This article is an extract from GTDT Market Intelligence Cartels 2022. Click here for the full guide.
1 What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?
In line with recent years, the Italian antitrust authority (authority) continues to vigorously fight all sorts of antitrust infringements and particularly cartels and anticompetitive agreements in general. A number of new investigations have been launched since January 2021, with several sectors targeted. These include, among others, the telecommunication, e-commerce and electronic devices, transport, copyright, pharmaceutical, construction and insurance sectors.
As in the past, there has been room for new sectors and actors to be targeted. To give a couple of examples, the authority recently opened investigations against price comparators and insurance companies in the area of motor vehicle liability policies and in the waste collection sector.
The authority continues to devote significant efforts also towards the pursuit of cases of lesser resonance, targeting smaller players or smaller markets. By way of example, in October 2021 the authority opened an investigation under article 2 of Law 287/90 against several pharmacies in Altamura, a municipality located in the south of the country (in the Puglia region) that accounts for fewer than 80,000 inhabitants.
Between January 2021 and February 2022, the authority launched two investigations in relation to alleged bid-rigging, while the previous year bid rigging was only one out of 10. This indicates that the strong fight against bid rigging carried out by the authority in recent years, with 16 investigations opened for alleged competition law infringements in public tenders in the past five years and the imposition of significant fines (in aggregate, around €385 million), is bringing good results, but the level of attention of the authority is still high.
2 What do recent investigations in your jurisdiction teach us?
In terms of enforcement, the authority has shown a more favourable attitude towards commitments proposed by the parties compared to the previous year. Since January 2021, commitments have been accepted in four out of the seven cases closed by the authority, while, in the previous year, commitments were offered in only one of the investigations closed by the authority, and were ultimately considered insufficient and dismissed.
By contrast, fines imposed on undertakings continue to be very significant and in line with previous years, (ie, more than €180 million between January 2021 and February 2022). The high level of fines can also be explained in the light of the authority’s guidelines for the calculation of fines, adopted in 2014, which appear to be more restrictive than those of the European Commission in a number of respects. For example, the Italian guidelines set a 15 per cent floor of the value of sales for the calculation of the basic amount of fines for secret practices aimed at fixing prices, sharing markets or limiting production. Between January 2021 and February 2022, the authority applied such a floor in two of the three decisions, imposing fines, and in one such case set the value of sales for the calculation of the basic amount of the fine at 25 per cent.
Recent decisions also confirm the authority’s self-restrain in the imposition of interim measures, which have been rarely adopted in recent years. However, where needed based on a prima facie case and a material threat of irreparable damage to competition, the authority has not hesitated to impose precautionary measures.
The covid-19 pandemic seems to have provisionally put the brakes on inspections by the authority. Between January 2021 and February 2022, the opening of the investigation was accompanied by dawn raids by the authority, in just one out seven cases. Nevertheless, one expects that the chilling effect on dawn raids due to the covid-19 pandemic is about to come to an end.
The most delicate phase of an investigation continues to be its early stages, in particular when dawn raids take place, for essentially two reasons: first, because inspection targets are generally taken by surprise; and second, because it is during the dawn raids that the authority collects most of the evidence it uses to build its case. It is therefore essential that the company’s rights are protected in this phase: the inspectors’ powers are not unlimited, and the company and their legal advisers should make use of those limits, in particular with regard to the scope of the inspection, legal privilege and right against self-incrimination.
3 How is the leniency system developing, and which factors should clients consider before applying for leniency?
The leniency programme was introduced in Italy in 2007. While until 2018 there had been only seven cases based on leniency applications, there has been an increase in this respect in the course of 2019, when the authority closed three investigations with leniency applications, imposing high fines. Based on public information, in the period January 2020 to February 2022, the authority has not adopted decisions based on leniency applications. The Council of State has confirmed the TAR Lazio judgment annulling the decision adopted by the authority in the car financing case, which was based on a leniency application.
Despite the limited use of such tool at national level in the past two years, the authority has always tried to encourage leniency applications. In its guidelines on antitrust compliance programmes (2018), the authority created a link between the possibility of benefitting from a fine reduction resulting from the adoption of an antitrust compliance programme and the prompt submission of a leniency application, where applicable.
The ECN+ Directive, which has been recently implemented in Italy through Legislative Decree No. 185/2021, entered into force on 14 December 2021 (ECN+ Implementing Decree), also seeks to enhance the enforcement of article 101 TFEU among the various EU jurisdictions by harmonising the leniency regimes in a way that levels the playing field and encourages whistle-blowing. While some provisions of the ECN+ Directive seek to simplify the procedure for the leniency applicant, other provisions are aimed at securing adequate protections to the leniency applicants either against disclosure of its statements or against sanctions for its staff.
The ECN+ Implementing Decree introduces at national level a set of detailed rules on leniency application, previously regulated only by soft law, in order to make such programmes more effective and, therefore, encourage companies to disclose secret cartels. This includes, inter alia, a mechanism of coordination between the authority and the European Commission, which should ease the relationship between the two authorities in the absence of the one-stop shop principle.
As a general rule, the factors to be taken into account in deciding whether to approach the authority for leniency are complex, and each case turns on its facts. It is, in any case, essential that consideration is given in the early stages as to whether to approach the authority, assessing the pros and cons from both the public and the private enforcement perspectives, ring-fencing as much as possible the risk of follow-on damage actions. Once the decision to apply for leniency is taken, in the absence of a one-stop-shop leniency regime in Europe, it is crucial that a coordinated approach is taken vis-à-vis the various authorities approached. This is even more true in the light of the ruling rendered by the European Court of Justice (ECJ) in the Italian freight forwarding case at the beginning of 2016, where the ECJ clarified that there is no legal link between the leniency applications submitted to the European Commission and those submitted to national authorities.
4 What means exist in your jurisdiction to speed up or streamline the authority’s decision-making, and what are your experiences in this regard?
There are currently no specific means to speed up or streamline the authority’s decision making in cartels proceedings, which usually have a significant duration.
However, in certain cases the parties can offer commitments within three months of the opening of the investigation, which, if accepted, lead to an early closing of the proceedings.
The authority shall indicate in the opening investigation decision the final term of proceedings, but it has wide discretion in setting such term (usually no less than one year from the decision opening the investigation).
The final term is usually postponed by the authority, often more than once in the course of the proceedings, due to, among others, the extension to additional companies and/or conduct not included in the decision opening the investigation. In the past five years, this has happened in approximately 70 per cent of the cases, with an average of approximately extra 84 days and two prorogation decisions per case.
Against this background, it shall be noted that, according to the relevant case law, even if the final term may be postponed, the prorogation shall be adequately reasoned.
It is worth noting that the Italian government recently presented to the Parliament the Annual Market and Competition Bill for 2021 (Disegno di Legge Annuale per il Mercato e la Concorrenza 2021), aimed at introducing, inter alia, a settlement procedure in Italy. The bill is currently before the Italian parliament for discussion and has not yet entered into force.
5 Tell us about the authority’s most important decisions over the year. What made them so significant?
The authority closed seven cases and opened five new investigations for alleged infringement of article 101 TFEU and/or the equivalent national provision in the relevant period. In particular, the number of investigations closed is remarkable considering the difficulties related to the covid-19 emergency and compared to the fewer proceedings closed in the previous year (ie, four cases in 2020).
As four cases in the relevant period were closed with commitments from the parties involved, overall fines imposed against the parties of the proceedings concerned amounted, for three cases, to approximately €185 million.
A recent investigation suggests that the authority is putting the tech sector under the spotlight. In the decision adopted against Apple and Amazon in proceeding I842, the authority found the two parties in breach of article 101 TFEU in prohibiting, based on discriminatory quantitative criteria, the sale on Amazon of Apple and Beats-branded products by certain retailers.
The authority has also devoted attention to the insurance sector, having opened an investigation to ascertain whether insurance companies and companies offering price comparison services came to an agreement restricting competition by exchanging sensitive information on the economic conditions for the direct sale of motor vehicle liability policies.
Alongside the enforcement activities carried out by the authority ex officio, the practice continues of preliminarily informing the authority about the existence of agreements potentially raising competition issues, in particular in the context of business associations and consortia.
For instance, the authority has recently closed (with commitments) an article 101 TFEU investigation that started last year from the submission of a communication regarding a ‘fraud detection project’ in life (pure risk) and non-life insurance submitted by ANIA, the association representing the Italian insurance companies. The project envisages, among the other aspects, the creation of a common database and the development of common algorithms to determine indicators of the risk of fraud that insurance companies could use both in the settlement and underwriting phases.
6 What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?
The authority has both investigative and decisional powers. Although investigative powers rest in the hands of the investigative directorates and decisional ones with the chairman and the commissioners, the line between the two was often blurred and the level of transparency on the interaction between the two functions in the course of an investigation could be improved, as also confirmed by a ruling rendered in 2019 by the Italian Constitutional Court casting doubts on the full impartiality of the authority.
The quality of judicial review of the decisions of the authority is generally good. Statistically, a good number of decisions are annulled at least in part at the appeal stage. In 2021 and the first quarter of 2022, the Council of State has confirmed the annulment of a decision of the authority concerning the supply of financial products by captive banks in the automotive sector. Two other decisions by the authority respectively in the telecommunication and direct debit payment sectors have been annulled in the first instance by the TAR Lazio. Moreover, the Council of State has also partially annulled a decision of the authority for incorrect quantification of the fine for one of the parties involved in a bid-rigging agreement for forest fire-fighting services (AIB).
The reviewing courts are entitled to exercise full jurisdiction on the merits with regard to the fines imposed by the authority (it is not by chance that very often the authority’s decisions are partially annulled on the ground of an incorrect quantification of the fines). As to the scrutiny of the substantive findings of the authority, a notable development has occurred in 2019: in Roche-Novartis, the Council of State has issued a landmark judgment, reiterating that the reviewing courts are entitled to perform an in-depth review of the authority’s decisions by directly and wholly addressing the underlying questions of fact to establish whether they are intrinsically true and, notably, also stating that, when it comes to complex technical and economic assessments (such as, for instance, the definition of the relevant markets), the reviewing courts should apply a test of ‘higher reliability’, rather than a test of ‘mere reliability’ of the authority’s assessment. Accordingly, we expect and welcome an increased standard of judicial review in the future in Italy. The need to apply a new standard of judicial review was also reiterated by the Council of State in 2021.
7 How is private cartel enforcement developing in your jurisdiction?
Italy has transposed the antitrust damages directive by means of legislative decree No. 3 of 19 January 2017, effective as of 3 February 2017. The decree largely, but not entirely, mirrors the directive. In line with the goals of the antitrust damages directive, its implementation is boosting the development of private legal actions for antitrust violations, including through class actions. One of the main features of the decree is the binding effect of final fining decisions adopted by the authority in follow-on actions with regard to the nature of the infringement as well as to its material, personal, temporal and territorial scope. Moreover, following the adoption of the decree, the Italian courts have adopted a more favourable approach to third-party access to the authority’s file. Access is often granted to the claimant where the requirements laid down in the decree (which mirror those included in the directive) are met.
According to public sources, between 2012 and 2021, more than 150 rulings on antitrust damages actions (including abuse of dominance cases) were issued by the Milan court (ie, the most active court in private antitrust litigation in Italy) in first and second instance, most of which are follow-on actions. Moreover, it seems that private enforcement has recently recorded a substantial increase: in particular, in 2021, the Italian courts having exclusive jurisdiction as to private damages actions (ie, Milan, Rome and Naples) issued almost 80 judgments (including abuse of dominance cases). In Italy, private cartel enforcement typically follows the adoption of decisions by the authority. This is because for a private party it is often difficult to gather evidence of the existence of cartels. In Italy, a significant number of private actions in the field of cartels originates from two authority decisions.
First, the fining decision of the authority concerning a cartel among the main insurance companies active in the car insurance sector (case I377-RC Auto, 2000). This decision led to a massive litigation brought by consumers to obtain compensation for the damage suffered as a consequence of the cartel (according to public sources, more than 10,000 actions have been initiated all over Italy).
Second, the decision adopted by the authority – jointly with the Bank of Italy – according to which the scheme of personal guarantee drafted by the Association of the Italian Banks amounted to an illicit decision of an association of undertakings, which has also given rise to a large stream of follow-on litigation. The relevance of such a case is confirmed by the fact that, in 2021, almost half of Italian courts’ overall decisions in the field of cartels regarded such a scheme.
8 What developments do you see in antitrust compliance?
The renewed interest in antitrust compliance in the last few years stems from the fact that the authority has indicated, in its guidelines on fines of October 2014, that the adoption and observance of an effective compliance programme represents an attenuating circumstance in case of antitrust infringements resulting in a possible reduction up to 15 per cent of the basic amount of the fine.
The authority has clarified from the onset that elements that it will take into account to assess the effectiveness of a compliance programme include: the level of involvement of the management; the appointment of compliance officers; the identification of the specific risks in the relevant sector and operational context; the existence of incentives or disincentives stemming from the observance or non-observance of the compliance programme; and whether there are adequate training, monitoring and auditing systems. The list is non-exhaustive and illustrative only. Experience shows that a compliance programme is not just about a formal compliance policy and guidance manuals, and the authority is fully aware of this.
In addition, in October 2018, the authority issued more detailed guidelines on antitrust compliance programmes aimed at giving guidance on (1) the content of the antitrust compliance programme, (2) the standard and burden of proof as to its adequacy and effectiveness for the purposes of benefitting from a fine reduction, and (3) the intended approach of the authority in terms of possible fine reduction.
As to the possible impact on fines, the authority’s approach seems quite strict. In particular, not only the guidelines distinguish between antitrust compliance programmes adopted prior or following the authority’s decision opening an investigation, with a preference for the former; but also allow the application of the 15 per cent maximum discount only in exceptional circumstances and provided that the infringement has been ended. Moreover, where leniency is an option, if the infringement is not ended and a leniency application not promptly lodged, the authority will deem the antitrust compliance programme as manifestly inadequate without leading to a fine reduction.
The approach described should be added to long list of reasons why monitoring and testing compliance is essential. The authority itself included the implementation of an adequate monitoring and auditing system among the key features of an effective compliance programme. On the one hand, monitoring compliance is of utmost importance in preventing possible infringements, creating a culture of compliance and showing full endorsement by the management. On the other hand, audits help in discovering anticompetitive behaviour that possibly occurred in the past, possibly increasing chances of applying for leniency.
Companies are often complex mechanisms, comprising different business divisions, each of which exposes both management and employees to different antitrust risks. Therefore, monitoring and testing compliance is also a question of tailoring compliance processes and audits to meet the needs and issues of each business.
The authority vigorously fosters the adoption of compliance programmes. This is demonstrated by the fact that in recent years an actual reduction of 5 per cent, and up to 10 per cent, of the fine has indeed been granted in a number of cases, where undertakings were able to prove that they not only adopted but also actually implemented an effective compliance programme. Such a favourable approach was confirmed in one case during the past year in which the authority granted an actual reduction of 5 per cent of the fine to cartels’ participants, with the exception of one undertaking that did not benefit from this mitigation because its compliance programme was not adopted and implemented at group level.
Also, time is of the essence. According to the guidelines, the authority must be made aware of the implementation of, or improvements to, an antitrust compliance programme as soon as possible during the proceedings, and in any case within six months of the opening of the proceedings, bearing in mind that the authority will want to look into the details of the programme.
In essence, our advice to build up an effective compliance programme is the following: (1) have it tailor-made; (2) provide for effective training in particular to business divisions and individuals most at risk; (3) implement the programme through the creation of a culture of compliance endorsed by senior management; (4) monitor closely; and (5) conduct regular audits.
9 What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?
The covid-19 pandemic and the recent geopolitical crisis caused by the war in Ukraine could increase the level of cooperation between undertakings, in particular in the areas where there has been an increasing demand for supplies and joint R&D research (eg, healthcare, pharmaceuticals, the entire food supply chain, distribution of scarce products and inputs, energy and oil and gas), as well as in the business areas more immediately affected by the economic impact of the virus (eg, transport, tourism, entertainment and event organising activities) and war (eg, raw materials, energy, oil and gas, and food). Even if in this situation companies are asked to collaborate to meet legitimate objectives or in relation to a matter that would normally be a parameter of competition and the authority may also decide to adapt its enforcement activities to these extraordinary circumstances to mitigate severe economic consequences caused by the above-mentioned events, we expect that it will still monitor closely relevant conduct so that the current crisis is not used to undermine a competitive level playing field between companies.
We also expect that the authority will continue showing interest in potential anticompetitive practices in the tech sector, with focus on online platforms and the associated algorithms on the competitive dynamics of digital markets.
Even if the authority has historically scrutinised the conduct of marketplace operators and ‘gate keepers’ more in the context of its enforcement powers related to consumers protection against unfair commercial practices, it is interesting to observe an increasing attention of the authority in connection with the rights of small business operators from an antitrust angle. In this field, the authority has recently fined Apple and Amazon, liable of creating barriers to entry into the market for online sales of electronic products.
Moreover, we expect that the recent implementation of the ECN+ Directive at national level, strengthening the powers of the authority, will have an impact on its enforcement activities. By way of example, the authority can now carry out more intrusive dawn raids, including inspections at private premises (eg, homes, grounds and vehicles) of personnel of the companies or associations of undertakings involved in the investigation. The ECN+ Implementing Decree has also significantly strengthened the authority’s sanctioning power (eg, extending it in certain circumstances to natural persons) to encourage fair and full cooperation with the authority and ensure a high deterrent effect against antitrust infringements.
Finally, as mentioned, the Italian government examined and approved the Annual Market and Competition Bill for 2021 (Disegno di Legge Annuale per il Mercato e la Concorrenza 2021) and recently presented it to the parliament. The bill, however, is not yet in force.
10 How has the covid-19 pandemic affected cartel enforcement in your jurisdiction?
The authority has not been particularly active in adopting covid-19 measures specifically related to cartels and anticompetitive agreements. Within such context, it is worth mentioning two communications issued by the authority in April 2020.
With the first one, concerning procedural aspects, the authority has, inter alia, suspended the payment of certain fines with the view of helping the concerned undertakings to outweigh the exceptional lack of liquidity. More generally, the authority has shown to be sensitive while imposing fines to companies that suffered economic loss during the pandemic. In particular, in a decision concerning an anticompetitive agreement between companies active in the market for the transport of flammable material and waste to and from the islands in the Gulf of Naples, the authority considered the seriousness of the economic consequences generated by the covid-19 on the business involved and ultimately reduced the amount of the fines imposed of 30 per cent.
The second communication (still in force) deals with substantial profiles and, also in line with the approach of the European Commission, aims, inter alia, at giving guidance on the authority’s criteria for the assessment of cooperation agreements for facilitating the production and distribution of essential goods and services during the covid-19 crisis. To date, the authority has positively applied (also consulting the European Commission) such communication only twice. The first case concerned a cooperation project for the distribution of single-use surgical masks through pharmacies and para-pharmacies, which the authority considered was aimed at managing the effective and uniform supply of surgical masks throughout the national territory. The second case concerned a temporary arrangement put in place within Assofin to adopt (also considering the recommendations of Bank of Italy) a common moratorium scheme for consumer credit. The authority, while deciding not to investigate further given the emergency and the limited duration of the arrangement, stressed the need for the moratorium not to involve direct or indirect exchanges of sensitive information.
Lastly, it is worth noting that the authority has been quite active in the adoption of covid-19 measures in the area of unfair commercial practices, ordering, on some occasions, the immediate interruption of those conduct that undermined fair competition. In this area, the interventions concerned, in particular, unfair and deceptive conduct in the e-commerce sector with reference, inter alia, to the marketing of sanitisers and masks for personal protection, the sale of drugs with misleading antiviral properties and tests for the self-diagnosis of the infection and the search of covid-19 antibodies by private healthcare facilities. The authority also intervened in the travel sector. The decisions concerned consumers being offered vouchers (rather than a refund) following the cancellation of a flight for health safety reasons, as well as a case of misleading travel insurance policies in the ferry market in the event that a passenger tests positive.
The Inside Track
What was the most interesting case you worked on recently?
We are working on a high-profile case concerning alleged information exchange in the insurance sector, involving the main national insurance companies and companies offering price comparison services in the area of direct sale of motor vehicle liability policies in Italy. The case raises interesting procedural and substantive questions.
If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?
Between January 2019 and February 2022, the authority qualified every conduct contested under article 101 or corresponding national law as a by-object infringement. We would welcome an approach where the by-object theory of harm is not stretched, with a broader recourse to an effect-based analysis for article 101 or corresponding national law cases that do not fall squarely into the by-object box. In this respect, we note that interestingly the authority, while finding a restriction by object, also conducted an effects-based analysis in the context of the recent proceeding I842 against Apple and Amazon.