgment

The ECJ held that the attribution of liability for infringements of EU competition law is determined in accordance with EU law, not national law. The cartel prohibition in Art. 101 TFEU uses the concept of an ‘undertaking’ to identify the party liable for the infringement. The ‘undertaking’ is an EU competition law concept and its interpretation therefore falls under the jurisdiction of the ECJ.

The ECJ further held that liability for antitrust damages is attributed to the undertakings that participated in the cartel. This follows directly from Art. 101 TFEU which identifies undertakings as the subjects liable for a cartel. The ECJ ruled that it does not matter whether the liability is for public enforcement fines or private enforcement damages; the concept of undertaking must be interpreted similarly in both types of enforcement. Both types of enforcement are integral parts of a system of enforcement that is intended to ensure the full effectiveness of EU competition rules and to deter and punish anticompetitive behaviour.

Referring to its previous case law on fines, the ECJ recalled that an undertaking is an economic unit. In other words, liability for infringements can be attached to the commercial assets that were used to commit the infringement, regardless of legal form. In case of a restructuring where an infringing legal entity ceases to exist but another legal entity takes over and continues the commercial activities, the successor entity can be held liable if, from an economic point of view, the two entities are the same. The ECJ now confirmed for the first time that, in addition to fines, this principle of economic succession also applies to antitrust damages. The ECJ’s reasoning is that otherwise it would be possible to evade liability for competition infringements simply through restructurings, sales or similar legal or organizational changes.

Implications of the judgment

The judgment raises a number of implications. First, following a corporate acquisition, the acquirer may unknowingly acquire the antitrust damages liabilities of the target of the acquisition, even if the acquirer itself never participated in the infringement. In particular, this means that an acquirer may not be able to shield itself from the target’s antitrust liabilities by only purchasing the assets of the target. The ECJ’s ruling applies to past, present and future acquisitions, making the potential scope for new damages liabilities wide indeed.

Second, attributing liability to an undertaking instead of a legal entity and applying the ECJ’s existing case law on undertakings can expand the legal exposure of companies in unexpected ways. The economic succession that featured in this particular case is unlikely to be a common scenario in damages claims, especially if claimants can use joint and several liability to target other cartel companies. Probably of more importance is that, based on the ECJ’s established case law, an undertaking can cover a number of legal entities in a company group. The most common application of this aspect of the concept of undertaking is parental liability where a parent company is held jointly and severally liable for fines with a subsidiary, even if the parent did not participate in the subsidiary’s anticompetitive conduct. Based on the ECJ’s reasoning, this now seems to apply to antitrust damages as well as fines. Furthermore, because an undertaking can cover different legal persons in different EU Member States, the judgment is likely to make it easier for claimants to establish anchor defendants in jurisdictions that claimants consider favourable. Over the coming years, innovative claimants and law firms are sure to test the boundaries of this judgment to its limits as they seek new applications for this ruling.

Third, the ECJ has now essentially copied into private enforcement a concept that was developed in and traditionally thought to apply only to public enforcement. This raises the obvious question of whether there are other EU law concepts and principles that have been developed and so far been used only in public enforcement but that could be applied also to private enforcement.

Finally, the judgment underlines that antitrust damages are clearly a new type of damages actions where even well-established national law concepts may be called into question as this new field of law slowly takes form.

Dittmar & Indrenius represents a number of claimants in the asphalt cartel damages litigation.

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