Dutch Competition Authority Fines Investment Firms: How Much Influence Is “Decisive”?

Private equity firms can be held liable for cartel infringements of their portfolio-companies. This has been confirmed by the judgment of the EU Court in Kendrion (2013) and by the European Commission in 2014 when it fined Goldman Sachs €37.3 million in relation to the High Voltage Cable case. Following these examples, the Dutch competition authority (ACM) has now for the first time imposed fines on private equity investment firms.

In 2010, the ACM imposed fines on Dutch, Belgian and German millers and several parent companies in relation to the flour cartel. One of the millers fined is Meneba. Subsequently, two other millers that were fined complained to the ACM about unequal treatment, arguing that their shareholders had been held accountable, whereas the Meneba shareholders had not. Following these objections, the ACM has re-evaluated its position towards the investment companies that were, at the time of the infringement, indirect shareholders in Meneba.

On 30 December 2014, the ACM published the decision by which it imposed fines on subsidiaries of investment firms Capital Investors Group Limited (CIGL) and CVC Capital Partners Europe Limited (CCPEL) and on subsidiaries of investment firm Bencis Capital Partners B.V. (BCP) with regard to the successive periods during which these investment firms were shareholders in Meneba.

In its assessment, the ACM relied on the principles established in EU case law on parental liability, according to which a parent company can be fined even though it had no personal involvement in the infringement. According to this case law, if a parent company exercises decisive influence over its subsidiary, there is a single economic unit and therefore a single undertaking for the purposes of the cartel prohibition. If a parent company holds (nearly) 100 percent of the shares, there is a rebuttable presumption that the parent company does in fact exercise decisive influence over the conduct of its subsidiary. 

In the case of the investment firms that owned shares of Meneba, however, the ACM could not rely on the presumption that these firms did exercise decisive influence. CIGL and CCPEL only owned 41 percent of the shares (during 2001-2004) and BCP owned 92 percent of the shares (during 2004-2007). Therefore the ACM had to go into more detail and investigate the influence actually exercised by the investment firms over Meneba. Aspects that the ACM deemed particularly relevant included, for example: members of the statutory board were nominated by the investment firms; the investment firms had appointed one or more representatives to the supervisory board; and, according to the shareholders agreement, strategic decisions had to be approved by the shareholders. 

These decisions confirm that not only group holding companies but also private equity investment firms can under circumstances be considered to form a single economic unit with their subsidiaries. This exposes private equity firms to liability for cartel fines, even in circumstances when they had no personal involvement in, nor knowledge of, illicit cartel arrangements. As demonstrated by this decision, there may be such risk even if the private equity firm holds no more than 41 percent of the shares. 

The present legal landscape requires a thorough due diligence prior to any acquisition, but in case of investment firms also the fund structure and arrangements that might give rise to “decisive influence” must be carefully assessed. When confronted with an antitrust investigation into a portfolio company, investment firms should seek to convince the authorities at the earliest possible stage that no decisive influence was exercised.