UK “Hub-and-Spoke” Cartel Decision Reinforces the Compliance Message
On 10 August 2011, the UK Office of Fair Trading (OFT) fined four UK supermarkets and five UK dairy processors a total of GBP49.51 million for a “hub-and-spoke” (or A-B-C) cartel infringement. There are various variants of this type of infringement. In the present case, it involved the supermarkets coordinating increases in the retail prices consumers paid for certain dairy products by the indirect exchange of pricing intentions with each other via the dairy processors.
This is yet another example of enforcement action in the UK against a hub-and-spoke cartel which, once again, involved retail markets. Retailers and their suppliers are particularly susceptible to A-B-C infringements, given in particular that the retailers often share a limited group of suppliers and have a large number of (often very target-driven) buyers. Nevertheless, the same issues can arise in other industries. From a compliance point of view, the message is that companies at risk of these types of infringement need in particular to be very careful about information flow and use of language in communications.
Private Equity Houses Are Responsible for the Actions of Their Investees
It is common in EU competition law cases for fines to be imposed on parents as well as the subsidiary which actually carried out the infringement. This follows the established principle of parental responsibility for the actions of a subsidiary. Recently, there has been a reminder that private equity houses are also parents for this purpose and therefore at risk of fines for the activities of their investee companies.
The case in question involves an alleged cartel concerning submarine and underground power cables. Goldman Sachs indicated in a securities filing that it is one of the recipients of a Statement of Objections (SO) (preliminary statement of case) issued in July by the European Commission to participants in the alleged cartel. It received the SO due to an interest held by certain of the GS Capital Partners funds in a company active in the alleged cartel (Prysmian). This is regardless of the fact that GS had apparently exited the investment after the alleged infringements took place.
Joint Acquisitions: Beware of EU Merger Control Even if the Target Is Not Active in the EU
A recent clearance decision under the EU Merger Regulation (EUMR) provides a reminder that, in a situation in which two or more companies make the acquisition, a filing may be needed even if the target is not active in the EU. This is not a new point, but nevertheless may be easy to miss when a joint acquisition is being considered.
The transaction was the joint acquisition by private equity houses Bain and Oaktree of International Market Centers (IMC). MC is an owner and operator of real estate, only in the U.S., which has no actual or potential activities in the EU. Nevertheless, in accordance with numerous precedents, the European Commission took jurisdiction over the merger under the EUMR. The full reasoning is not available, but this will be because, although the target has no activities in the EU, the turnover of the jointly-controlling parents (Bain and Oaktree groups), or more accurately their controlled investee companies, exceeded the turnover thresholds under the EUMR. These thresholds require two parties to a transaction to have sufficient turnover in the EU, and this can be satisfied by the controlling parent companies alone, as in this case.
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