Investors can be held liable for cartel infringements quite easily In a judgment dated 26 January 2017, the Rotterdam District Court confirmed an earlier decision of the Dutch Authority for Consumers & Markets (ACM) by which the ACM imposed a fine of almost €1.3 million on a private equity firm. The fine related to a cartel infringement on the market for flour, committed by one of the investor’s former portfolio companies between 2001 and 2007.
In its original decision, the ACM did not suggest that the investor was or should have been aware of the company’s illegal conduct but merely established that the investor was in a legal position to influence the company’s strategic behaviour. The Rotterdam District Court now confirms that the investor can indeed be held liable for the infringement, because it was capable of exercising influence on the company’s conduct. It follows that the ACM does not need to demonstrate that a direct or indirect shareholder did actually use its powers to influence the conduct of its subsidiary.
Compliance Is Crucial Although the investor may still appeal the judgment, it is clear that private equity firms can quite easily be held liable for cartel infringements committed by their portfolio companies. This underlines the importance for an investor to ensure that its portfolio companies are fully compliant with the applicable competition rules. A compliance programme that is specifically tailored to each individual portfolio company can be of great value in this respect. Such a programme may include a code of conduct, compliance training, a compliance officer, a monitoring protocol and a whistle-blowers’ programme. In certain cases, it may also be appropriate to carry out a legal audit and look for possible on-going cartel infringements.
In this respect, we also point out that the maximum fines for cartel infringements in the Netherlands were recently raised considerably. As from 1 July 2016, the maximum fine that the ACM may impose on a company is 10% of its worldwide group turnover for every year that the infringement continued, up to a maximum of four years. The resulting maximum fine of 40% of the worldwide group turnover in case of an infringement of the Dutch cartel prohibition largely exceeds the maximum fine of 10% of the worldwide group turnover that can be imposed by the European Commission under the EU competition rules. Moreover, in cases of recidivism within five years, the maximum fine can even be doubled and therefore be as high as 80% of the worldwide group turnover.