Andrij Jurkiw - risk warning Womble Bond Dickinson
Investment bank Goldman Sachs, the world's biggest cablemaker Prysmian, Nexans and eight other cable companies on Thursday lost their challenge against a 302 million euros ($353 million) EU cartel fine. The parties had appealed to the General Court, Europe's second-highest court, asking for the European Commission's 2014 decision to be thrown out and their fines reduced.
Decision to be appealed
The EU antitrust enforcer said the group ran a power cable cartel for almost 10 years from 1999, sharing markets and allocating customers between themselves. ABB escaped a 33 million euro sanction by alerting the authorities. The court rejected the appeals, with judges ruling ‘the General Court confirms the fines of over 300 million euros that the Commission imposed on the main European and Asian producers of (extra) high voltage power cables for their participation in a worldwide cartel.’ Prysmian was hit with the biggest fine at 104.6 million euros, which included a joint fine of 37.3 million euros with Goldman Sachs. The group said in a statement it would appeal the general court's decision at the EU's highest court, the European Court of Justice. Other cartel members were Japanese cable firms Exsym Corporation, J-Power Systems Corporation and Viscas Corporation, Korean peer LS Cable & System and General Cable Corp via its subsidiary Silec. Fines were also given to Danish company NKT Holding , South Korean firm Taihan Electric Wire, Mitsubishi Cable Industries, Sumitomo Electric Industries and Hitachi Metals Ltd. Sumitomo and Hitachi were J-Power Systems' previous owners. Antitrust enforcers in Japan, South Korea and Australia have already levied million-dollar fines against cable companies for anti-competitive practices.
Unnecessary competition law risks
Commenting on the ruling in respect to the investment bank, Andrij Jurkiw, Partner at law firm Womble Bond Dickinson, explained ‘Goldman Sachs was found to have exercised decisive influence over the market conduct of two Prysmian corporate entities, during the period of its financial investment, by virtue of its shareholding in Prysmian.’ However, Goldman Sachs had argued that ‘despite its powers over the various Prysmian directors, those powers did not enable Goldman Sachs to exercise actual control over the board or more importantly control over Prysmian's commercial policy.’ Mr Jurkiw commented, ‘This case demonstrates the risks for professional investors of having rights over their investee business but, nonetheless, failing to take steps to reduce the likelihood of the investee business engaging in anti-competitive behaviour. Extensive due diligence before the investment is approved is all well and good. What this case demonstrates is needed, are some ongoing controls aimed at minimising unnecessary competition law risks, if scenarios such as the one Goldman Sachs finds itself in are potentially to be avoided.’