Edison Wins Significant EU Competition Appellate Decision

June 16, 2011

Cleary Gottlieb won a significant appellate decision on an important issue of EU competition law for the Italian energy company Edison.

On June 16, 2011, the EU General Court annulled a 2006 decision of the Commission in the part where it handed down a €58 million fine on Edison in connection with the hydrogen peroxide cartel. The Commission had fined Edison based on the circumstance that, during the infringement period, it held the entire share capital of Ausimont which had taken part in the cartel. In case of a wholly-owned subsidiary involved in an antitrust infringement, the EU courts’ case-law allows the Commission to rely on a presumption that the subsidiary does not act autonomously on the market, but is subject to the decisive influence of its parent, which can thus be held jointly liable for the infringement. The parent company can rebut the presumption by adducing proof to the contrary.

Upholding the arguments set forth by Cleary Gottlieb’s lawyers on behalf of Edison, the General Court established that the Commission did not adequately reason its conclusion as to Edison’s liability for the infringement committed by Ausimont. In particular, the General Court found that, by not properly explaining its reasons for rejecting the evidence adduced by Edison to demonstrate that, notwithstanding its 100% participation to Ausimont’s share capital, it did not actually exercise a decisive influence on the commercial behavior of the latter, the Commission had effectively failed to examine and take a position on such evidence, thereby incurring a lack of reasoning vitiating the decision. The General Court also found that, contrary to the Commission’s contention, the pieces of evidence brought by Edison were clearly relevant and significant to the demonstration of Ausimont’s decisional autonomy.

The Edison judgment represents one of the very few instances of annulment of a Commission antitrust decision on the issue of parental liability. Indeed, a string of recent cases seemed to have made it virtually impossible for a parent company holding a 100% participation in a subsidiary involved in a cartel to rebut the presumption that it exercised decisive influence over its wholly-owned subsidiary and should thus be held liable for the infringement committed by the latter. The significance of the Edison judgment lies in the fact that the General Court has clearly affirmed that, when it makes use of the presumption, the Commission has a duty to scrupulously review the evidence adduced by the parent company in order to rebut the presumption and, if it believes that the evidence is not capable of doing so, to explain in detail, in its decision, why it deems so. Indeed, if it fails to do so, the Commission effectively transforms the presumption from rebuttable into conclusive, and this is contrary to the EU court’s case-law.