Antitrust

S H E A R M A N & S T E R L I N G L L P | 5 3 The second expansion was by the General Court in a July 2018 case. 10 Goldman Sachs (GS) was held jointly and severally liable with its 'subsidiary,' Prysmian (in which it held an indirect shareholding through a fund it managed), for Prysmian's direct involvement in the power cables cartel. Despite its shareholding being a pure financial investment and GS itself not being implicated in the misconduct, the parental liability was upheld on two main bases: For the first infringement period, the ability to effectively exercise all voting rights in Prysmian while holding a high majority stake (between 84.4% and 91.1%, bar a period of 41 days where it held 100%) was held to be "a similar situation to that of the sole owner of that subsidiary" and confer "total control over the conduct of that subsidiary without any third parties, in particular other shareholders, being in principle able to object to that control," 11 satisfying the presumption of decisive influence. This presumption was not rebutted by evidence that Prysmian independently determined its commercial strategy. This was notwithstanding that GS had reduced its shareholding through a number of divestments, on the basis that these divestments had been made on the condition that purchasers would be passive investors without voting rights. • For the second infringement period, when the shareholding decreased to 32% following an initial public offering on the Milan Stock Exchange, the General Court confirmed that the EC could not rely on the presumption of decisive influence. The EC was instead required to analyze all factors relevant to the economic, organizational and legal links between the parent and subsidiary to decide liability. The Court found that the EC had made out its case adequately with reference to the ability to, (i) appoint and call for the revocation of board members; (ii) call shareholder meetings; (iii) have appointed board members in Prysmian's strategic committees; and (v) receive regular updates on Prysmian's commercial policy. CONCLUSION The two cases indicate a continued expansion of the EC's net of parental liability for subsidiary conduct, capturing institutional investors and denying parents the defenses afforded to their subsidiaries. Investors will need to conduct careful antitrust diligence before investing, as to avoid antitrust liability would require demonstrating that their investment was purely financial and passive with no involvement in the management and control of the portfolio company in which they invest. Arguably, the EC's approach has become unduly broad and parental liability should be established based on a more nuanced assessment of the connection between a parent and its subsidiary, rather than 1. Case C-15/74, Centrafarm BV and Adriaan de Peijper v. Sterling Drug Inc. (EU:C:1974:114), [41]. 2. Case 48/69, Imperial Chemical Industries Ltd. v. Commission (EU:C:1972:70). 3. Case 107/82, Allgemeine Elektrizitäts- Gesellschaft AEG-Telefunken AG v. Commission (EU:C:1983:293). 4. Case C-286/98 P, Stora Kopparbergs Bergslags AB v. Commission (EU:C:2000:630). 5. Case C-97/08 P, Akzo Nobel NV and Others v. Commission (EU:C:2009:536), [49] and [58]. 6. Case T-206/06, Total SA and Elf Aquitaine SA v. Commission (EU:T:2011:250). 7. Case C-407/08 P, Knauf Gips KG v. Commission (EU:C:2010:389). 8. Case C-179/12 P, The Dow Chemical Company v. Commission (EU:C:2013:605). 9. Case C-516/15 P, Akzo Nobel NV and Others v. Commission (EU:C:2017:314). 11. Goldman Sachs, [50] and [52]. 12. AG Bot Opinion in Joined Cases C-201/09 P and C-216/09 P, ArcelorMittal Luxembourg SA v. Commission, (EU:C:2010:634). 13. Case T-640/16, GEA Group AG v. Commission (EU:T:2018:700). on shareholding-based presumptions that are difficult to rebut in practice. 12 This would be more in line with other jurisdictions, such as France, where more concrete evidence of decisive influence is required in instances of 100% ownership, or the U.S., where a parent is generally not liable for a subsidiary's conduct unless circumstances justify piercing the corporate veil. The EC has welcomed the confirmation that "institutional investors can be treated like other corporate parents, by attributing parental liability to them in exactly the same way," suggesting that its expansive approach to enforcing parental liability and in turn imposing higher and more deterrent fines is here to stay. Despite recent clarifications from the General Court that the EC must comply with the principle of equal treatment when apportioning fines between multiple successor parent entities, 13 there have been few checks and balances on the EC's approach to establishing parental liability. Potentially, the EC's broad approach will be reined in by the EU courts in GS's appeal — but in the meantime, multinational entities faced with cross-border investigations should be aware of the EC's tendency to impose fines on parent entities and the contrast with approaches in other jurisdictions.

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