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EU court confirms fine on Goldman Sachs for its subsidiary’s anti-competitive conduct

  • United Kingdom
  • Competition, EU and Trade
  • Private equity


On 12 July 2018, the EU General Court handed down its judgment in the case of Goldman Sachs Group v Commission (T-422/14), in which it confirmed that private equity investors, such as Goldman Sachs, can be held jointly and severally liable for price fixing fines imposed on subsidiaries in which they have invested.

The Cables Cartel and Goldman Sachs

In 2014, the European Commission (the ‘Commission’) imposed fines of over €300 million on a number of producers of high voltage power cables for participating in an anticompetitive cartel.

According to the Commission, the main European, Japanese and South Korean power cable producers participated in a cartel for almost ten years aimed at restricting competition for projects in specific territories by allocating markets and customers, thereby distorting the normal competitive process.

Although Goldman Sachs is a financial institution and did not directly take part in the price-fixing cartel, the Commission decided in 2014 to impose a fine on it due to the fact that Goldman Sachs was the majority shareholder in Prysmian, one of the participants in the cartel. Prysmian was fined €104,613,000 for its anti-competitive behaviour and the investment bank was held to be jointly and severally liable for €37,303,000 of the fine (covering the period of the cartel when Prysmian was controlled by Goldman Sachs).

The EU General Court (the ‘Court’) upheld the 2014 findings of the Commission and confirmed the fines imposed on all parties involved.

Liability of parent companies

Prior to this case, it was already an established principle of EU law that parent companies could be held liable for the cartel activities of their subsidiaries. A key case in this area is the 2009 ruling of the Court concerning the Dutch chemical producer Akzo Nobel. The reasoning behind the parental liability principle is the fact that the parent company has considerable managerial power and control over the decision-making process in the business conducted by its subsidiary. Where a parent owns 100% of the subsidiary, there is a presumption of control.

The role of investors

Goldman Sachs was involved in the present case because one of its funds (GS Capital Partners) had a majority shareholding (ranging between 84% and 91%) in Prysmian.

The main argument of Goldman Sachs’ was that it was not a parent company of Prysmian but instead that it owned funds in the company which were classified as “investment vehicles”. Moreover, the bank argued that its interest in Prysmian was only “a pure financial investment”.

The Court rejected these submissions and held that Goldman Sachs was able to “exercise decisive influence” over Prysmian due to the nature and amount of its shareholding which was comparable to “the ability it would have enjoyed as sole owner”. The Court considered that its very high majority stake in Prysmian gave Goldman Sachs the ability to exercise all the voting rights in the subsidiary’s shares.

The Court also concluded that the Commission was right to take into account other relevant factors, such as: (i) the bank’s power to appoint board members, (ii) to call shareholders meetings, and (iii) the role of the Goldman Sachs’ board within Prysmian strategic committee.

Generally, the Court approved the Commission’s presumption that if a subsidiary was part of a cartel, the parent company could have taken certain actions to influence and change the anti-competitive behaviour of the subsidiary. Rebutting this presumption is possible but, as this case confirms, this is very difficult to achieve.

Goldman Sachs may try running its arguments again should it seek to appeal the decision to the Court of Justice,.

The message of the Court is clear – investors and their executives can be held responsible for all parts of their businesses and should ensure compliance with competition rules at all levels. This case therefore signals a greater need for consideration of voting rights acquired by private equity investors, to ensure that pure financial investments do not give rise to financial liability resulting from competition law infringements.