Competition Law: Court of Justice of the European Union clarifies responsibility for sub-contractors’ anti-competitive behaviourContact
Author: Senior Lawyer Lennart Garnes
The judgment was awaited with great tension as the Court’s high profile legal advisor, the Advocate General (“the AG”), in its advisory opinion, had proposed a very strict and far-reaching presumption for the contracting undertaking’s responsibility for the sub-contractor’s unilateral collusive anti-competitive actions. Although slightly modified, the AG’s proposal appeared very much inspired by an undertaking’s full and direct responsibility for actions attributed to its employees and controlled subsidiaries.
Fortunately, at least from the perspective of undertakings utilising external service providers in the course of their business, the Court rejected the Advocate General’s proposed approach. Instead, the Court found that the contracting undertaking cannot automatically be held liable for the anti-competitive conduct of a hired independent service provider, the latter being a separate economic entity (undertaking).
Only under certain circumstances and conditions, the Court held, may the actions of a seemingly independent service provider nevertheless be attributed to the contracting undertaking.
Firstly, the contracting undertaking may be held liable if the service provider is de facto acting under the direction or control of the contracting undertaking, thus not exercising any genuine autonomy. As part of its reasoning, the Court compares this situation to the relationship between parent companies and subsidiaries.
Secondly, liability on the part of the contracting undertaking may also be found if the undertaking was aware of the anti-competitive behaviour of its sub-contractor and expressly or tacitly consented to or even actively contributed to the anti-competitive actions.
Finally, the contracting authority may be considered liable if it “could reasonably have foreseen” the anti-competitive acts at issue, and yet “was prepared to accept the risk” of non-compliance and anti-competitive effects that entailed.
In our opinion, the judgment manages to strike a reasonable balance between the principles of individual responsibility and legal certainty, at one hand, and the efficiency and enforceability of competition law on the other. In doing so the Court reconciles its former case-law on when an undertaking not directly involved in an anti-competitive concerted practice nevertheless is made liable through the use of independent external service providers. Contrary to the far-reaching proposed liability presumption of the AG, liability for the contracting undertaking now at least requires either de facto influence over the sub-contractor or some sort of awareness or anticipation of the anti-competitive conduct of its service provider.
Even though the judgment carries important legal clarifications and is more liberal and business-friendly than the AG’s proposed approach, challenges still remain for undertakings using external service providers: In order to avoid liability under the conditions set out by the Court, knowledge of these criteria and their backdrop should be raised among businesses, especially for employees dealing with external service providers and sub-contractors, e.g. within the construction industry. It would also be an advantage for businesses to adopt and implement management procedures to facilitate the identification and handling of any anti-competitive behaviour committed by its external service providers, including measures to properly distance itself from the sub-contractor’s competition law infringements.