Supreme Court: par­ent companies could be held accountable for sub­sidiaries’ com­pe­ti­tion vi­o­la­tions

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The Supreme Court of Latvia has made a rul­ing, in ac­cor­dance with which Latvia’s com­pe­ti­tion rights are es­tab­lished in a way that per­mits author­i­ties to pun­ish par­ent companies for vi­o­la­tions of com­pe­ti­tion rights com­mit­ted by their sub­sidiaries.

This means Com­pe­ti­tion Coun­cil will be au­tho­rized to ap­ply penal­ties to par­ent companies in sit­u­a­tions when com­pe­ti­tion vi­o­la­tions are com­mit­ted by their sub­sidiaries, as BNN was told by the coun­cil. In 2014, the Com­pe­ti­tion Coun­cil found that mul­ti­ple Moller Group companies had been sys­tem­at­i­cally co­or­di­nat­ing their pro­cure­ments over a course of at least five years. CC con­cluded that those sub­sidiaries did not per­form their ac­tiv­i­ties in­de­pen­dently of their par­ent companies. Be­cause of that, CC ap­plied ac­count­abil­ity for sev­eral par­ent companies – Moller Auto Baltic AS, Har­ald A. Moller AS and Heinz Wilke Auto-han­del Gmbh. CC ap­plied ac­count­abil­ity for par­ent companies af­ter finding their 100% par­tic­i­pa­tion in their sub­sidiaries.

Af­ter re­view­ing an ap­pli­ca­tion from par­ent companies re­gard­ing un­jus­ti­fied ap­pli­ca­tion of re­spon­si­bil­ity, the ad­min­is­tra­tive re­gional court sat­is­fied it, and CC had the mea­sure can­celled par­tially. It is men­tioned in the rul­ing that the Com­pe­ti­tion Law does not per­mit ap­pli­ca­tion of re­spon­si­bil­ity to a com­pany that is not re­spon­si­ble for vi­o­lat­ing the law, CC ex­plains.

The coun­cil also notes that af­ter re­view­ing a cas­sa­tion com­plaint from the Com­pe­ti­tion Coun­cil, the Supreme Court also can­celled ad­min­is­tra­tive re­gional court’s rul­ing and ad­mit­ted that the anal­y­sis in­cluded in the rul­ing is wrong and in­suf­fi­cient. The sub­ject of the Com­pe­ti­tion Coun­cil is a mar­ket par­tic­i­pant that per­forms economic ac­tiv­i­ties re­gard­less of their economic unit or le­gal for­mat. With that, par­ent companies are also sub­jects of the Com­pe­ti­tion Law. It should be men­tioned that the same stance is taken by the Euro­pean Union Court, whose rul­ings are also ap­pli­ca­ble for Latvia’s leg­is­la­tion. CC ex­ec­u­tive man­ager Māris Spička: «The rul­ing of the Supreme Court puts to rest any un­cer­tain­ties in re­gards to whether or not par­ent companies have any re­spon­si­bil­ity over their sub­sidiaries’ com­pe­ti­tion vi­o­la­tions. Hope­fully, the court’s rul­ing will mo­ti­vate par­ent companies in Latvia to re­form their su­per­vi­sory meth­ods to en­sure com­pli­ance with com­pe­ti­tion re­quire­ments.» The Supreme Court also de­clared ad­min­is­tra­tive re­gional court’s con­clu­sion on the need for CC to prove the fact that par­ent companies and their sub­sidiaries are one whole mar­ket par­tic­i­pants in a sit­u­a­tion when a par­ent com­pany’s pres­ence is proven 100% as in­cor­rect.

Pan­therMe­dia/SCANPIX

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