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In two landmark decisions, the CJEU clarified the limits of the “single economic unit” doctrine in cartel damages proceedings. By limiting legal exposure of defendants across multiple EU member states, the judgments balance the need for efficient and speedy legal proceedings with the need for effective protection of the defendants’ procedural rights.
The CJEU had already confirmed that the “single economic unit” doctrine, according to which a parent company and its subsidiary can be considered as a single 'economic unit' or 'undertaking' for the purpose of competition law infringements, also applies to private actions. According to the CJEU, the concept of ‘undertaking’ within the meaning of Article 101 TFEU cannot have a different scope when the Commission imposes a fine compared to damages actions. Consequently, the CJEU held that actions for damages due to breaches of EU competition law can be brought against either the parent company, its subsidiaries, or both (case C 882/19 – Sumal).
The CJEU has now ruled on procedural issues in connection with the “single economic unit” doctrine in two different damages cases. The court clarified that the doctrine pertains to considerations of substantive law and does not extend to procedural questions.
In 2018, Transsaqui brought an action for damages against Volvo. It served the summons to Volvo’s subsidiary in Madrid instead of Volvo’s headquarters in Sweden on the basis that Volvo and its subsidiary formed a single economic unit. The Supreme Court of Spain referred the case to the CJEU to decide if the document instituting the proceedings had been validly served.
The CJEU ruled that a parent company is not validly summoned to appear where service of the document initiating the proceedings is effected at the address of its subsidiary domiciled in the member state in which the action is brought, even if the parent company forms an economic unit with that subsidiary. The concept of the single economic unit does not justify the service of documents intended for a parent company at a subsidiary's address.
MOL, an undertaking established in Hungary with a controlling interest in several subsidiaries across Europe, brought an action for damages against Mercedes-Benz in Hungary, claiming that its Budapest headquarters, being the centre of its financial interests, was the 'place where the harmful event' occurred within the meaning of Article 7(2) of the Recast Brussels I Regulation. Mercedes-Benz challenged the jurisdiction of the Hungarian courts claiming that, if at all, only MOL’s non-Hungarian subsidiaries may have suffered a loss. The case proceeded to the Supreme Court of Hungary, which sought guidance from the CJEU on whether the “single economic unit” doctrine may be relied on for establishing jurisdiction in this scenario and, consequently, on whether the parent company’s registered office can be considered as the 'place where the harmful event occurred'.
The CJEU ruled that the 'place where the harmful event occurred' cannot be construed so extensively as to encompass any place where the adverse consequences of a competition law infringement, actually occurring elsewhere, can be felt. The court explained that the objectives of proximity and predictability of the rules governing jurisdiction and consistency between the forum and the applicable law preclude a reverse application of the concept of 'single economic unit' for the determination of the 'place where the harmful event occurred'. Therefore, this place does not cover the registered office of a parent company bringing an action for damages for harm suffered solely by its subsidiaries, even if it is claimed that that parent company and those subsidiaries form part of the same economic unit.
The rulings are good news for defendants. The CJEU clarifies that its case law on the application of the “single economic unit” doctrine in private enforcement of competition law relates only to substantive law and does not extend to procedural rules. As noted by Advocate General Szpunar in his Opinion in Volvo, while a claimant may choose between pursuing the parent company, its subsidiary, or both under the “single economic unit” doctrine, he cannot cherry-pick the procedural law applicable in each scenario.
This is a positive development because navigating the EU’s legal framework, especially in cases with cross-border elements, can be exceptionally challenging for multinational corporations. The CJEU confirms that competition disputes are not exempt from the procedural guarantees that are key to ensuring that each party has a fair opportunity to present their case and defend their interests under equivalent conditions.
For instance, the Volvo judgment adheres to the requirement for judicial documents intended for a person to be actually and effectively delivered to that person. This ensures that defendants have the necessary information to prepare their defence adequately. Neither cost considerations related to translation and document service nor the need for efficient and speedy transmission of documents should compromise the fundamental right to a robust defence.
Moreover, it is vital for defendants that the rules of jurisdiction are highly predictable. By clearly delineating the boundaries for establishing jurisdiction in competition cases based on the “single economic unit” doctrine, the MOL judgment helps defendants to anticipate the legal jurisdictions in which they might be sued. This is crucial for multinational corporations, which may face numerous legal challenges across various jurisdictions.
The CJEU’s decisions bring clarity on procedural aspects in cartel damages cases, empowering companies to better anticipate legal challenges, strategically plan their defence, and safeguard their interests across different EU jurisdictions.