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Antitrust liability and subsidiary companies

06 July 2015

In Tesco Stores Ltd & ors v Mastercard Inc & ors [2015] EWHC 1145, 24 April 2015, Mastercard was unsuccessful in attempting to strike out the claimants' antitrust claim in relation to the setting of multilateral interchange fees. Summary judgment was also refused. Mastercard had argued that Tesco Bank was part of the same economic entity as the Tesco claimants, and had been engaging in similar allegedly anticompetitive conduct as Mastercard. The claim against Mastercard for breach of competition law rules will now proceed to trial. Although this is an interlocutory judgment, the judge's remarks shed new light on the application of the Akzo Nobel precedent to the question of when "horizontal" liability can be imputed from one to another subsidiary of the same group.

The issues in this case arose from litigation brought by Tesco Stores against Mastercard for a breach of EU and national competition law through the imposition of multilateral interchange fees. The defendants (Mastercard) sought to strike out the application under the principle of ex turpi causa on the ground that Tesco Bank, a wholly owned subsidiary of Tesco Stores, had participated in the same allegedly unlawful conduct as the defendants. In the defendants' view, the fact that Tesco Bank and Tesco Stores belonged to the same economic entity barred Tesco Stores' claim from proceeding to trial.

Mrs Justice Asplin DBE dismissed the defendants' request for summary judgment and ordered that the case proceed to trial. The case was not suitable for a strike out because it involved difficult questions of law in a developing area. Four issues were specifically addressed by the court:

(1) Single economic entity: are Tesco Stores and Tesco Bank part of the same economic entity? The test is whether the two companies form a unitary organisation of personal, tangible and intangible elements which pursue a specific economic aim on a long-term basis. There is a presumption that a parent company exercises decisive influence over its wholly owned subsidiary and it is for the company denying liability to rebut such presumption. In this case the court recognised that Tesco plc had decisive influence over both the claimant Tesco Stores and Tesco Bank, however the question was whether joint and several liability could be imputed on two subsidiaries "horizontally" when there was no question of the "vertical" relationship with the parent company. Asplin J relied on Case C-97/08 P Akzo Nobel v Commission to hold that a wide range of factors should be considered before coming to a conclusion as to whether joint and several liability could be imposed on Tesco Stores for Tesco Bank's conduct. In particular, the court would need to first reach a view on the specific nature of the infringement and the activities involved before deciding whether liability can be imposed on a different entity within the Tesco group. In summary, even if it were found that the two entities operating horizontally in this case formed a single economic entity, it could be said that the claimants had a "realistic as opposed to a fanciful" prospect of success in showing that the alleged infringement by Tesco Bank should not be imputed to Tesco Stores. The judge remarked that responsibility within an economic entity is not imposed on the basis of strict liability only and instead requires a degree of "decisive influence" being exercised by one entity over the other entity's conduct. The judge did not express a view as to the exact degree of influence that is required.

(2) Did Tesco Bank participate in the alleged infringement? The court held that, given the absence of disclosure amongst other factors, it was not at this stage merely fanciful to suggest that the claimants may succeed in showing that Tesco Bank was not a party to the infringement in question. Thus the case should proceed to trial.

(3) Does the English law principle of ex turpi causa apply? In order to determine whether the principle of ex turpi causa applied to this case, the court would need to establish each of the claimants' knowledge and/or joint state of knowledge regarding the unlawful conduct, in accordance with Lord Sumption's test in Les Laboratoires Servier & anr v Apotex Inc & ors [2014] 3 WLR 1257. Therefore the issue should be reconsidered at trial.

(4) Does Tesco Bank bear a significant responsibility for the infringement? Asplin J held that the issue was fact-specific and was thus to be decided on the basis of factual evidence at trial.

Comment

This case is yet further proof that courts are not willing to strike out claims that involve complex issues in developing areas of the law. The judge makes interesting remarks regarding the extent to which joint and several liability can be imputed horizontally on an undertaking that is part of the same group of entities yet not necessarily in a position to exercise decisive influence on the undertaking which engaged in the allegedly unlawful behaviour. The case emphasises that, in light of the Akzo Nobel case, the question of joint and several liability requires a complex consideration of a wide range of factors that cannot be determined summarily. In addition, it appears that the imputation of liability on another undertaking is a factual question which can only be answered by reference to the specific factual framework within which the alleged unlawful conduct took place, eg by asking whether in fact Tesco Stores had any control or influence over Tesco Bank's behaviour in relation to multilateral interchange fees. Another point that is worthy of note is the court's recognition that, in accordance with Lord Sumption's analysis in Apotex, the principle of ex turpi causa in English law should generally only apply to criminal or "quasi criminal" conduct. Therefore in order to establish a defence of ex turpi causa it might be necessary to prove the requisite mental state.