On 28 May 2020, the Italian Administrative Supreme Court ("CoS") reinstated remedies imposed by the Italian Competition Authority ("ICA" or "Authority") to mitigate the effects of the acquisition by Sky Italia Holding S.p.A. ("Sky") of certain assets of the digital terrestrial Pay-TV owned by Mediaset Premium S.p.A. ("MP"). The ICA decision had been quashed by the Regional Administrative Tribunal of Lazio.
| what you need to know - key takeaways |
- The ICA can impose remedies in relation to a concentration that has been partially implemented before the end of its investigation: Italian competition law allows parties to close a transaction prior to receiving clearance. However, completing a transaction may have effects that cannot be easily unwound and the ICA may impose far reaching remedies to restore the pre-merger level of competition.
- Even a limited degree of control over part of the assets of a company, for a short period, may bring about lasting and irreversible anticompetitive effects in the market: returning the assets to their original owner will not necessarily restore the level of competition that existed before the deal took place.
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The CoS ruled that the Regional Administrative Tribunal of Lazio wrongly quashed the ICA decision imposing remedies on Sky's purchase of R2 S.r.l. ("R2"), which runs MP's pay digital terrestrial television (DTT) platform and is the main pay-TV competitor of Sky in Italy, despite suggestions that Sky had abandoned the transaction. Further background information on the case may be found in our previous newsletter.
In its judgment, the CoS concurred with the ICA's finding that the purchase of the DTT sub-licence eliminated Sky's only significant competitor in the pay-TV space (DTT and satellite). Therefore, the ICA was right to prohibit Sky from entering into exclusive rights for audio-visual content and linear channels for internet platforms in Italy for three years, so that content would be available for other operators that provide their services through Internet services.
The CoS further held that the abandonment of the transaction did not restore competition to the level that existed prior to the transaction. In particular, despite the fact Sky only held "temporary" control over R2, the transaction produced irreversible anticompetitive effects. Indeed, during that limited period, Sky had the possibility of making technological changes to the CAM modules (where the SIM cards are plugged in) used by the R2 platform, thus facilitating its acquisition of new customers and hampering rivals' ability to acquire those customers. The CoS therefore reinstated the measure the ICA imposed to mitigate such "irreversible" effects, thereby ordering Sky to grant FRAND access to competitors to any new platform it may develop.
The CoS also rejected Sky's claims on procedural grounds notably concerning Sky's right of defence (allegedly violated in so far as the ICA did not issue a new statement of objections in relation to the "residual" part of the transaction) and the violation of the principles concerning the assessment of inter-related transactions as a single concentration.
Italian competition law allows parties to close a transaction prior to receiving clearance. However, this case illustrates the difficulty in some cases of unwinding the effects of a completed transaction giving rise to competition concerns and the fact that, in such cases, the ICA is prepared to impose far-reaching remedies to restore competition.
