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Legislation, triggers and thresholds
What legislation applies to the control of mergers?
Law 287/1990, in particular Articles 5 to 7 and 16 to 19, contains the rules on control of concentrations and joint ventures. Other procedural rules are contained in Presidential Decree 217/1998. In addition, Decree Law 201/2011 prohibits the so-called interlocking directorates in the banking, insurance and financial services sectors, making it illegal for individuals to sit on the board of more than one corporate body in competing undertakings in any of these sectors. Since the merger notification form requires the merging parties to fill in a section on interlocking directorates, merger control in the above-mentioned sectors can also be used as a means for spotting potential infringements of this law.
Finally, when undertakings entrusted with the operation of services of general economic interest, or operating under a statutory monopoly, wish to operate in markets other than those of their current activity, they must do so through a separate company. The incorporation of such new companies, or the acquisition of a controlling interest in companies operating in new markets, requires notification to the Italian Competition Authority (ICA) irrespective of turnover. Failure to comply with this obligation triggers a penalty under Article 15 of Law 287/90
What is the relevant authority?
The ICA is the authority acting as both an investigative and decision-making body.
According to Article 20(4) of Law 287/90, in the case of operations involving insurers, measures can be adopted by the ICA only after hearing the opinion of the Istituto per la Vigilanza sulle Assicurazioni to be issued within 30 days from receipt of the documents on which the measure is based.
According to Article 20(5) of Law 287/90, in the case of mergers involving banks, the ICA has to take a decision within 60 days of the submission date. The ICA will assess whether the concentration gives rise to any antitrust concerns, and the Bank of Italy, in line with its financial supervisory role, will assess the transaction under prudential rules in a parallel proceeding also lasting 60 days.
Furthermore, the ICA may, at the request of the Bank of Italy, authorise a merger involving banks or banking groups which creates or strengthens a dominant position, in the interests of the stability of one or more parties involved. The authorisation may not, however, permit any restrictions to competition which are not strictly necessary to achieve the purposes therein indicated (Articles 20(5-bis and 5-ter of Law 287/90).
With regard to communications, the law setting up the Autorità per le Garanzie nelle Comunicazioni (AGCOM, the communications regulator (Law 249/1997), requires that before issuing a decision on any merger (or agreement) in the telecoms, broadcasting and media sector the ICA must request a non-binding opinion from AGCOM. In addition, AGCOM must be notified of transfers of ownership of undertakings engaging in radio and television broadcasting within 15 days of their execution. The notion of “transfer of ownership” includes every act, regardless of its form, leading to the acquisition of control or dominant influence on an undertaking. Failure to do so may result in a fine.
The regulation also requires ex ante notification of concentrations and agreements involving undertakings operating in the Integrated Communication System (ICS) which includes the press, publishing, television and radio broadcasting, cinema, and outdoor advertising. If operations involving undertakings active in the ICS also entail a transfer of ownership, only one notification is required (for details, see Decision 368/14/CONS of 17 July 2014, Regulation on the procedure for the authorisation of ownership transfers in the broadcasting sector and on the procedures under Article 45 of Legislative Decree 177/2005).
Under what circumstances is a transaction caught by the legislation?
The law applies to concentrations. A concentration occurs where:
- two or more undertakings merge;
- an undertaking or a person already controlling an undertaking acquires sole or joint control over the whole or parts of another undertaking; or
- two or more undertakings form a concentrative joint venture through the establishment of a new company.
The following types of transaction do not constitute a concentration:
- acquisition of equity holdings for purely financial purposes (Article 5(2), Law 287/1990);
- any transaction leading to the creation of a cooperative joint venture (Article 5(3), Law 287/1990);
- Intra-group transactions (ie, those occurring between undertakings that are not independent);
- transactions involving companies not engaged in any economic activities; and
- operations not producing economic effects on the Italian markets (see below).
Do thresholds apply to determine when a transaction is caught by the legislation?
Until the adoption of the annual competition act in August 2017, Article 16(1) of Law 287/1990 required prior notification of all mergers and acquisitions involving undertakings:
- whose aggregate turnover in Italy exceeds €499 million (as revised on 14 March 2017);
- and when the aggregate turnover in Italy of the undertaking to be acquired exceeds €50 million (as revised on 14 March 2017).
The thresholds have been revised in August 2017 and Article 16(1) now envisages the following thresholds:
- a combined aggregate domestic turnover of all the undertakings concerned exceeding €492 million; and
- an aggregate turnover in Italy of at least two of the undertakings concerned exceeding €30 million.
In practice, the second threshold has been lowered but at least two of the undertakings concerned must meet such threshold. This is likely to increase the number of notifications.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
Parties may approach the ICA during the phase prior to the formal notification of acquisitions and mergers, to discuss any problems.
Parties intending to use this procedure may submit an informal communication to the ICA at least 15 days before the date on which they intend to file formal notification, preferably containing the following information:
- the identity of the parties to the acquisition or merger;
- a short description of the acquisition or merger procedures;
- an indication of the relevant markets;
- the shares of the parties on these markets; and
- whether the operation must be notified to the authorities in any other country.
In the latter case, the parties are requested to specify:
- whether the information supplied in that phase can be the subject of an exchange of information with the competent authorities in order to evaluate operation in the other member states;
- whether the information on operation is to be considered public, requiring in the contrary case authorisation to divulge same information to the other competent authorities; and
- whether the likely timing of notification to the other competent authorities.
The issues raised in the informal document relating to the preparation of subsequent notification will be examined jointly with the ICA as and when agreed with the parties. Where necessary, the ICA may acquire further information in this prior phase. The phase prior to formal merger or acquisition notification, relating particularly to the contents of the informal document, will be strictly confidential.
When submitting the informal document, the parties must take note of the fact that the deadline for the ICA to adopt a formal decision on the proposed transaction would start running as from formal notification of the transaction using the appropriate form, accompanied by all the necessary supporting information.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
Transactions involving foreign-registered undertakings which do not have at the time of the operation, and did not have during the previous three years, directly or indirectly, a turnover in Italy, do not need to be notified following the general rules on the notification thresholds. These operations are, however, subject to notification whenever, following the concentration, an undertaking begins doing business on the Italian market.
In addition, the creation of joint ventures and the mergers in which at least one of the parties to the operation is foreign-registered need not be notified if the foreign party does not have at the time of the operation, and did not have during the previous three years, any turnover in Italy. These operations are, however, subject to notification whenever, following the merger or acquisition, the new entity will start operating an economic activity on the Italian market.
What types of joint venture are caught by the legislation?
The incorporation of a jointly controlled undertaking or the acquisition of joint control over a previously existing undertaking will give rise to a ‘concentrative joint venture’. This will be subject to merger control regime provided that:
- the joint venture is a full-function joint venture; and
- the joint venture’s main object or effect is not the coordination of the competitive behaviour of the parent companies.
In order to assess whether a joint venture is concentrative or cooperative, the ICA still applies the 1994 European Commission notice on the distinction between cooperative and concentrative joint ventures. Accordingly, full-function joint ventures are treated as cooperative and appraised under the rules on agreements between undertakings (and not under the merger control rules) if, after the transaction, both parents will remain actual or potential competitors in the same geographical and product market as the joint venture, or in a market that is upstream or downstream or neighbouring with respect to that of the joint venture, if certain conditions are met (see, for a recent example, the ICA decision in C12069 – Admiral Entertainment-Lottomatica Holding/Newco 26355/2017).
Full-function, concentrative joint ventures will be treated as concentrations. As such, they must be notified to the ICA for appraisal under the merger rules.
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