Important Compliance Message – Do Not Obstruct Raids
As recently reinforced, companies obstructing dawn raids will be severely punished, thus competition law compliance programmes in the EU must adequately train personnel in how to deal with raids, and obstruction issues must be reinforced on the day of a raid.
On May 24, 2011, the European Commission (EC) fined Suez Environnement and its subsidiary Lyonnaise des Eaux France (LDE) EUR8 million for the breach of a seal affixed by the EC during a dawn raid at LDE’s premises. The seal was affixed at the end of the first day of the raid (in April 2010) to secure a room overnight. Upon returning the next morning, EC officials found the seal had been broken. LDE and Suez Environnement admitted that an LDE employee had breached the seal, but argued that it was an unintentional act.
Unintentional or not, the EC took a very strong line stating, “the breach of a seal is a serious infringement of EU competition law, because this undermines the effectiveness of inspections.” This is entirely consistent with its previously expressed views, not least in the infamous E.ON case from 2008, in which E.ON was fined EUR38 million for breaking a seal. In the current case, the fine, although still large, was reduced due to the cooperation of LDE and Suez Environnement.
Parental Liability for Competition Law Infringements
The EU General Court provided a reminder on May 17, 2011, that parents are responsible for the behaviour of their subsidiary companies, since the latter are usually not treated as independent companies.
In judgments involving the Elf Aquitaine group, the court confirmed, in accordance with existing case law, that there is a rebuttable presumption that a subsidiary wholly owned by its parent company does not freely determine its own conduct on the market. Such a presumption also applies where a parent company owns almost all of the share capital of its subsidiary. Elf Aquitaine held more than 97% of the shares of its subsidiary Arkema France, and did not furnish evidence capable of rebutting the presumption of parental control. Arkema France’s breaches of competition law could therefore be imputed to Elf Aquitaine.
The court also confirmed that, when setting fines, the EC has the power, but is not obliged, to impute the responsibility for an infringement committed by a subsidiary to its parent company. This issue can be important for example following a disposal, since a vendor which is treated as having controlled a former subsidiary can find itself the subject of a fine for competition law breaches of that subsidiary (for the period up to completion of the sale).
EC Focuses on Financial Services
The EC is actively investigating the financial services sector, and it is likely that more cases will be forthcoming. Two current cases involve specific companies and a key area of EC concern, financial data/market infrastructure. The Standard & Poor’s investigation concerns the distribution of International Securities Identification Numbers developed by the International Organisation for Standardisation (ISO). The second case involves Thomson Reuters and concerns the restrictions the company imposes on the use of Reuters Instrument Codes (RICs).
In addition, the EC has opened at least two general investigations. One is into Credit Default Swaps (CDS) – the first time it has looked at the markets for derivatives. Part of the CDS investigation involves 16 investment banks and Markit, the leading provider of financial information in the CDS market. The second part involves nine large banks – all of them also part of the first investigation – and the agreements they concluded when a company called The Clearing Corporation was sold to Intercontinental Exchange (ICE). The second investigation, according to press reports, is looking at whether banks manipulated the daily London interbank offered rate (Libor), which is an issue also being examined by other regulators.
The financial crisis has forced a regulatory focus on financial services in the EU, and these cases and EC statements indicate that competition law enforcement will strongly back this up over the next few years. Companies active in this sector would be well-advised to audit their EU activities so as to pre-empt any concerns.
Additional EU/UK competition law news coverage can be found in our news section.