Italy: Carloni Publishes Chapter On The Recent Important Developments In Merger Control In Italy

Overview of merger control activity during the last 12 months

In 2013, 59 concentrations were notified to the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato or "ICA"), a significant reduction compared to the numbers in 2012 (451) and in 2011 (514). During the first months of 2014 (January to April), the ICA reviewed and cleared unconditionally 14 concentrations.

This sharp reduction in the number of concentrations reported to the ICA was due to the impact of the Monti government reform on the Italian merger control regime which, as of 1 January 2013, led to: (i) the modification of the reportability requirements in Italy1 which, by making the turnover thresholds cumulative rather than alternatives, introduced an effective mandatory local nexus requirement; and (ii) the abolition of the merger filing fees ("Monti reform")².

The Monti reform attempted to reduce red-tape and unnecessary administrative burdens by correcting a longstanding anomaly of the ICA having jurisdiction over transactions that do not have an appreciable impact in Italy. A concurrent objective was to free up the ICA's resources to ensure the ICA can focus on the fight against hard-core infringements. This objective appears notionally to have been met given the significant reduction in the number of reviewable transactions. As discussed further in the section 'Key policy developments' below, in order to assess the impact of the amendments in more detail and consider whether further adjustments are necessary, the ICA undertook a statistical analysis and then launched a public consultation to analyse and seek views on the potential effects of lowering the now cumulative Italian target turnover threshold from €49m to €10m so as to ensure that a noninsignificant number of potentially problematic transactions do not escape review (ICA's Comunicazione of 10 February 2014).

From January 2013 to April 2014 ("Relevant Period"):

• 62 cases were unconditionally cleared by the ICA in Phase I³ since they did not raise serious doubts as to their compatibility with the Italian Competition Act;
• one case (M-DIS – Servizi Stampa Liguria – Società di Edizione e Pubblicazioni/GEDIS) ⁴ was unconditionally cleared by the ICA after an in-depth investigation (Phase II);⁵
• one case (Italgas S.p.A. – Acegas-Aps S.p.A/Isontina Reti Gas)6 was prohibited by the ICA after Phase II since it would have created or strengthened a dominant position, as a result of which competition would have been eliminated or substantially reduced on a lasting basis in the Italian market (Article 18 of the Italian Competition Act);
• 21 cases resulted in a decision of inapplicability of the Italian Competition Act. The ICA adopts this sort of decision when the notified transaction: (i) does not fall within the scope of the Italian Competition Act because it does not amount to a concentration within the meaning of Article 5 of the Italian Competition Act, e.g. the notified transaction did not result in a change of control; (ii) has a Community dimension and as a result falls within the scope of the EU Merger Regulation ("EUMR"); (iii) does not meet the cumulative turnover thresholds set forth in Article 16 of the Italian Competition Act; or (iv) is abandoned;⁷
• in five cases the ICA opened proceedings for failure to notify a concentration prior to implementation pursuant to Article 19(2) of the Italian Competition Act;⁸
• in one case (Unipol/Fonsai)⁹ the ICA opened proceedings for failure to comply with the conditions imposed pursuant to Article 19(1) of the Italian Competition Law. In another case (Moby/CIN/Tirrenia),¹⁰ the ICA imposed a fine of €500,000 on Moby and of €271,000 on CIN for breach of their commitments in connection with the acquisition of Tirrenia in June 2012; and
• in one case (Telecom Italia/Seat Pagine Gialle),¹¹ further to an application from Seat in October 2013, the ICA modified certain commitments given in connection with the Telecom Italia/Seat Pagine Gialle merger of 2000.

In the Relevant Period there was one Article 22 EUMR referral from the ICA to the European Commission ("Commission"). In Canon/I.R.I.S, which concerned Canon's proposed acquisition through its public bid of I.R.I.S S.p.A. ("IRIS"), a developer of a broad range of capture software for multi-functional peripherals used in several document related-functions, such as scanning, copying and printing, the ICA and others joined the initial referral request made by the Belgian competition authority.¹² The Commission found that both legal requirements set forth by Article 22 EUMR were met, since: (i) the scope of the potentially affected markets was wider than national, if not EEA-wide, therefore it affected trade between Member States; and (ii) the concentration threatened to significantly affect competition in the market for portable document scanners in the EEA and in Italy (the requesting Member State). In particular, the concentration would have led to high combined market shares post-merger (50-60% in Italy and in the EEA) in the already oligopolistic market for portable document scanners (a niche market with a possible size of €10m to €20m in 2011 at the EEA level). As a result, the Commission reviewed the concentration which was subsequently unconditionally cleared in Phase I.

No referrals from the European Commission to the ICA under Article 9 EUMR have been made in the Relevant Period. However, the ICA has previously signalled its intention to review concentrations liable to potentially impact the Italian market. For instance, in Lactalis/Parmalat (2011), which concerned Lactalis's unsolicited €3.4bn bid for Parmalat's entire share capital and resulted in the creation of the largest dairy group in the world, there were indications concerning a potential Article 9 request as stated by the former Chairman of the ICA, Mr. Catricalà: "They (Lactalis) can present a case to the EU (the European Union's Commission) but if we see that there are competition problems for the Italian market, we will ask to see it".¹³ Ultimately, the ICA did not submit a formal Article 9 request and the concentration was exclusively reviewed by the Commission who cleared it unconditionally in Phase I.

New developments in jurisdictional assessment or procedure

With the exception of the implementation of the Monti reform which, as of 1 January 2013, introduced the cumulative turnover thresholds and abolished the merger filing fees (see section, 'Key policy developments' below for the ICA's assessment of the impact of the Monti reform), there has been no significant change as regards the substantive assessments of concentrations notified to the ICA or the procedural rules.

Key industry sectors reviewed and approach adopted to market definition, barriers to entry, nature of international competition etc.

As regards the sectors currently under scrutiny, the energy sector (in particular, gas distribution) appears to attract most of the ICA's attention. Italgas-Acegas/Isontina Reti Gas was the only concentration prohibited by the ICA in the Relevant Period and involved the transfer of joint control of Italian gas distributor Isontina Rete Gas from ENI and Acegas-Aps to Acegas-Aps (Hera Group) and Italgas, Italy's largest gas distributor. The concentration was blocked on grounds that it would have created a dominant position capable of eliminating or reducing competition in future tenders for natural gas distribution concessions in certain narrowly defined geographic markets. The ICA found that Italgas and Acegas would have participated jointly in tenders for gas distribution concessions in these geographic areas and would not have faced sufficient competitive constraint, posttransaction, from Isontina (now controlled by Italgas and Acegas) and other potential entrants. The ICA had also previously prohibited another concentration in the energy sector in 2011 (CVA-Compagnia Valdostana delle Acque/Deval-Vallenergie)¹⁴ which subsequently was re-notified and authorised due to amendments in the applicable regional regulation concerning the electricity market.¹⁵

Other sectors under scrutiny are transport (Moby/CIN/Tirrenia) and insurance (Unipol/ Fonsai) where the ICA imposed fines for breach of commitments and opened proceedings for failure to comply with the conditions attached to its clearance decision. In the telecommunications sector, the ICA modified certain commitments given in connection with the Telecom Italia/Seat Pagine Gialle merger of 2000 (see the section 'Key policy developments' below).

Key economic appraisal techniques applied e.g. as regards unilateral effects and co-ordinated effects, and the assessment of vertical and conglomerate mergers

Whilst the ICA's substantive test (i.e., a concentration is prohibited whenever it creates or strengthens a dominant position as a result of which competition is eliminated or substantially reduced on a lasting basis in the Italian market) mirrors that of pre-2004 EUMR reform, the ICA's decisional practice is generally in line with the current EUMR test.

Section 1(4) of the Italian Competition Act requires the ICA to interpret the national competition rules and merger control in accordance with the principles of EU competition law. The ICA relies on the substantive criteria adopted by the Commission, including appraisal of market shares of the parties and their competitors, the alternative choices available to suppliers and customers, the existence of entry barriers, access to sources of supply or market outlets, structure of the relevant markets, supply and demand trends and overall competitive situation of the market concerned. Broadly speaking, when assessing the competitive effects stemming from a concentration, the ICA tends to rely on a market-structure based approach that attempts to determine the existing parameters and dynamics of competition on the affected market(s), and predicts the post-merger effects on that (these) market(s). The ICA compares the envisaged competitive conditions in the post-merger scenario with those that would prevail absent the concentration (i.e. the 'counterfactual'), and endeavours to ascertain whether the merging parties will face sufficient competitive constraints to make it unprofitable to engage in alleged anti-competitive behaviour post-merger.

By way of illustration, in AtlantiaGemina, which concerned the substitution of one operator (Roma/ADR, the company that manages the Rome airports) by another (Autogrill, a company active in the catering and retail services, including airports) in relation to the management of airport facilities and ground-handling services, the ICA appraised the vertical effects in the travel retail and catering markets. As regards these markets, the ICA took into account: (i) the presence of established competitors at the global level (Adita, Dufry, Nuance Group, Gbr. Heinemann, etc.) which had the ability to discipline Autogrill, post-merger; and (ii) the fact that the procedures for the award of sub-concessions for the provision of catering services in the airport ensured equal and non-discriminatory access for Autogrill's competitors.

In M-DIS-Servizi Stampa Liguria-Società di Edizione e Pubblicazioni/GE-DIS, which concerned the markets of newspapers and periodicals distribution, the ICA conducted an in-depth review of the horizontal and vertical effects of the concentration. Within the market of periodicals distribution, the ICA considered local distribution markets in which the merging parties would have had a combined share of 80-85% post-merger. At the end of Phase II, the ICA unconditionally cleared the concentration given that the merging parties' market power would not increase inter alia as a result of the fact that they were subject to regulatory obligations incumbent on national and local distributors which made it impossible for the merging parties to influence the parameters of competition. Whilst the ICA's decisional practice16 does not attribute particular relevance to efficiency arguments, in M-DIS-Servizi Stampa Liguria-Società di Edizione e Pubblicazioni/GE-DIS, in its assessment the ICA took into account cost-efficiencies resulting from the concentration in the context of difficult market conditions for newspapers and periodicals distribution.

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Previously published in the Third Edition of Global Legal Insights – Merger Control

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