Investment firms liable for cartel participation by companies in which they invest

Written on 22 Oct 2015

On 20 October 2015, the Dutch national competition authority (the ACM) confirmed its decision that investment firms can be fined for anti-competitive actions by businesses in which they invest, if it can be shown that the investment firms exercise ‘decisive influence’ over the business involved. 

Following its investigation into a flour cartel, in December 2014 the ACM issued its decision, finding that certain flour companies – including Meneba  had entered into a market sharing agreement contrary to competition law. The ACM held that Meneba’s ultimate parent entities were jointly and severally liable for the infringements, concluding that:

  • Bencis Capital Partners group held over 90% of shares in Meneba and were liable for €1m of the fine imposed on Meneba; and
  • two companies in the CVC group, which had previously held c.40% of shares in Meneba during the period of the infringement, were jointly and severally liable for €450,000 each. 

Bencis Capital Partners and Bencis Buyout Fund II appealed the ACM’s decision, arguing that their influence over Meneba’s board did not constitute the necessary level of decisive influence and that, in any event, buyout firms (such a private equity firms) were not ‘centrally guided concerns’ for the purposes of legislation. 

These arguments were rejected by the ACM, which considered that:

  1. the competition rules apply to any entity that carries out economic activity and, as such, the actions of investment firms are also caught; and
  2. the firms had the power to appoint board members, influence business plans and cast deciding votes in relation to the supervisory board, all of which did constitute decisive influence. 

As such, the ACM’s decision of 20 October 2015 confirmed its original decision that Bencis Capital Partners and Bencis Buyout Fund II should be held jointly and severally liable for Meneba’s participation in the cartel. 

Bencis Capital Partners and Bencis Buyout Fund II have the opportunity to appeal the ACM’s decision to the Dutch district court in Rotterdam. 

Is this surprising?

The ACM’s reasoning in this case is consistent with the European Commission’s decision of 2 April 2014 in the high voltage power cables cartel. Following its investigation, the Commission fined 11 producers of underground and submarine high voltage power cables for market and customer sharing contrary to competition law. The Commission found that Goldman Sachs was jointly and severally liable for EUR 37.3m of Prysmian’s EUR 104.6m fine as it exercised decisive influence over Prysmian by virtue of a fund it managed (GS Capital Partners) owning a stake in Prysmian (the Commission found that Goldman Sachs held 100% of the voting rights). 

Goldman Sachs has appealed the Commission’s decision to the General Court. 

The outcome of Goldman Sachs’ appeal will be awaited with some anticipation as, if the Commission’s decision is upheld, the General Court will be seen as giving a green light to competition authorities (both the Commission and national authorities) which find investment firms liable for the actions of the businesses in which they invest. However, the ACM’s decision is particularly of interest given that the CVC group were also held liable while only holding 40% of the shares. 

While “decisive influence” is required to be exercised by the investment firms, it is widely acknowledged in an EU merger control situation that even a minority shareholding can result in a finding of “decisive influence“. As such, it will be interesting to see whether investment firms start seeking a lower level of voting rights, board representation or management control in order to avoid being found to exercise decisive influence over the business in which they are investing.