The Italian Competition Authority (ICA) enforces EU and national competition rules in Italy.
Each of the ICA's five directorates deals with mergers, abuses and restrictive practices in their assigned business sectors.2 The ICA also has advocacy powers. It reports to the parliament and the government on any laws, regulations or general administrative acts that give rise to competition concerns and are not justified by general interest considerations. The ICA may also challenge in court decisions of public administrations that are deemed incompatible with competition law. Finally, the ICA is empowered to address abuses of economic dependence, unfair commercial practices and conflicts of interest of government officials.
Case teams in each directorate conduct the investigations, while the opening and final decisions, as well the decisions to notify the statements of objections, are taken by a college of three members appointed by the presidents of the two branches of the parliament.
As recently confirmed by the Constitutional Court, the ICA is not an impartial judicial body.3 Its decisions are subject to judicial review by administrative courts (i.e., the Regional Administrative Tribunal (TAR) of Rome and, on second and final appeal, the Council of State).
On 20 December 2018, Roberto Rustichelli was appointed as President of the ICA, even though at the time of writing he has not yet taken office. Mr Rustichelli is a civil judge and panel president within the Tribunal of Naples' special section for business law. Former President Giovanni Pitruzzella has taken over the post of Advocate General at the EU Court of Justice.
i Significant cases
ICA imposes largest ever fine on captive banks and their trade associations
On 20 December 2018, the ICA imposed its largest ever overall fine in a cartel case (over €678 million) on captive banks belonging to automotive groups.4 The ICA found that the captive banks had exchanged sensitive information – directly among themselves and through trade associations – including about interest rates, sales volumes, costs, etc.
The parties argued that captive banks are not in competition with each other in the market for consumer credit or lease contracts for cars, because they exclusively serve their own brand. The ICA, however, rebutted that financing by captive banks affects competition between car manufacturers in the sale of vehicles. In fact, the ICA held that the relevant product market is the sale of cars financed by captive banks.
The ICA imputed the infringement also to the captive banks' parent companies, based on the parental liability doctrine. The ICA held liable not only parent companies holding 100 per cent (or almost all of the shares) of their subsidiary, but, for the first time, it also held jointly controlling parents of a joint venture liable. In the latter case, however, the ICA did not impose on them joint and several liability for the joint venture's fine, due to the novelty of its approach.
Although the ICA concluded that the infringement was particularly serious, it found that the application of a correspondingly high gravity multiplier would result in excessive fines, also in light of the financial crisis affecting the automotive industry during the period of the infringement. The gravity multiplier was therefore reduced to only 4 per cent.
Council of State quashes TAR judgment on exchange of information about television post-production services
In 2015, the ICA found that 21 companies and their trade association had been exchanging sensitive information and coordinating prices in the tenders for post-production services provided to the national TV broadcaster RAI.5 The decision was quashed by the TAR.6 On 21 March 2018, the Council of State overruled that judgment and confirmed the ICA's findings.7
Following previous case law, the Council of State criticised the TAR for indulging in piecemeal analysis of the evidence, instead of weighing it as a whole. In the absence of plausible alternative explanations, the Council of State found that the price increases' unusual timing and magnitude was sufficient proof of collusive conduct.
According to the Council of State, the trade association contributed to disseminating sensitive information and even the exchange of historic data, which each company could autonomously gather, might infringe antitrust rules.
ii Trends, developments and strategies
Council of State and TAR clarify criteria for antitrust fines in cartel cases
In 2018, the case law on the quantification of antitrust fines was enriched by a new string of precedents.
In a case concerning a cartel between model management agencies, the TAR clarified the notion of relevant turnover for fining purposes. Payments made to agencies and passed on to models do not accrue to the agencies, because these transactions are financially neutral. Therefore, these amounts should not be included in the agencies' value of sales for the purpose of calculating the base amount of the fine.8
In a case concerning a cartel in the cement industry, the Council of State confirmed that the 10 per cent maximum threshold for fines applies to the company's turnover in the last entire financial year prior to the final decision. This principle applies even if this turnover is much lower than in the previous year due to the divestment of certain entities of the group.9
Finally, the Council of State confirmed that, for serious infringements, a fine equal to 15 per cent of the cartelised products' annual sales can apply. If a company only supplies cartelised products (so-called mono-product companies), that multiplier will always result in a fine exceeding the 10 per cent maximum threshold of that company's overall turnover – and will have to be reduced accordingly. However, according to the Council of State, this inevitable application of the maximum possible fine to mono-product companies does not in itself imply an unfair discrimination towards those companies.10
TAR clarifies the scope of right of access to the ICA's internal documents in cartel cases
In a judgment of 5 November 2018,11 the TAR provided guidance on the scope of the ICA's duty to disclose documents in the context of antitrust investigations.
According to the TAR, the ICA may delay third-party access to documents attached to a complaint until it has assessed whether they have any relevance with respect to the proceedings (and, in any event, no later than the adoption of a statement of objections). This assessment is necessary to strike the right balance between the complainant's right to confidentiality and the investigated party's defence rights.
The TAR also annulled the ICA's refusal to disclose an internal communication on organisational matters between the case team and the college of the ICA. This document cannot be classified as a preliminary draft or report relating to the content of an act to be adopted by the ICA, which are explicitly exempted from disclosure under applicable legislation.
Importantly, the TAR affirmed that in principle the ICA cannot deny disclosure arguing that a given document is not relevant to the party's defence: the assessment of the relevance of a document for the purpose of defence is an exclusive prerogative of the party requesting disclosure.
In the coming months, the ICA will continue to focus its enforcement efforts on public tenders, particularly for integrated management of health and safety conditions on workplaces and private security.12 The ICA also launched an investigation into an alleged coordination among the main telecommunications operators on retail mobile and fixed telecommunications services.13
Moreover, the Council of State is expected to adopt a final judgment on the alleged collusion between Roche and Novartis. The two pharmaceutical companies are accused of favouring the commercialisation of the drug Lucentis – sold by Novartis under Roche's licence – to the detriment of the cheaper drug Avastin. The Court of Justice of the European Union issued a preliminary ruling on the same case on 23 January 2018, clarifying that an agreement on the dissemination of misleading information with a view to reducing the competitive pressure of a pharmaceutical product might amount to an infringement 'by object' of Article 101 TFEU.14
III ANTITRUST: RESTRICTIVE AGREEMENTS AND DOMINANCE
i Significant cases
Enel and Acea fined for abusive conduct hindering the liberalisation of the electricity market
With decisions dated 20 December 2018,15 the ICA found that the national incumbent Enel and the local supplier Acea abused their dominant positions in the Italian markets for the supply of electricity.
After the liberalisation of the Italian energy sector, electricity is sold on an open market at the prevailing prices. However, until 2020 residential customers and small enterprises may opt to buy electricity at regulated tariffs, set by the Italian energy authority. The ICA found that Enel and Acea used contact details and other information on customers in the regulated market – where they hold a dominant position – to address tailored commercial offers for the provision of services in the open market. The ICA held that this information was not available and could not be replicated by other competitors outside the regulated market.
In addition, Acea used detailed information on the competitors' market shares and market positions obtained from its branch active in the downstream market of electricity distribution. The ICA found that a similar competitive advantage could not be replicated by other non-integrated suppliers.
When calculating the fines, the ICA took into account the volume of sales achieved in both the regulated and open markets. However, since the abusive conduct only affected the open market, the ICA granted a substantial reduction on the final amount of the fines.
ii Trends, developments and strategies
ICA closes the investigation against Aspen for alleged non-compliance with its decision on excessive pricing
In 2016, the ICA found that Aspen had adopted an aggressive negotiation strategy to force the Italian Medicines Agency (AIFA) to authorise excessive and unjustified price increases of between 300 and 1,500 per cent. Following Aspen's appeal, the ICA's decision was upheld by the TAR Lazio.
The ICA reopened proceedings on 1 March 2017, as it considered that Aspen was not complying with its previous decision. Proceedings were dismissed after a lengthy negotiation between Aspen and AIFA, resulting in a redefinition of drugs prices in line with the relevant sector-specific regulation and the retroactive application of those prices as from the date of ICA's initial decision.
An investigation against Aspen for excessive prices is still ongoing at the European level.18
In 2018, the ICA initiated proceedings for alleged infringements of Article 102 TFEU affecting the markets for post-trading services, event ticketing, rail transport services, and diagnostic medical devices.19 The ICA is also scrutinising the compliance of Poste Italiane with its previous decision on the exclusionary rebates applied by the dominant postal services operator.20
IV SECTORAL COMPETITION: MARKET INVESTIGATIONS AND REGULATED INDUSTRIES
i Significant cases
The Italian Communications Authority publishes preliminary results of the market investigation into big data
On 8 June 2018, the Italian Communications Authority (AGCom) published the preliminary results of its market investigation into big data.
AGCom's interim report first analyses the structure of big data markets and the players active in the sector. These include first and foremost all consumers using the internet, often trading data on their own online activities as an implicit payment for free internet services, such as mobile apps and social network websites. On the other end of the value chain are a very diversified category of private and public players, interested in extracting added value from the analysis of big data. Between these two categories of players, specialised companies provide technological support for data management, data brokers market sets of data collected from different sources, research agencies develop new technologies and algorithms for the analysis of raw data. Without providing a conclusive market definition, the AGCom found that these segments are characterised by high barriers to entry and expansion, few big vertically integrated operators, and a number of small specialised companies.
Based on this analysis, AGCom pinpointed some of the main risks related to the development of the data-driven economy: strengthening of market power in concentrated areas of the market, asymmetry of information to the detriment of consumers, distortions in the development of the public opinion, and potential discrimination also as a result of the application of price-setting algorithms.
In order to tackle these problems, AGCom concluded that the adoption of ex ante regulation (possibly including regulation of algorithm use) is necessary, particularly when the citizens' political and social rights are at issue. According to the AGCom, the amount of data stored, the context in which they are analysed, and the technologies used no longer allow for a categorisation of data according to traditional labels (such as 'personal' or 'sensitive' data). Therefore, new data regulation should simply refer to data 'per se'.
The ICA is carrying out a parallel market investigation on big data, and its report is expected over the next months.
ii Trends, developments and strategies
The ICA enforces national legislation on unfair practices. These are commercial, promotional and communication strategies that – while not amounting to antitrust infringements – result in an unfair prejudice to the consumers' rights. In 2018, smartphones and social networks were the ICA's main area of focus.
On 25 September 2018, the ICA imposed fines on Samsung and Apple for releasing software updates causing malfunctions and early obsolescence of smartphones. The ICA also found that Samsung had charged high repair costs for out-of-warranty repairs of those malfunctions.21
On 29 November 2018, the ICA fined Facebook €10 million for using its subscribers' data for commercial purposes. The ICA found that Facebook did not adequately inform customers, upon their registration on the platform, that their data would be used for commercial purposes. Moreover, Facebook transferred personal data to third-party websites and apps without the consumers' express and prior consent.22
On 21 February 2019, the ICA fined Ryanair and Wizz Air for applying an extra charge for the transport of one large cabin bag on their flights. The investigation showed that almost all passengers need to carry at least one large bag in the cabin. Therefore the exclusion of this service from the base price would provide a misleading representation of the ticket's real value.23
At the end of an exceptionally long and burdensome parliamentary procedure, the bill aimed at developing and supporting competition and protecting consumers was finally approved and entered into force on 29 August 2017.24 The new law introduced a number of significant reforms in a wide range of sectors.
In 2018, ministerial decrees have implemented the provisions of the bill concerning (1) the simplification of the procedures to gather and transport ferrous and non-ferrous metals; (2) the simplification of the procedures to allow customers migration among mobile telecommunication operators; and (3) the creation of a passport for artworks to simplify their export outside the national territory.
However, crucial aspects of the bill still need to be implemented. In particular, the government still has to adopt a decree on transportation services through online platforms, such as Uber, while a decree increasing the number of notaries public has yet to be enacted.
V STATE AID
i Significant cases
European Commission finds that non-refundable financial support constitutes state aid, but the delayed collection of fees by a state entity does not
Maritime transport services are a perpetually hot topic in Italian antitrust enforcement, given their pivotal role in the national economy, the high barriers to entry in the sector and the significant involvement of state resources. 2018 made no exception: the Commission declared state aid granted to the Port Authority of Naples and the shipbuilder Cantieri del Mediterraneo (CAMED) incompatible with EU rules.25
The Port Authority had received non-refundable financial support at no cost for the refurbishment of local dry-docks, while CAMED was granted below-market price use of those facilities without open tender. The Commission took the view that such an advantage could not be justified by the performance of public service obligations.
Nonetheless, the Commission did not take issue with the delayed collection of fees due to the Port Authority by other ship repairers, terminal operators and transport companies. Since the Port Authority acted as a diligent market operator would do – requiring interest payments, setting up instalment plans, and terminating concession contracts – no undue benefit was granted to the debtors.
ii Trends, developments and strategies
Direct actions for annulment brought by competitors of state aid beneficiaries are admissible
The Court of Justice for the first time affirmed that competitors of the beneficiary of a contested measure have legal standing to bring an action for annulment against the Commission decision assessing that measure.26
The appeal was brought by a school and a bed and breakfast competing against certain educational and accommodation businesses controlled by ecclesiastical institutions, which had been granted a tax exemption from the Italian state.
Although the Commission had found that the tax exemption constituted state aid, it concluded that the aid was impossible to recover because the necessary information could not be retrieved from the Italian land register and tax databases. The Court of Justice was not satisfied with the Commission's argument: absent any assessment of other alternative ways to achieve at least a partial recovery of the unlawful aid, the Commission could not conclude that such recovery was absolutely impossible.
In 2019, the Council of State is expected to decide whether the system of green certificates in place in Italy until 2014 constituted state aid.27 The claimant argued that the system breached EU rules because it imposed an obligation to buy green certificates on imported green electricity, while domestic green electricity was exempted. This litigation has been closely followed by the Commission, which also intervened to support the claimant in the proceedings before the Council of State.28
In the following months, the EU Court of Justice will also address the request for preliminary ruling submitted by the Council of State in the litigation between the Italian Ministry of Transport and some local railway operators. The Council of State asked the Court to clarify whether the grant of financial support to a distressed rail transport operator and its subsequent sale to a third party without a competitive tender procedure (and for no consideration) constitute state aid.29
VI MERGER REVIEW
i Significant cases
In 2018, the ICA made merger clearance conditional upon remedies in four cases.
Luxottica, global leader in the production of eyewear, filed a notification for the acquisition of Barberini, active in the production of glass blanks and finished glass lenses. After reviewing the companies' market shares post-merger, the ICA noted that no alternative supplier of high quality lenses would be in a position to effectively meet the requirements of the main customers in this sector. The ICA also raised concerns in relation to Luxottica's significant market power and vertical integration in the segment of glass blanks, as well as in the downstream segment of glass lenses. Finally, the ICA took into account Barberini's competitive advantage resulting from considerable R&D resources and ability to innovate. The acquisition was cleared subject to Luxottica's obligation not to impose minimum purchase requirements in the supply of glass blanks and to allow customers to access certain innovative products covered by Barberini's intellectual property rights.30
The ICA also reviewed the proposed acquisition of Nedgia by 2i Rete Gas, both active in the operation of gas distribution networks. The ICA raised concerns about certain territorial districts, particularly in Sicily and Puglia, where the two companies are the main (if not the only) participants in tenders for distribution networks operation. The ICA made the acquisition conditional upon divestment of 2i Rete Gas' assets in some of those districts. The ICA also imposed behavioural measures to be implemented in the event no suitable buyer can be found for the acquisition of the divested assets.31
Structural remedies were also required to obtain the ICA's greenlight to the acquisition of Gardenia-Limoni by Douglas, both active in the selective retail distribution of luxury perfumes,32 and the acquisition of Modial Pet by Noah 2, two distributors of pet food.33
ii Trends, developments and strategies
Law No. 124 of 4 August 2017 revised the two cumulative turnover thresholds for the notification of concentrations to the ICA. The first threshold, applying to the combined aggregate domestic turnover of all undertakings concerned by the concentration, has been slightly lowered from €499 million to €492 million. The second threshold has been lowered from €50 million to €30 million and now applies to each of at least two of the undertakings concerned, and no longer to the acquired undertaking alone.
Since the first threshold remains extraordinarily high, the ICA's ability to review proposed transactions continues to be very limited. Only 73 concentrations were notified in 2018, slightly more than the 64 transactions notified in 2017. By comparison, more than 400 transactions a year were notified before 2013, when the application of just one of the two turnover thresholds was sufficient to trigger a filing obligation.
The old EU law distinction between cooperative and concentrative joint ventures remains applicable under Italian competition rules. Accordingly, all joint ventures (including full-function ones) whose main object or effect is the coordination of their parent companies' behaviour do not constitute a 'concentration' within the meaning of Article 5 of Law No. 287/1990. These joint ventures must be assessed under the restrictive agreements or market dominance provisions, or both. The ICA presented a reform proposal to the Italian government through Recommendation No. AS988 of 2 October 2012, suggesting to add into Article 5 an explicit reference to the applicability of merger control rules also to full-function cooperative joint ventures. However, the proposal has not yet become law.
The ICA has continued to pursue its approach in terms of both advocacy and enforcement, particularly in regulated sectors. Its investigations remain focused on infringements affecting the public finances, such as bid rigging in public tenders or commercialisation of drugs supplied by the healthcare system. Merger control is the area in which amendments continue to be most desirable, both in terms of filing thresholds (which are now excessively high) and substantive test analysis (moving away from the dominance test to the significant impediment to effective competition test). Moreover, in line with EU rules, efficiencies should formally become part of the ICA's assessment.
1 Giuseppe Scassellati-Sforzolini and Marco D'Ostuni are partners, Luciana Bellia is a senior attorney, Fabio Chiovini is an associate, and Michael Tagliavini is a trainee lawyer at Cleary Gottlieb Steen & Hamilton LLP.
2 A table summarising the ICA's activities from 2011 to 2018 is available at http://www.agcm.it/dotcmsDOC/come-funziona/e27_file.pdf.
3 Constitutional Court, Judgment No. 13 of 31 January 2019.
4 Case I811 – Finanziamenti auto.
5 Case I771 – Servizi di post-produzione di programmi televisivi Rai.
6 TAR Lazio, judgment of 6 June 2016, New Italian Broadcasting Association (NIBA) and ICA (Judgment No. 6475).
7 Council of State, judgment of 21 March 2018, ICA and NIBA (Judgment No. 1822).
8 TAR Lazio, judgment of 20 April 2018, Why Not S.r.l. and ICA (Judgment No. 4405).
9 Council of State, judgment of 31 December 2018, Italcementi and ICA (Judgment No. 7320).
10 Council of State, judgment of 21 March 2018, Olmo and ICA (Judgment No. 1821).
11 TAR Lazio, judgment of 5 November 2018, Sintesi and ICA (Judgment No. 10643).
12 Case I822 – Consip/Gara sicurezza e salute 4; Case I821 – Affidamenti vari di servizi di vigilanza privata.
13 Case I820 – Fatturazione mensile con rimodulazione tariffaria.
14 Court of Justice, Case C-179/16 F. Hoffmann-La Roche and Others, judgment of 23 January 2018.
15 Case A511 – Enel/Condotte anticoncorrenziali nel mercato della vendita di energia elettrica, case A512 – A2A/Condotte anticoncorrenziali nel mercato della vendita di energia elettrica, case A513 – Acea/Condotte anticoncorrenziali nel mercato della vendita di energia elettrica.
16 Case A480B – Incremento prezzo farmaci Aspen-inottemperanza.
17 Case A480 – Incremento prezzo farmaci Aspen.
18 Case AT.40394 – Aspen.
19 Case A505 – Monte titoli/Servizi di post-trading, case A523 – Ticketone/Condotte escludenti nella prevendita di biglietti, case A519 – Affidamento diretto del servizio di trasporto pubblico ferroviario nel Veneto, case A517 – Mercati di manutenzione di dispositivi diagnostici.
20 Case A493B – Poste Italiane/Prezzi recapito.
21 Case PS11009 – Samsung-Aggiornamento software, case PS11039 – Apple-Aggiornamento software.
22 Case PS11112 – Facebook-Condivisione dati con terzi.
23 Case PS11272 and PS11237 – Modifica policy bagagli.
24 Law No. 124 of 4 August 2017.
25 Commission press release 'State aid: Commission finds Italy granted incompatible aid to Naples port authority but no aid involved in delayed collection of concession fees by port authority,' 20 September 2018.
26 Court of Justice, Case C-624/16, Scuola Elementare Maria Montessori and Pietro Ferracci v. Commission, judgment of 6 November 2018.
27 Appeal against TAR Lazio, judgment of 18 September 2017, Axpo v. GSE (Judgment No. 9777).
28 The intervention of the Commission before national courts in state aid cases is allowed by Article 29 of Regulation 2015/1589 laying down detailed rules for the application of Article 108 TFEU.
29 Court of Justice, Case C-385/18, Arriva Italia v. Ministry of Transport.
30 Case C12183 – Luxottica/Barberini.
31 Case C12125 – 2i Rete Gas/Nedgia.
32 Case C12109 – Douglas/La Gardenia-Limoni.
33 Case C12139 – Noah 2/Mondial Pet Distribution.