In April we witnessed The European Commission impose a fine of €37.3 million directly on Goldman Sachs, holding the investor partly responsible for participation by its former portfolio company, Prysmian, in a cartel it ran with ten other producers of high voltage power cables. The European Commission justified making Goldman joint and severally liable for part of the fine imposed on Prysmian by the fact that during the period when Goldman was an investor in Prysmian, Goldman exercised decisive control over Prysmian.

The case is a stark warning to private equity investors that they may be held directly liable by competition authorities for anti-competitive activities of portfolio companies, even in cases where they do not hold majority stakes, if the terms of their investment enable them to control, either alone or jointly with other investors, the commercial policy of the investee company. The case also demonstrates that authorities are ready to pursue former investors retrospectively if anti-competitive activities were undertaken by a portfolio company during the period in which an investment was held.

Private equity investors should therefore take particular care in due diligence to look for signs of anti-competitive behaviour and satisfy themselves that sales and commercial teams are pursuing only legitimate strategies.

Post close, investors with access to management information, and in particular board representation must use their positions to verify the absence of any unlawful activity, and to ensure effective compliance policies are in place.