On 2 April 2014, the European Commission fined a well-known investment company amongst 18 other companies for participation in a market and customer sharing cartel in high voltage power cables. The importance of this decision is that it shows investment companies, which may not have any participation in their portfolio companies cartel activity, can be held liable nethertheless.

The European Commission considers that the behaviour occurred over a 10 year period and that the cartel had a worldwide effect in the market for high voltage power cables. The fines for all the participants combined totaled over €302 million.

The Commission considers that the investment company wielded a decisive influence in an Italian cable manufacturer which participated in the cartel. The investment company was therefore held liable for its actions under the established EU principle of parent company liability. This finding of liability follows the Akzo Nobel case of 2009 which helped confirm the principle that parent companies can be held liable for the competition infringements of their subsidiaries.

The effect of the current case on the M&A marketplace could be for buyers to increase their due diligence into competition infringements when buying companies. Whilst sellers may give standard warranties as to regulatory or competition infringements, large fines levied years down the line will fall outside likely financial and time limitation periods, leaving the buyer without redress. This case shows the importance of detailed competition due diligence and the identifying of risks from the outset of the acquisition process.

For more information, please see the European Commission’s press release found here.