Private Equity Investors Are Not Immune to Antitrust Risks in the EU

April 11, 2014

Earlier this month, the European Commission imposed fines totaling nearly EUR 302 million on producers of underground and high-voltage power cables, based on allegations that the producers had engaged in illicit market sharing and customer allocation for a period of almost ten years beginning in 1999 (COMP/39.610 – Power Cables). Notably, the list of entities fined by the Commission includes not only the companies directly involved and their industrial owners but also an investment firm, Goldman Sachs, whose private equity arm, GS Capital Partners (GS), formerly owned Prysmian, one of the producers that allegedly participated in the cartel. In this case, the private equity investor is to be held jointly and severally liable for EUR 37.3 million of the EUR 104.6 million fine imposed on Prysmian.

A GS investment fund had acquired substantial ownership and control of Prysmian in 2005, but significantly reduced its stake following Prysmian’s IPO two years later and eventually sold its remaining shares in the company in 2009. There is no suggestion that GS representatives were involved in or had knowledge of Prysmian’s alleged anti-competitive conduct. Instead, it appears that the Commission’s decision (which has not yet been published) is based on a number of factors indicating that GS exercised “decisive influence” over Prysmian’s general commercial conduct during the relevant period. Competition Commissioner Almunia is quoted as saying that GS had extensive rights relating to the composition of Prysmian’s board and that GS employees were represented in the company’s decision-making bodies.

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