Are financial investors liable for competition law infringements committed by their investment subsidiaries?

The General Court (GC) clarified in its recent judgment in the case of Goldman Sachs Group v Commission (12 July 2018, T-422/14) that financial investors can be liable for competition law infringements committed by their investment subsidiaries in cases where they exercised decisive influence over their subsidiary.

The GC dismissed Goldman Sachs (GS)’ appeal against a fine of EUR 37.3 million imposed by the European Commission on GS and its subsidiary Prysmian in 2014. The latter was directly involved in the power cables cartel between 2005 and 2009 (see press release). GS argued, amongst other things, that the presumption of actual exercise of decisive influence over its subsidiary Prysmian was not applicable in this case because GS was a purely financial investor.

The GC reiterated that it is settled case law that a parent company is liable for its subsidiary’s anticompetitive conduct if the parent exercises decisive influence over its subsidiary and in particular over its market conduct. To this end, the European Court of Justice held in its 2009 Akzo judgement that where a parent company has a 100% shareholding in a subsidiary, it is able to exercise decisive influence. In addition, it also stated that there is a rebuttable presumption that the parent company does in fact exercise decisive influence over the conduct of the subsidiary.

The GC also clarified – in line with GS’ argument – that the imputation of liability to the parent is indeed not applicable to a “purely financial investor” and further that being a “purely financial investor” is a circumstance in which a parent company could rebut the presumption of actual exercise of decisive influence. However, at the same time the GC points out that a “purely financial investor” is namely an investor which holds shares in a company in order to make a profit, but which refrains from any involvement in its management and in its control. The GC concluded that GS did not fulfil these criteria.

During the time of the infringement where GS held 100% of Prysmian’s voting rights, it was in a position to exercise total control over its subsidiary, not least because of the absence of any other shareholders that would be able to object to that control. In addition, GS initially also had a majority stake in the share capital of Prysmian during this time (roughly between 84 % and 91 % before the IPO date). The GC found this situation comparable to that of a sole owner of a subsidiary and thus applied the presumption of actual exercise of decisive influence established in the previously mentioned Akzo judgement. The GC also confirmed the European Commission’s analysis of other objective factors that support the finding of liability of a parent company during the remaining time of the infringement. These factors can be, for example, the appointment of members of the board of directors, the power to call shareholders’ meetings, as well as the participation of the parent company in the strategic committee of the subsidiary.

This judgment clarifies the liability of financial investors for competition law infringements committed by their subsidiaries. In general, they are treated the same as any other parent company. However, the presumption of actual exercise of decisive influence and thus liability can be challenged by “purely financial investors”. Against this background, financial investors need to carefully examine their investments, in particular, with respect to voting rights in order to ensure that their involvement in a subsidiary indeed qualifies as a “purely financial investment”. This is particularly important because the liability for an infringement of a subsidiary during the time of ownership can still exist even after an divestment.