EU competition law is, in theory, only applicable if there is a link between the EU and the agreement or practice at issue. According to the terms of Articles 101 and 102 TFEU, the link results from anticompetitive effects produced on the territory making up the internal market.

However, when the external undertakings have subsidiaries on the EU territory, the anticompetitive behavior, as well as the restrictive effects, are located in the Union and in those circumstances the EU authorities do not need to refer to the effects theory: the unlawful behavior is first attributed to the subsidiaries and then to the parent company established elsewhere. However, in order to do this, a relationship of control must be established and that control must be effective. According to the Court of Justice, when the behavior of a parent company outside the internal market and that of its subsidiary established on the territory of the Union are characterized by an obvious united action, the two companies must be deemed an economic unit and are jointly and severally responsible for the conduct complained of. The single economic entity theory has the advantage of avoiding the implementation difficulties related to the extraterritorial application of competition law.