This is a really interesting case whereby an Italian high voltage cable manufacturer, Prysiam was fined 104m euros for its part in a price fixing cartel with 10 other world wide cable suppliers.
What’s interesting in this case is that Goldman Sachs, the US private equity firm held a 30% shareholding in Prysiam and as a result of this shareholding, Goldman’s were fined 37m euros on the basis that they have ‘decisive influence’ over Prysiam.
This case has important ramifications for private equity firms based in Jersey or trust structures based in Jersey with overseas trading companies.
Read more
Goldman Sachs, Nexans Fined by EU for Power Cable Cartel
Goldman Sachs Group Inc. (GS) and a group of cable makers including Nexans SA (NEX) were fined a total of 301.6 million euros ($416 million) by the European Union for fixing the price of high-voltage power cables sold to energy providers.
Goldman Sachs shared a fine of 37.3 million euros with Prysmian SpA (PRY), an Italian cable maker that Goldman Sachs Capital Partners bought in 2005. Prysmian also shared a 67.3 million-euro fine with its former owner Pirelli & C. SpA. (PC) Nexans SA, the world’s second-biggest cable maker, was fined 70.7 million euros, less than the 200 million euros it had booked.
The fines add to a 953 million-euro penalty for car-parts makers last month and a record 1.7 billion euros last year for banks and a broker that rigged interest-rate benchmarks. Breaking up cartels and levying high fines to deter price-fixing is one of the EU’s priorities, according to Joaquin Almunia, the bloc’s antitrust chief.
“These companies knew very well that what they were doing was illegal. This is why they acted cautiously and with great secrecy,” Almunia said in an e-mailed statement.
“Despite this and through joint efforts by several competition authorities around the world, we have detected their anti-competitive agreements and brought them to an end.
Underground Cables
The EU said 11 producers of underground and submarine cables shared markets and allocated customers including large infrastructure projects and offshore wind farms ‘‘on an almost worldwide scale’’ from 1999 until regulators raided the companies in January 2009. Six European, three Japanese and two Korean producers agreed to avoid each others’ home markets and agreed on price levels and rigged bids for power projects.
Goldman Sachs said in an e-mailed statement that it’s considering its rights of appeal in the case.
‘‘There is no suggestion that Goldman Sachs or its people had any knowledge or involvement in the purported collusive behavior,” according to the statement from the bank’s London press office.
“It is important to recognize that the commission has chosen to hold Goldman Sachs jointly and severally liable with Prysmian solely under its parental liability doctrine on the basis that certain Goldman Sachs sponsored funds acquired Prysmian in 2005 and divested their interest gradually until their final exit in 2010,” the company said in the statement.
Goldman Sachs
Almunia defended the decision to fine Goldman Sachs, saying it controlled Prysmian for “almost two years” and appointed board members that approved important and strategic decisions and “were regularly updated on Prysmian business,” he told reporters at a press conference in Brussels.
Prysmian said in a statement that the EU decision it will appeal the fine “based on a superficial and erroneous analysis of the relevant facts and therefore considers the decision unlawful.” The company said it has set aside 200 million euros for any fines by the EU, U.S., Canada and Australia.
Nexans’s fine will affect its net debt in 2014 and it will review the EU decision and options including a possible appeal, the Paris-based company said in a statement. Legal action by customers seeking compensation “could have a material adverse effect on the results of Nexans and its financial situation.”
EU Powers
Nexans Chief Executive Office Frederic Vincent has complained about high EU fines, saying the regulator’s power should be curbed. Nexans and Prysmian lost an EU court challenge seeking to restrict the probe over complaints that the scope of the investigators’ initial searches was too broad.
Viscas Corp. shares a 35 million-euro fine with Furukawa Electric Co. and Fujikura Ltd. Furukawa was separately fined an additional 8.9 million euros and Fujikura must pay an extra 8.2 million euros. J-Power Systems Corp., a joint venture owned by Sumitomo Electric Industries Ltd. (5802) and Hitachi Cable Ltd., was fined 20.7 million euros. Sumitomo was also fined 2.6 million euros and Hitachi was fined 2.3 million euros.
LS Cable & System Ltd. was fined 11.3 million euros, Taihan Electric Wire Co. (001440) Ltd. was fined 6.2 million euros, Brugg Kabel AG was fined 8.5 million euros and NKT Holding A/S (NKT) was fined 3.9 million euros.
Safran SA (SAF) was fined 8.6 million euros and must share another 123,500-euro fine with Silec Cable SAS which it has since sold to General Cable. (BGC) Silec and General Cable Co. share a 1.9 million euro fine. General Cable is suing Safran for compensation for the fine, according to Safran’s 2013 annual report.
Safran Provisions
Safran’s fine “will not have a significant impact on the group’s results because of provisions that were previously set aside,” the company said in an e-mailed statement. The company “was totally unaware” of the illegal behavior, it said.
NKT said there is “no substance to the commission’s allegations” and it will appeal the fine at the EU courts. The fine will reduce the company’s profits by 29 million Danish krone ($5.4 million) for the 2014 financial year, according at a statement on its website.
Exsym Corp. shared a 6.6 million euro fine with SWCC Showa Holdings Co. Ltd. and Mitsubishi Corp. (8058) SWCC Showa was also fined 844,000 euros, while Mitsubishi must pay an extra 750,000 euros.
Pirelli said it will appeal the decision since it wasn’t directly involved in the cartel and any fine should be paid by its former unit. As a result, it said there wouldn’t be any financial impact from the decision.
Viscas, Fujikura, Furukawa, J-Power Systems, Sumitomo, LS Cable, Taihan, Exsym, SWCC Showa, Mitsubishi and Brugg didn’t immediately respond to e-mails and calls for comment. Hitachi and Silec declined to immediately comment.
ABB Ltd. (ABBN) escaped a fine because it was the first to inform the EU of the cartel.
Loading...