Power cables' price rigging probe a test of EU regulators' ability to punish private equity

December 17
10:15 PM 2013

As part of the antitrust investigation about a cartel for underwater power cables, Goldman Sachs Group Inc could be fined early in 2014 by the European Union, Bloomberg reported. The case will also be a test of the ability of regulators to castigate private equity investors.

Sources told Bloomberg that 11 companies could potentially face fines in the four-year old probe. The list included Italy-based cable maker Prysmian SpA that was acquired by Goldman Sachs Capital Partners and the New York-based bank in 2005. Goldman Sachs said that its private equity unit did not know of any price-rigging efforts by the firms that began the firm before their purchase.

The report said the EU has increasingly become more aggressive in making parent firms answer for the bad behavior of their subsidiaries as evidenced by various court decisions. Goldman Sachs and other private equity owners have so far not persuaded regulators to treat them differently.

The report quoted Norton Rose Fulbright lawyer Jay Modrall who said, "There is a tendency of private equity firms to think that because they are financial investors they aren't in the same category as industrial group parent companies, but so far the case law on parental liability does not distinguish between financial and other investors."

The regulator said firms like Prysmian, ABB Ltd, Nexans and NKT Holdings worked together to rig the prices of undersea and underground high-voltage power cables that had been sold to European energy providers for at least a decade, the report said. Two of the sources said ABB may not be fined since it informed the regulators first about the existence of the cartel.

When European Commission Spokesman Antoine Colombani was asked by Bloomberg about the issue, he did not comment on the potential fine or the liability of parent firms but said that the regulators' probe is still going on.

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