Exception to the Principle of Personal Criminal Responsibility in Competition Law Infringements

The general rule in competition law infringements is to apply the principle of personal criminal responsibility, which means that each business will be held responsible for its own actions. However, exceptionally, a business may be held accountable for the infringement of another business.

Today, case laws make it possible for a business to be held liable for another business’ anti-competitive actions since the infringing business may sometimes evade penalties.

A business may have ceased to exist in law or suspended its activities before that. Likewise, it may have completely changed its organizational structure, disposed of the infringing assets or transferred the infringing operations to another business, or have been acquired by a business operating in a totally different sector. In such cases, it is discussed if: there is an entity to pay an administrative fine; a business that has changed its organizational structure or disposed of its assets or certain operations can currently be held liable for its past infringement of competition law; the successor was aware of the anti-competitive conduct that took place before the acquisition and if it could be held accountable, i.e. whether it can be held liable for the competition infringements committed by the acquired business prior to the acquisition. In this framework, the challenge of identifying the liable business may be resolved in accordance with the “economic continuity principle/economic succession principle” adopted by the European Commission (“Commission”) and the EU courts.

Principle of Economic Continuity

According to the “economic continuity principle” or the “economic succession principle”, the Commission may hold a business accountable for a violation of competition law even if the business did not directly engage in the infringement.

Case laws entitle the Commission to hold another business responsible, as an exception to the principle of personal criminal responsibility. Based on the economic continuity principle, a business is considered to be the successor of an infringing business, and the successor is held responsible for the infringement. As commonly known, succession involves assuming the position of another by acquiring their rights or property, leading to a transfer of ownership. The economic continuity principle should be construed in a restrictive manner since it extends the obligations of companies and may harm a business that is associated with an infringing business.

While the legal termination of a business’ activities means that the business has ceased to exist legally, the “de facto” termination of its activities means that its economic activities have ended even though its legal existence persists. Thus, the Commission endeavors to enforce competition law effectively by holding economic successors accountable for infringements when there is difficulty in identifying an entity on which an administrative fine can be imposed while applying the principle of personal criminal responsibility.