(CN) – It was unjustified to double the fine against a French chemical company found to have participated in an acrylic glass cartel days after spinning off from its parent, a European court ruled.
The European Commission in May 2006 imposed a fine of about $319 million on Arkema France, which at the time was called Arkema SA. A few days before the commission made its decision, the company officially broke off from parent companies Total SA and Elf Aquitaine SA, which were also held liable for cartel penalties.
The General Court of the European Union said that principally, a wholly owned subsidiary does not act independently, and it is up to the parent company to prove otherwise.
Such evidence was lacking in this case, the court continued in rejecting motions to annul the fines.
But the European Commission’s doubling of an initial fine based on Total’s high revenues was excessive, the court continued, since the fine wouldn’t even apply to the former parent as it was imposed after Arkema was floated on the stock market.
A fine increase of 25 percent should sufficiently deter future violations, the Luexmbourg-based court concluded. The court set Arkema’s fine at $165 million.
The court also rejected arguments that other cartel penalties that a company faces should justify reduction of financial liability, as that could lead to a situation where a company “could multiply its participation in cartels and see the cost of each fine diminish progressively.”