CN08 - Italian Competition Authority - new powers to address concentrations and conduct

On 27 August 2022, the annual Law on Market and Competition entered into force, strengthening the existing investigative and enforcement powers of the Italian Competition Authority ("ICA"), most notably in relation to digital platforms.

Key takeaways

• The substantive merger control test is now in line with the European Commission's "significant impediment to effective competition" or "SIEC" test.
• The ICA may require the notification of certain acquisitions of control of small-size companies with innovative strategies that fall below the standard thresholds for compulsory notification.
• A position of economic dependence from a digital platform may be presumed when a digital platform is a "must use"/ key gateway for business users to reach their customers or suppliers.
• Businesses under investigation for infringements of competition law may now enter into settlement negotiations with the ICA.
• The ICA may send compulsory requests for information even though no formal proceedings have been launched. Refusing to answer compulsory information requests may result in fines.

On 2 August 2022, the Italian Parliament approved Law No. 118/2022, the new Annual Law on Market and Competition ("NALMC"), which came into force on 27 August 2022.

The new rules are aimed at strengthening the enforcement powers of the ICA, with a particular focus on platforms in the digital sector.

In addition, new investigative tools will complement the enforcement powers recently introduced under the Italian Legislative Decree No. 185/2021 (transposing Directive (EU) 2019/1 (the "ECN+ Directive")), which sought to ensure that the national competition authorities of EU Member States enjoy the resources, independence and powers to enforce EU competition rules more effectively throughout the EU.

Changes to merger control rules to align with EU principles, plus new tools to tackle "killer acquisitions"

SIEC test: In relation to the substantive test to assess concentrations (the so-called "SIEC" test) and the analysis of efficiencies in merger cases, the NALMC has brought the ICA's enforcement powers into line with the principles applied by the European Commission under EU merger control.

Full-function joint ventures: The types of joint venture that must be notified to the ICA now includes "full-function" joint ventures (i.e. joint ventures that perform on a lasting basis all the functions of an autonomous economic entity), including joint ventures which could result in the cooperation between parent companies. Where the transaction establishing a joint venture has as its object or effect the coordination of the behaviour of independent undertakings, such coordination is assessed as part of the ICA's merger inquiry according to the principles of Article 101 TFEU. 

Review of "killer acquisitions": In addition, the NALMC ensures that the ICA will now have the power to carry out ex-post reviews of certain concentrations that raise competition issues (which are under the normal thresholds for compulsory notification). Under the new rules, the ICA may require notification within 30 days of a concentration that: 

• meets one of the turnover thresholds set out below; and
• may restrict competition in the national market (or in a substantial part of it); and
• has been closed in the preceding six months.

The relevant turnover thresholds are: 

• the parties' aggregate turnover in Italy is at least EUR 517 million; or
• each of at least two parties to the transaction has turnover of at least EUR 31 million in Italy; or
• the parties' aggregate worldwide turnover exceeds EUR 5 billion.

The aim of this provision is to enable the ICA to  examine acquisitions by very large companies of small target companies that act as important competitive forces in the Italian market.  For example, an acquirer with revenue exceeding EUR 5 billion may be required to submit a merger notification to the ICA if it acquires a target business with substantially less than the normal domestic turnover threshold of EUR 31 million; however, the application of the EUR 5 billion threshold remains quite high and therefore ensures that only relatively large companies will be directly affected or concerned by this new set of rules. 

In respect of such transactions, the substantive test applied by the ICA will focus on the assessment of "… the anticompetitive effects of acquisitions of control on small-size companies characterised by innovative strategies also in the field of new technologies".  

The ICA is in the process of adopting specific procedural rules concerning such type of merger control review. 

Introduction of settlement procedure for antitrust cases

In line with the EU rules, the NALMC introduces a settlement procedure whereby undertakings who may be party to an alleged anticompetitive agreement or practice, or are alleged to have abused a dominant position, respectively in breach of Articles 101 or 102 TFEU, may seek to enter into a settlement agreement (i.e. plea bargaining) with the ICA. 

In practice, the ICA will need to adopt procedural rules in relation to the settlement procedure, which are likely to be in line with the rules currently in place at the EU level, where undertakings that enter into settlement agreements with the European Commission may expect a fine reduction of 10% of the applicable fine.

Abuse of economic dependence and digital platforms – a (very) small DMA?

The NALMC has introduced a rebuttable presumption of economic dependence from digital platforms, which applies in cases where digital platforms act as key gateways for (typically) smaller / weaker business users to reach their customers or suppliers (e.g. in terms of network effects and data availability). 

In parallel, the NALMC has expressly introduced a list of the types of conduct by digital platforms that may give rise to an abuse of economic dependence, such as:

• the provision of insufficient information on the scope or quality of the service provided;
• a request for undue unilateral services not justified by the nature or content of the activity performed;
• the adoption of practices that inhibit or impede the use of a different provider for the same service; and
• the application of unilateral conditions or additional costs not provided for in the contractual agreements or existing licenses.

While the ICA had requested, in its 2021 report to the Italian Parliament, powers similar to those of the Bundeskartellamt (the German national competition authority) to give designated status to certain digital platforms that would have been subject to 'Dos and Don'ts', the Italian Parliament has opted instead for the expansion of the existing toolkit concerning the abuse of economic dependence, which the ICA has been increasingly using in the last few years. In this way, the NALMC appears to seek a balance between providing more legal certainty to companies (by avoiding the duplication of multiple national regimes that are similar to the EU's newly adopted Digital Markets Act) and entrusting the ICA with more agile enforcement tools to tackle the behavior of digital platforms.

The President of the Council of Ministries, jointly with the Ministry of Justice and in cooperation with the ICA, are expected to adopt specific guidelines to facilitate the application of the new rules.

New investigatory powers 

The NALMC provides that the ICA may, at any time, request information or documentation from any entity or person in connection with the enforcement of competition rules, and impose fines of up to 1% of total worldwide turnover for the failure to provide such information or documents. The ICA may use its enhanced information gathering powers even prior to launching formal proceedings.

Comment

As a result of the changes introduced by the law implementing the ECN+ Directive and the NALMC, the enforcement and investigative powers of the ICA have been brought into line with other EU Member States and the wider EU system. The NALMC also provides the ICA with stronger enforcement tools in the digital platform economy. However, a potential cause of concern is the further expansion of the concept of abuse of the economic dependence, especially considering the recent trend which has seen a wider use of this concept by the ICA.

With thanks to Dalila Marchello of Ashurst for her contribution.