Spain: new judgment affecting the interpretation of the Single Economic Unit Doctrine

The Spanish High Court (Audiencia Nacional) has issued a judgement, in the framework of a special procedure for the protection of constitutional rights, which interprets the Single Economic Unit Doctrine away from settled case law of the Court of Justice of the European Union (CJEU).

The “Single Economic Unit Doctrine” and its implications for companies

Under competition rules, two or more separate legal entities may be treated as one because of their economic links. This means that when the European Commission or a National Competition Authority sanctions infringements of article 101 of the TFEU, such as cartels, they can make a parent company responsible for the wrongdoing of its subsidiary. In the Akzo Nobel case, the CJEU held that a 100% control over a subsidiary creates a rebuttable presumption of decisive influence over the subsidiary company. It came to the same conclusion in cases of “almost wholly owned” companies in the Legris Industries case.

This means that undertakings cannot be held liable for price agreements between companies of the same economic group; but, it also means that parent companies can be held responsible for their subsidiaries. This is settled case law at an EU level, as well as at a national level in Spain.

The Spanish Competition Authority (CNMC) sanction

In 2015, the CNMC, by applying articles 101 of the TFEU and 1 of the Spanish competition act, sanctioned Respol, S.A. for the wrongdoing of its 99,78% controlled subsidiary company Repsol Comercial de Productos Petrolíferos, S.A.

The CNMC considered in its decision that, by application of the Single Economic Unit Doctrine, Repsol, S.A. was liable for the conduct of its “almost wholly owned” company. The CNMC also considered that Repsol, S.A. did not meet the threshold under case law to rebut the presumption of control – by demonstrating that its subsidiary acted on its own initiative despite being “almost wholly owned” when infringing competition rules.

Based on this reasoning and on the settled case law of the CJEU and the Spanish courts, the CNMC directly sanctioned Repsol, S.A. for the wrongdoing of its subsidiary, without addressing its decision to its subsidiary.

The “controversial” Spanish High Court (Audiencia Nacional) judgement

Repsol, S.A. appealed the CNMC’s decision before the High Court in two separate proceedings: one related to the amount of the sanction and the substantive issues of the decision; and the other focused solely on the way the sanction was addressed, based on the constitutional rights of culpability and personal responsibility. In this second judicial process, Repsol, S.A. argued that the declaration of sole responsibility of the parent company in the decision, without addressing it also to its subsidiary, violated the Spanish constitutional principles and the provisions of the Spanish competition act.

Although the High Court started its reasoning by referring to the Akso Nobel case, the Single Economic Unit Doctrine and the requirements to rebut the presumption of control, its reasoning appeared to depart from settled case law by implicitly restricting the CJEU interpretation of the doctrine and its rebuttable presumption solely to subsidiary companies controlled 100% by the parent company.

The High Court based its reasoning on the finding that the objective responsibility principle despite the fact that the Single Economic Unit Doctrine and the law of the CJEU specifically address this issue, providing that the use of this doctrine avoids the objective responsibility of parent companies. Nevertheless, the High Court upheld Repsol, S.A.’s appeal and annulled the decision of the CNMC.

Conclusions and possible consequences

The main conclusion from this case is that the High Court appears to have detached itself from its own settled case law and that of the CJEU on the interpretation of single economic unit doctrine.

The major practical impact of this judgement is that it will undoubtedly be used by practitioners to defend companies in all pending proceedings against decisions of the CNMC that applied article 101 of the TFEU before the Spanish High Court.

Finally, this judgement and its possible implications for the uniform interpretation of EU law will have to be clarified, either by the Spanish Supreme Court, or by a preliminary ruling of the CJEU. The CNMC has the opportunity to appeal this judgement before the Spanish Supreme Court and the European Commission could act as Amicus Curiae in this proceeding, or in any other proceedings that may apply this judgement, to clarify the correct interpretation of the Single Economic Unit Doctrine in Spain and, accordingly, under EU law.

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