Pirelli loses appeal against EU cartel ruling on former unit

By Foo Yun Chee

BRUSSELS (Reuters) - Italian tyremaker Pirelli on Wednesday lost an appeal against a European Union cartel ruling after Europe's highest court rejected its argument that it should not bear liability for its former subsidiary and cartel member Prysmian (NYSE: PRY).

The European Commission in its 2014 decision fined Prysmian, Nexans, investment bank Goldman Sachs (NYSE: GS) and eight other cable firms 301.6 million euros ($357 million) for operating a 10-year power cable cartel.

Pirelli, which sold Prysmian to Goldman Sachs in 2005, challenged the antitrust decision, saying there were no grounds to charge it with parental liability and that the company directly involved in the cartel should bear sole responsibility.

The Luxembourg-based Court of Justice of the European Union (CJEU) dismissed its appeal.

Judges said there was already well-established case law that competition violations by subsidiaries can be imputed to the parent company and that the EU competition enforcer does not need to prove that parent companies are involved in wrongdoing.

Pirelli reiterated that it had set aside a provision for potential liabilities from the EU decision and had already provided a bank guarantee for 33.7 million euros plus interest to the Commission for its share of the fine.

"From the financial point of view, if payment of the fine takes place before Dec. 31, 2020, the net cash flow target announced to the market on Aug. 5, 2020 (net cash flow between about +190 and about +220 million euros), would be respected in the lower part of the range," it said in a statement.

In 2014, Pirelli went to a Milan court to ask for a declaration that Prysmian is obliged to relieve the company from any claim related to the cartel, including the fine. A judgment is pending.

The case is Pirelli & C. v Commission C-611/18 P.

(Reporting by Foo Yun Chee; additional reporting by Giulio Piovaccari in Milan; Editing by Jason Neely and Mike Harrison)

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