Private equity investors must ensure their investee companies comply with competition law

Private equity investors must ensure their investee companies comply with competition law


Author: Amanda Howlett

On 30 December 2014, the Dutch competition authority announced it had fined three investment companies between 450,000 and 1.5 million (EUR) for their investee businesses' involvement in a cartel in the flour industry.

These fines were imposed even though the investors themselves had no direct involvement in illegal conduct.

Although this was a Dutch case, the same principles apply in the UK (and throughout the EU). The case is a reminder of the importance of private equity (PE) investors and others of taking steps to ensure that their investee companies fully comply with competition law.

This is not the first time a financial investor has been fined for its investee company's conduct.

In April 2014, the European Commission decided that investment bank Goldman Sachs was jointly and severally liable for a fine of 37.3 million (EUR) imposed on its investee company Prysmian, which had been involved in a 10 year cartel with other producers of underground and submarine high voltage power cables. The liability was on the basis that Goldman Sachs was found to have 'decisive influence' over Prsymian. Goldman Sachs has appealed against that decision and the outcome is eagerly awaited.

In a speech delivered on 2 April 2014, the vice president of the European Commission responsible for competition policy, commented: 'I would like to highlight the responsibility of groups of companies, up to the highest level of the corporate structure, to make sure that they fully comply with competition rules.

'This responsibility is the same for investment companies, who should take a careful look at the compliance culture of the companies they invest in.'

Put simply, the competition authorities want financial investors to take responsibility for ensuring competition compliance by their investee companies - and are prepared to punish investors who don't.

Where an investor places people on the investee company's board, it is also worth bearing in mind that the UK Competition and Markets Authority has the power to seek director disqualification orders.

The incentives for investors to take steps to protect themselves, and their investments, from competition law liability are therefore significant. An investee company's competition law risk profile will depend to a large extent on its industry, market position and the commercial landscape it faces. A relatively straightforward competition audit of can readily identify the main areas of likely risk. Arrangements (usually revolving around training staff) can then be put in place to minimise that risk.

If you have any questions relating to this article please get in touch with Amanda Howlett or Simon Barnes, partners in our competition team.

About the author

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Amanda Howlett


03700 86 5804

Amanda is a partner in Shoosmith's EU and competition law practice. She has extensive experience advising on competition law compliance, merger control, price fixing and cartels. Shoosmiths is a full service national law firm in the UK including corporate teams advising on all types of private equity and venture capital transactions, supported by in-house specialist tax, employment and pensions, real estate, environmental, intellectual property, IT and competition lawyers.

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