United States: Private Equity Funds At Higher Risk Of Antitrust Fines (Focus On Private Equity

Recent trends in competition law enforcement in Europe show that private equity funds are increasingly exposed to potential liabilities for alleged infringements of their portfolio companies.  Therefore, private equity funds investing in companies that operate in Europe should consider putting in place adequate measures to minimize such risks.

Breach of competition laws may result in serious fines of up to 10 percent of the group turnover of the company in question being imposed on those companies which are found to have participated in alleged infringements by the European Commission (the Commission) and/or the applicable national competition authorities in the European Economic Area.  In addition, decisions of the Commission and/or national competition authorities are binding proof of a breach of competition law, which, in turn, can result in follow-on damage claims being brought before the national court of the applicable jurisdiction within the European Economic Area.

Under what is known as the "parental liability doctrine," competition authorities can attribute liability to entities that exercise a "decisive influence" over a company or group of companies that have participated in an alleged infringement.  As a consequence, the controlling entity or entities are considered jointly and severally liable for the fine imposed on the infringing subsidiaries.
Decisive influence is presumed by the competition authorities where there are wholly-owned or almost wholly owned subsidiaries, and it is extremely difficult for parent companies to rebut such presumption in practice.  Where this is not the case, the competition authorities are required to prove that the parent company exercised decisive influence.  Any economic, organizational or legal link between the two entities would, in principle, be sufficient to meet the decisive influence test and would, in principle, equally apply in cases of minority shareholdings.  In addition, parental liability can be found between two entities even after the subsidiary involved in the infringement has been disposed of by the controlling entity and may arise even if the controlling entity was not involved in or aware of the infringement.

Past decisions of the Commission and the case law of the European courts show that private equity funds are not considered any differently from other businesses for the purposes of the parent liability doctrine.  The fact that private equity funds are only involved in the high-level strategy and commercial policy of their portfolio companies does not exclude their potential liability, with respect to alleged infringements.  To the contrary and as we expand on below, recent trends in competition law enforcement seem to indicate that private equity funds are increasingly exposed to potential liabilities for competition law infringements of their portfolio companies. 

In its decision of April 2, 2014, in relation to the underground and submarine high-voltage power cables cartel case (COMP/39610), the Commission held the parent companies of the producers involved liable, on the basis that they had exercised decisive influence over the producers.  The fines levied by the Commission in this case totalled €301.6 million.  One of the businesses found liable was Goldman Sachs, the former owner of Prysmian, which is one of the companies that allegedly participated in the cartel.

Goldman Sachs had acquired a (minority/majority) stake in Prysmian in 2005 through its private equity fund and completely divested of it in 2010.  The fact that Goldman Sachs no longer owned Prysmian did not prevent the Commission from fining the bank, holding that it was the entity ultimately exercising decisive influence over Prysmian at the time of the alleged infringements.
This is not the first time that the Commission has imposed fines on private equity funds for alleged infringements by their portfolio companies.  In 2009, the Commission fined the German company SKW Stahl-Metallurgie (SKW) and its former parent companies, amongst which was the investment company Arques Industries, for alleged participation in the calcium carbide cartel from 2004 to 2007.  During that period, SKW was owned by several parent companies, and the Commission held each one liable for its respective period of ownership.  The Commission's decision was confirmed by the General Court of the European Union on January 23, 2014.  However, the judgment was appealed on May 8, 2014, and the case is now pending before the Court of Justice of the European Union.

Private equity firms investing in companies operating in the European Union should take note of the recent decisions in competition law enforcement handed down by the Commission.  In order to minimize potential risks, private equity firms would be advised to ensure that:

  • Adequate due diligence is carried out that is sufficient to capture potential competition law infringements by prospective subsidiaries
  • Existing and prospective subsidiaries have in place tailored and effective competition law compliance programs and codes of ethics, and that these are rigorously implemented.  Such programs and codes should, amongst other things, provide for the dismissal of employees and directors who fail or refuse to comply with antitrust rules.  In Parker ITR and Parker-Hannifin v. Commission T-146/09 (currently under appeal), the General Court dismissed Parker's argument that the conduct of its subsidiary's directors prevented Parker from exercising its control over the subsidiary.  The General Court held that there was nothing to prevent Parker from dismissing the directors who deliberately ignored the group's code of ethics, which, amongst other things, prohibited its employees from taking part in collusive activities.
  • Consider the feasibility of contractual arrangements that provide for allocation of liability between the portfolio companies and parent companies and/or an indemnity in favour of the parent companies

Private Equity Funds At Higher Risk Of Antitrust Fines (Focus on Private Equity - July 2014)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions