On October 28, 2020, the Court of Justice rejected an appeal by Pirelli & C. SpA (“Pirelli”) against a 2018 judgment of the EU General Court upholding a 2014 Commission decision which held the power cables manufacturer jointly and severally liable, with its former subsidiary Prysmian, for Prysmian’s participation in a bid-rigging cartel. Pirelli’s appeal focused on the concept of parental liability and the Commission’s obligation to explain its reasoning.
The Power cables cartel
In 2014, the Commission fined eleven European, Korean, and Japanese producers of underground and submarine high voltage power cables a total of €302 million for market sharing and customer allocation globally, by coordinating their behavior and exchanging sensitive information to rig the outcome of bids over a period of almost 10 years (1999–2009). One of the addressees of the decision was the Italian cable manufacturer
Prysmian, which was owned initially by Pirelli (1999–2005) and subsequently sold to the Goldman Sachs Group (2005–2009). The Commission fined Prysmian c. €105 million, and held its parent companies Pirelli and Goldman Sachs jointly and severally liable to the tune of c. €67 million and c. €37 million, respectively, according to the amount of time they each owned Prysmian.
Under the well-established principle of parental liability, a parent company may be held liable for the anticompetitive conduct of its subsidiary if the parent exercises “decisive influence” over the commercial strategy of its subsidiary (i.e., the subsidiary is not capable of acting independently on the market but carries out the instructions of its parent). If the parent holds all, or almost all, of its subsidiary’s share capital, that creates a rebuttable presumption of decisive influence requiring the parent to demonstrate otherwise. Parental liability is triggered at the time when the infringement took place and is not affected by the subsequent sale of the subsidiary, a change in company name, disposal of the relevant assets, or the subsidiary exiting the market.
General Court judgment
Pirelli appealed the Commission decision to the General Court in July 2014, as did Goldman Sachs and most of the other addresses. Pirelli argued that it did not have decisive influence over Prysmian during the relevant period for two main reasons.
First, Pirelli was the holding company of a conglomerate that controlled over 100 subsidiaries across diverse commercial sectors and therefore its “control” over activities was, in essence, limited to technical and financial management, devoid of commercial aspects. Second, Prysmian’s continued engagement in anticompetitive conduct after it was taken over by Goldman Sachs was indicative of its ability to operate autonomously on the market.
Pirelli further argued that the Commission had breached its obligation to state reasons by not explaining why the evidence submitted by Pirelli during the investigation was held to be insufficient to rebut the presumption of decisive influence.
In 2018, the General Court dismissed Pirelli’s appeal and upheld the Commission’s decision in its entirety. The General Court found that the Commission had correctly applied the presumption of decisive influence, even though Pirelli did not directly hold all of Prysmian’s share capital. Further, the Court found that the Commission had correctly taken other factors into account, such as the power to appoint or dismiss board members, to call shareholder meetings, and to receive regular updates on the subsidiary’s business.
On the alleged failure to state reasons, the General Court held that the only evidence the Commission needed to bring forward to trigger the presumption of decisive influence was the near-100% shareholding, and that it was not required to specify all relevant factual and legal elements underlying its decision.
Pirelli appealed the General Court judgment to the Court of Justice in October 2018.
Court of Justice judgment
On October 28, 2020, the Court of Justice dismissed Pirelli’s appeal in its entirety. On the presumption of decisive influence, the Court of Justice recalled that the presumption is that the parent company actually exercises decisive influence over its subsidiary. It also clarified that rebuttal of the presumption was “difficult” but not impossible, and that the evidence submitted by Pirelli was clearly insufficient in this respect.
On the alleged failure to state reasons, the Court of Justice confirmed that, where evidence is adduced to rebut the presumption of decisive influence, the Commission must set out the reasons why it deems the evidence insufficient, but is “not required to take a position on matters which are clearly out of scope, meaningless or clearly secondary.”
Goldman Sachs and the implications for pure financial investors
The Court of Justice judgment in Pirelli will likely strengthen the Commission’s ability to rely on the presumption of decisive influence in cartel cases, including when the parent is a holding or conglomerate company with multiple interests spanning diverse commercial sectors.
It will be interesting to see whether the Court takes a similar approach in the forthcoming Goldman Sachs appeal. In the General Court judgment, Goldman Sachs’ ownership of Prysmian was divided into two phases: 2005–2007, during which its shareholding ranged between 84.4% to 91.1% (the “first period”); and 2007–2009, when it divested the majority of its shares, retaining only 31.69% (the “second period”).
The General Court followed the Pirelli reasoning for the first period. For the second period, the General Court held that Goldman Sachs continued to exercise decisive influence over Prysmian’s commercial strategy after the share divestment because the members of Prysmian’s board of directors that were nominated by Goldman Sachs before 2007 remained on the board until the end of the infringement, and because Goldman Sachs continued to use its power to revoke and nominate board members.
 ABB, Nexans, Prysmian (previously Pirelli), J-Power Systems (previously Sumitomo Electric and Hitachi Metals), VISCAS (previously Furukawa Electric and Fujikura), EXSYM (previously SWCC Showa and Mitsubishi Cable), Brugg, NKT, Silec (previously Safran), LS Cable and Taihan.
 The cables are typically used to connect to the electricity grid and between power grids in different countries.
 Power cables (Case COMP/AT.39610), Commission decision of April 2, 2014.
 “[A] legal person who is not the perpetrator of an infringement of the competition rules may nevertheless be penalized for the unlawful conduct of another legal person, if both of those persons form part of the same economic entity.” Siemens Österreich and Others v. Commission, and Siemens Transmission & Distribution and Others v. Commission (Case C-231/11 P) EU:C:2014:256, para. 45.
 The analysis should have particular regard for “the economic, organisational and legal links between those two legal entities” (see Akzo Nobel NV and Others v. Commission of the European Communities (Case C-97/08) EU:C:2009:536, para. 52; and AEG v. Commission (Case C-107/82) EU:C:1983:293, paras. 49–53).
 Compagnie Royale Asturienne des Mines SA and Rheinzink v. Commission (Case C-29/83) EU:C:1984:130, para. 9.
 Prestressing steel (Case COMP/AT.38344), Commission decision of June 30, 2010.
 Nexans, Prysmian, NKT, Goldman Sachs, LS Cable & System, Fujikura, Furukawa, Viscas, Brugg Kbel, Silec Cable, and General Cable all lodged appeals.
 This obligation is rooted in Article 296 of the Treaty on the Functioning of the European Union, which states that “[l]egal acts shall state the reasons on which they are based and shall refer to any proposals, initiatives, recommendations, requests or opinions required by the Treaties.”
 Pirelli & C. v. Commission (Case T-455/14) EU:T:2018:450.
 Pirelli held 98.75% of Prysmian shares (Pirelli Finance S.A. owned the remaining 1.25%).
 Nexans, Prysmian, NKT, Goldman Sachs, LS Cable & System, Fujikura, Furukawa, Viscas, Brugg Kabel, Silec Cable, and General Cable also filed appeals against the General Court decision.
 Pirelli & C. SpA v. European Commission (Case C-611/18 P) EU:C:2020:868 (“Pirelli”). The Court of Justice also rejected Pirelli’s other arguments, specifically, that the Commission, in its application of a different method of assessment to Goldman Sachs, had breached the principle of equal treatment, and hence Pirelli’s fundamental rights under Articles 48 and 49 of the Charter of Fundamental Rights, i.e., the presumption of innocence and rights of defence, and principle of proportionality; and that it had breached Article 261 TFEU in respect of the order, distribution, and amount of the fine.
 Pirelli, para. 68.
 Pirelli, paras. 72 and 49 (“manifestement non suffisant”).
 Pirelli, para. 46. The Court held that the evidence had actually been submitted in response to an argument made by Prysmian as to why Pirelli should be held solely responsible for the infringement, and were thus outside the scope of Pirelli’s arguments on decisive influence.
 The Goldman Sachs Group v. Commission (Case C-595/18 P), case pending.
 The Goldman Sachs Group v. Commission (Case T-418-14) EU:T:2018:445 (“Goldman Sachs”).