Risks Facing Acquiring Companies: Liability To Pay Damages For EU Competition Law Infringements Committed By Acquired Businesses

On 14 March 2019, the Court of Justice (CoJ) delivered a landmark judgment confirming that acquiring companies may be liable to pay damages for the harm caused by an acquired company's infringement of EU competition law.

The judgment may be expected to have significant implications for the scope of due diligence to be undertaken in the context of transaction planning, as well as the negotiation of contractual protections concerning potential future liabilities, and the maintenance of competition law compliance programmes more generally.

Risks facing an acquiring company

The CoJ has confirmed that where an acquiring company:

acquires all of the shares in the acquired company, and proceeds to dissolve this entity; and then carries on the commercial activities of that acquired company, the acquiring company may be liable for the harm caused by the acquired company's participation in a cartel that infringed EU competition law.

In such circumstances, the acquiring company may be sued in private actions for damages by third parties suffering harm as a result of the acquired company's infringement, even if the acquirer had no knowledge of that infringement.

Reference to the CoJ from the Supreme Court in Finland

The judgment in Vantann kaupunki v Skanska Industrial Solutions & Others1 followed a reference to the CoJ by the Supreme Court in Finland for a preliminary ruling in the context of a private action for damages before the domestic courts in Finland.

Action for damages commenced in Finland

In this private action, the claimant (the City of Vantaa, Finland) is seeking damages from three defendant companies, on the basis that they are jointly and severally liable for the claimant's additional costs incurred in respect of asphalt works, as a result of a cartel that operated in the asphalt market in Finland between 1994 and 2002.

Each of the three defendant companies had directly (or indirectly) acquired the share capital of a company that had participated in the cartel, with each of these acquired companies then subsequently being either liquidated or wound up on a voluntary basis.

Fines imposed on the basis of economic continuity

Following an investigation into the cartel by the national competition authority, the Supreme Administrative Court in Finland imposed fines on the three defendant companies for the conduct of the acquired companies (as well as on one defendant company for its own conduct in participating in the cartel), on the basis...