Cartel Fines: Liability Of Private Equity Funds

The European Commission has held Goldman Sachs jointly and severally liable for a cartel infringement committed by Prysmian, an Italian cable maker formerly owned by Goldman Sachs' private equity arm. The decision is a stark reminder that EU competition law allows the corporate veil to be readily pierced and that private equity companies are no exception.

The Power Cables Decision

The European Commission has found that 11 producers of underground and submarine high voltage power cables operated a cartel; it has imposed fines totalling EUR 302 million.1

Goldman Sachs (GS) has been held liable for the infringement. There is no allegation that GS actually participated in, or was even aware of, the alleged cartel. Rather, the Commission imposed a fine on GS purely on the basis of its parental liability doctrine because GS, through its private investment fund GS Capital Partners, held a stake in Prysmian, a cable manufacturer, at the time of the alleged cartel infringement.2

The Commission has frequently been successful in imputing, in case of a cartel infringement, the illegal conduct of a subsidiary to its parent. The fine imposed on GS makes clear that EU competition law allows the corporate veil to be readily pierced and that private equity companies are no exception.

Parental Liability - Principles Applicable in the European Union

In the EU, it is established case law that, in case of a cartel infringement, the conduct of a subsidiary may be attributed to the parent company even if the parent did not participate in, or was not aware of, the alleged cartel. This is particularly the case where the parent exercises "decisive influence" over the conduct of its subsidiary.3 In practice, the test is easy for the Commission to satisfy. Liability may be imputed to the parent even if its influence only has to do with high level strategy or commercial policy.

The Commission cannot, however, merely find that the parent is in a position to exercise decisive influence over the conduct of its subsidiary; it must also check whether that influence was actually exercised.4Where a parent company holds (almost) all of the capital in a subsidiary, there is a rebuttable presumption that the parent exercises decisive influence over its subsidiary.5 In the absence of a (nearly) 100% shareholding, the Commission must adduce evidence of the exercise of decisive influence.6

The so-called "100% presumption" is rebuttable. A parent company may rebut the presumption of...