Italian Competition Authority: new powers to fight against concentrations and behavior of digital platforms
This article is part of the October 2022 edition of our Competition Law Newsletter and focuses on some recent key developments.
On August 27, 2022, the annual Market and Competition Law entered into force, strengthening the existing investigative and enforcement powers of the Italian Competition Authority (“ICA”), in particular with regard to digital platforms.
Key points to remember
- The substantive merger control test is now consistent with the “significant impediment to effective competition” Where “SIEC” test.
- The ICA may require notification of certain takeovers of small companies with innovative strategies that fall below the standard mandatory notification thresholds.
- A position of economic dependence on 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.
- Companies under investigation for antitrust violations can now enter into settlement negotiations with the ICA.
- The ICA can send mandatory information requests even if no formal procedure has been initiated. Failure to respond to mandatory information requests may result in fines.
On August 2, 2022, the Italian Parliament approved Law No. 118/2022, the new annual Market and Competition Law (“NALMC”), which entered into force on August 27, 2022.
The new rules aim to strengthen the enforcement powers of the ICA, with a particular focus on digital sector platforms.
In addition, new investigative tools will complement the enforcement powers recently introduced under Italian Legislative Decree no. ensure that national competition authorities in EU Member States have the resources, independence and powers to enforce EU competition rules more effectively across the EU.
Changes to merger control rules to align with EU principles, plus new tools to tackle “killer acquisitions“
SIEC test: With respect to the substantive test for assessing mergers (the so-called “SIEC test”) and the analysis of efficiencies in merger cases, the NALMC has aligned the enforcement powers of the ICA with the principles applied by the European Commission in the context of EU merger control.
Full-function joint ventures: The types of joint ventures which must be notified to the ICA now include “full-function” joint ventures (i.e. joint ventures which carry out on a lasting basis all the functions of an autonomous economic entity ), including joint ventures that could lead to co-operation between parent companies. When the operation constituting a joint venture has as its object or effect the coordination of the behavior of independent undertakings, this coordination is assessed within the framework of the ICA’s merger investigation according to the principles of Article 101 TFEU.
Examination of “deadly acquisitions”: In addition, the NALMC ensures that the ICA will now have the power to carry out ex post reviews of certain mergers that raise competition concerns (which fall below normal mandatory notification thresholds). The new rules require notification within 30 days of a concentration that:
- reaches one of the two relevant turnover thresholds: (i) €517 million total Italian turnover of all undertakings concerned and €31 million individual Italian turnover of at least two of the companies involved; or (ii) where the combined worldwide turnover of the undertakings concerned exceeds EUR 5 billion;
- raises concrete risks for competition in the national market (or in a part of it), including negative effects for the development and dissemination of small businesses characterized by innovative strategies; and
- has not been completed for more than six months.
The purpose of this provision is for the ICA to review acquisitions by very large companies of smaller target companies that act as significant competitive forces in the Italian market. For example, an acquirer whose turnover exceeds EUR 5,000,000,000 may be required to submit a merger notification to the ICA if it acquires a target company whose domestic turnover is significantly below the normal threshold EUR 31,000,000; however, the application of the €5 billion threshold remains quite high and therefore ensures that only relatively large companies will be directly affected or impacted by this new set of rules.
With respect to such transactions, the substantive test applied by the CIA will focus on the assessment of “… the anti-competitive effects of takeovers on small companies characterized by innovative strategies also in the field of new technologies“.
The ICA is in the process of adopting specific procedural rules regarding this type of merger review.
Introduction of the procedure for settling antitrust cases
In accordance with EU rules, the NALMC introduces a settlement procedure whereby companies that may be party to an allegedly anti-competitive agreement or practice, or suspected of having abused a dominant position, respectively in violation of Articles 101 or 102 TFEU, may seek to enter into a settlement agreement (i.e. plea bargain) with the ICA.
In practice, the CAI will have to adopt procedural rules relating to the settlement procedure, which will probably be in line with the rules currently in force at EU level, where companies entering into settlement agreements with the European Commission can s expect a fine 10% reduction of the applicable fine.
Abuse of economic dependency and digital platforms – a (very) small DMA?
NALMC introduced a rebuttable presumption of economic dependence on 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 behavior of digital platforms that can 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 benefits not justified by the nature or content of the activity carried out;
- adopting 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 contractual agreements or existing licenses.
While the ICA had asked, in its 2021 report to the Italian Parliament, for powers similar to those of the Bundeskartellamt (Germany’s national competition authority) to give designated status to certain digital platforms which would have been the subject of ‘Dos and Don’ts’, the Italian Parliament opted instead to expand the existing toolbox regarding the abuse of economic dependence, which the ICA has increasingly used in recent years. In this way, the NALMC seems to seek a balance between providing more legal certainty to companies (avoiding the duplication of several national regimes similar to the law on digital markets recently adopted by the EU) and entrusting the ICA with tools more agile applications to combat the behavior of digital platforms.
The President of the Council of Ministers, together with the Ministry of Justice and in cooperation with the ICA, should adopt specific guidelines to facilitate the application of the new rules.
New investigative powers
NALMC provides that the CIA may, at any time, request information or documents from any entity or person in connection with the application of competition rules, and impose fines of up to 1% of total worldwide turnover in the event of failure to provide this information or documents. The ICA can use its enhanced information-gathering powers even before initiating formal proceedings.
Following the changes introduced by the law implementing the ECN+ Directive and the NALMC, the ICA’s enforcement and investigative powers have been aligned with those of other EU member states and the European system in wider. NALMC also provides the ICA with stronger enforcement tools in the digital platform economy. However, a potential cause for concern is the expansion of the concept of abuse of economic dependency, particularly given the recent trend that has seen wider use of this concept by the CIA.