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