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Where two or more companies form a joint venture company they will be liable for any infringements of competition law by the joint venture company unless it is allowed to operate independently from its parents. To avoid competition liability, parent companies must avoid having a decisive influence over the joint venture company or giving it "specific instructions or guidelines on individual elements of commercial policy". Where the parent companies do have such a decisive influence or give such specific guidelines or instructions they should put in place a robust competition compliance programme.
Earlier this year the European Union General Court held that Dow Chemical Co and EI du Pont de Nemours & Co were jointly and severally liable for the anti-competitive conduct of a joint venture company in which they each had a 50% interest. The joint venture company (DDE) had participated in an illegal price-fixing and market-fixing cartel in relation to chloroprene rubber.
The General Court established this liability by regarding the joint venture company as an "undertaking" with each parent company. The General Court also found that both of the parent companies had been in a position to exercise "decisive influence" over the conduct of DDE and had actually done so.
The box below details the ways in which DDE was decisively influenced by its parents.
The General Court stated that parent companies have "a specific responsibility to ensure that all subsidiaries over which they hold decisive influence comply with competition law".
Dow Chemical Co v European Commission (T-77/08) and EI du Pont de Nemours & Co v European Commission (T-76/08) (Appeal pending)
Where did they go wrong?
"Decisive influence" was considered as being exercised in this case because:
- DDE's Members Committee was established to supervise and manage the business, yet DuPont and Dow each had an absolute right of veto over decisions made by the Committee
- The top managers in DDE were individuals from senior management positions of the parent companies. These individuals were involved in anti-competitive meetings
- The Members Committee agreed to the closure of a DDE production plant, which could not have happened without the agreement of the parent companies, which appeared to be acting through the Members Committee
- The parent companies had conducted an internal investigation to establish whether DDE had participated in the cartel. This highlighted that the parent companies believed that they had the means of requiring the joint venture to abide by their competition rules
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