Antitrust law has a supranational dimension and scope. From the perspective of the Italian and Eu legislators, antitrust rules are aimed at preserving conditions of competition into the market among operators to the benefit of consumers.
In the European Union, the supervising and fining authority is the European Commission, while in the Italian territory, this power is granted to the Autorità garante della concorrenza e del mercato, the so called Italian Antitrust Authority, based in Rome.
In this article, after a general definition of antitrust law, we will deal with the powers of the Antitrust Authority in Italy, related to competition.
What is antitrust law?
Antitrust law empowers competition authorities to act in order to prevent restrictions to competition. In EU these powers are conferred for the benefit of consumers and other competitors.
Tipically, restriction of competition – which is harmful to consumers and businesses – may arise when:
- companies agree to coordinate their market behavior instead of competing openly;
- one or more companies abuse their market power by imposing unreasonable prices on consumers, denying market access to potential competitors or maneuvering to cut competitors out of their markets;
- the planned merger between two or more companies or the take over of one company may result in a new entity/ies having too much market power.
In the first 2 cases, the competition authorities, after an investigation and an administrative proceeding, will issue a decision and, if there is an infringement, will order to stop it and impose a relevant fine on turnover of the undertakings concerned.
In the case of a merger or acquisition, the competition authorities will assess if the resulting concentration may restrict competition and suspend it. In some cases, they can authorise it provided that the undertakings concerned commit themselves to change the structure of the operation, in order to overcome the competition concerns.
The Italian Competition Act
Antitrust rules in Italy were introduced by Law no. 287 of 10 October 1990 (“The Competition and Fair Trading Act”, hereinafter “the Competition Act”), which established also the Italian Competition Authority as an administrative independent Authority, without any possibility of interference by the Italian government. In 2022, the Competition Act was amended in line with some EU rules. In particular, the new law changed the substantive test for assessing mergers, some rules applicable to joint ventures, and the calculation of turnover for credit and financial undertakings.
Other laws endowed the Italian Competition Authority with additional powers. Actually, the scope of activity of the Authority covers:
- Consumer protection
- Conflicts of interests
- Legality rating
The powers conferred to the Italian Authority in the field of competition are directed to prevent agreements between competitors which may restrict the market, to stop abuse of market powers in Italy or in a part of the Italian territory, to authorize in advance mergers and take overs having an effect in Italy.
Moreover, the Italian Antitrust authority is entrusted with the repression of unfair commercial practices, misleading and unlawful comparative advertising; the control of conflict of interests concerning government-office holders; the legality rating of companies in Italy.
Herein we will deal with the powers conferred on competition.
1) Agreements and abuse of dominant position
Section 2 of the Italian Competition Act prohibits agreements between undertakings which even only potentially may affect competition within the whole national market or a part of it.
Prohibited agreements between undertakings may be formal agreements, concerted practices and resolutions adopted by associations of undertakings and consortia. It is not necessary that these agreements intervene between “economic operators”. The Italian Competition Act prohibits all forms in which several entities may deliberately act jointly to coordinate their market behavior.
After the entry into force of EU Regulation no. 1/2003 of 16 December 2002, concerning the application of the rules of competition referred to in Articles 101 and 102 of the TFUE (Treaty on the Functioning of the European Union), agreements likely to prejudice trade between member States must be subjected to Article 101 of the Treaty. The undertakings themselves, at their own risk, determine whether the agreement satisfies the requirements for an exemption, pursuant to and in accordance with Article 101(3); any controls occur ex post if an investigation is launched.
In accordance with Article 5 of this Regulation, therefore, the Italian Antitrust Authority may not proceed to assess the merits of prior notices submitted by undertakings which have a EU dimension, even for agreements between Italian undertakings.
This has significantly reduced the number of occasions on which the Italian Antitrust Authority may exercise also its peculiar waiver power. Actually, in accordance with Section 4 of Law no. 287/90, the Authority is still empowered to authorize agreements having exclusively a national dimension – which restrict competition for a limited period of time (Section 4 of the Act). In order to qualify for this exemption, the companies concerned must ask for the opinion of the Authority and show that the limitations on competition are absolutely necessary in order to give a substantial benefit to consumers (for example, by reducing prices or providing a good or service which would not otherwise be available).
Italian definition of cartel
In the Italian case law, price fixing, market sharing, bid rigging and production or sales quotas have always been considered very serious cartel behaviors, although there is no specific legal definition of “cartel“. The definition of section 2 of the Italian Competition Act is very broad:
“agreements and/or concerted practices between undertakings, and any decisions, even if adopted pursuant to their Articles or Bylaws, taken by consortia, associations of undertakings and other similar entities. Agreements are prohibited between undertakings which have as their object or effect the prevention, restriction or distortion of competition within the national market or within a substantial part of it”.
Investigations and decisions
Investigations are generally initiated on the basis of a complaint, a leniency application or ex officio. The complaint shall be lodged in writing but no formal criteria are required, except for anonymous complaint which are not considered.
It is worth noting that, in 2022, the Authority was entrusted with the general power to request information and documents outside of formal investigations.
At the end of the proceeding, the Authority may adopt the following type of decisions:
- a) may establish that the conduct of the undertaking is lawful;
- b) if there is an infringement, may prohibit it and set a deadline within which the undertakings concerned are to remedy the infringement.
- c) in the most serious cases, it may decide, depending on the gravity and the duration of the infringement, to impose a fine.
In addition, after the amendment of 2022, in cases concerning restrictive agreements and abuse of dominant position, the Italian Antitrust Authority can settle the case, provided that, before the formal notification of the statement of objections, the undertakings concerned acknowledge
the infringement and submit an acceptable settlement proposal.
Fines and leniency policy
Section 15 of the Italian Competition Act states that, depending on the gravity and the duration of the infringement, the Italian authority may impose a fine up to 10% of the turnover of each undertaking or entity during the prior financial year. Section 15 deals also with non-imposition and reduction of fines.
Immunity from fines is granted to the undertaking who is the first to submit voluntarily information or evidence provided that the Italian Authority consider such disclosure as decisive for the finding of an infringement and the Authority did not already have sufficient information or evidence to prove the alleged infringement (see par. 2 and 3 of the Leniency Programme). Pursuant to Section 4 of the Leniency Programme, partial leniency is granted to undertakings which provide evidence that represents, in the Italian Antitrust Authority’s view, significant added value to the investigation. The reduction of fines shall normally not exceed 50%, but it is not excluded that it may be higher. Immunity and/or a reduction in fines are granted in the final decision on the case.
Lastly, after 2022, the Italian Antitrust Authority may adopt fine reductions in the event of successful conclusion of the settlement procedure (as indicated in the paragraph above).
2) Mergers and acquisitions: what they are and when they are prohibited
In EU law a “concentration” occurs when one company merges with another or acquires control over another, or when two undertakings set up a joint venture that operates as an independent economic entity in every respect (fully functional joint venture). After 2022, all joint ventures, including those which were defined by the Italian Authority as cooperative and categorized as an “agreement” are now treated as “concentrations” and subject to the regime of mandatory advance notification established for the mergers.
A concentration might substantially reduce competition on a lasting basis, and enable the parties to raise prices or impose conditions that are detrimental to consumers.
Italian Competition Act (Law no. 287/90) provides that the Antitrust Authority must be notified of any merger operations prior to the execution, whenever the aggregate nation-wide turnover of each of at least two of the undertakings concerned and the turnover of the relevant group of undertakings on Italian territory exceeds predefined thresholds. If the merger has a EU dimension, the notification must be addressed to the EU Commission which will assess it.
After 2022, the Italian Antitrust Authority has been enabled to investigate and examine also the mergers and acquisitions which are under the national thresholds, if some specific conditions are met.
The Italian Antitrust Authority examines all the operations it is notified in order to determine their effects on competition in Italy.
A merger is prohibited if it leads to the creation or strengthening of a dominant position substantially reducing competition on a lasting basis (Section 6 of Law no. 287/90). The amendment of 2022 changed the assessment test indicated in section 6 of the Competition Act. The “dominance test” (“creation or strengthening of a dominant position in the national market”) has been replaced with a more complex test adopted by the EU Commission, the so-called SIEC test (“significant impediment to effective competition”).
The Competition Act also states that a merger or acquisition may be authorized by the Italian Authority provided that the original project is amended in order to remove the distortive aspects on competition. As an example, such an operation may be authorised provided that a part of the acquired undertaking is sold to a third party.
In order to meet the need of speed and certainty, the Authority’s offices may be contacted by the parties for preliminary discussions of any problems connected with the formal notification of future mergers, provided that they comply with the conditions indicated in Section 16(1) of the Law.
Legal Services in Competition Law
We advise national and international clients on issues related to Antitrust Law and, namely, we may carry on the following activities:
- Assessment of the antitrust issues arising in drafting and negotiating some commercial contracts, in particular distribution agreements and supply chain agreements, at national or international level.
- Evaluation of the merger or acquisition from an antitrust viewpoint, notification of the prospected operation to the Antitrust authority and management of the related process.
- Development and management of antitrust compliance programs and company courses, in line with the guidelines of the Italian Antitrust authority.
- Legal assistance before the Italian Antitrust authority and in litigation cases concerning competition issues.