European Commission launches public consultation on draft revised VBER and Vertical Guidelines

On 9 July, the European Commission launched a public consultation concerning the Commission’s draft revised Regulation 330/2010 (Vertical Block Exemption Regulation or VBER) and Vertical Guidelines drawn up following a comprehensive evaluation process that started in October 2018.

The Commission pursued three objectives during the revision process of the VBER and the Guidelines: (i) readjust the safe harbour provided by the VBER taking into account relevant issues such as dual distribution, parity obligations, restrictions on active sales and restrictions on online sales; (ii) update the VBER and the Guidelines, also in view of the development of e-commerce and online platforms; and (iii) reduce compliance costs for businesses, by simplifying and clarifying certain provisions that the stakeholders perceive as particularly complex and difficult to implement.

Specifically, the draft revised VBER and Vertical Guidelines outlines a series of amendments on the following issues:

  • “Dual distribution”, i.e. cases where a supplier sells its goods and services through independent distributors but also directly to final customers. The Commission would exempt from the application of Article 101 TFEU dual distribution agreements where the aggregate market share of the supplier and the distributor in the relevant market at retail level does not exceed 10%. Where, on the other hand, the aggregate market share in the relevant market at retail level is between 10% and 30%, the Commission envisages exempting such agreements, except where information is exchanged between the parties.
  • “Parity obligations” or MFN clauses. The Commission would remove the benefit of the exemption for the so-called “wide MFN clauses”, ie clauses requiring an undertaking to offer the same or better conditions to its contract party as those offered on any other sales/marketing channel (eg on other platforms). Conversely, the Commission’s draft would exempt the so-called “narrow MFN clauses”, ie clauses under which an undertaking is free to offer lower prices on third-party platforms, but not on its own direct sales channels (eg on its own website).
  • “Dual pricing”, i.e. cases where the supplier sells to the same distributor at a higher wholesale price for products intended to be sold online than for products intended to be sold offline. The Commission would remove dual pricing from the hardcore restrictions under the VBER, thus allowing suppliers to set different wholesale prices for online and offline sales by the same distributor.
  • “Restrictions on the use of marketplaces”. The Commission would introduce a new section in the Guidelines aimed at regulating restrictions on marketplace sales, based on the guiding principles expressed by the Court of Justice in the Pierre Fabre and Coty judgements. The Commission would exempt restrictions on marketplace sales from the application of Article 101 TFEU if the market share of the supplier and the buyer is below 30% and the agreement does not include hardcore restrictions under the VBER.

Stakeholders may submit comments on the draft revised VBER and Guidelines by September 17, 2021.

Italian Regional Administrative Court of Lazio annuls the ICA’s decision on 28-day billing

With judgments no. 8233, 8236, 8239 and 8240 of July 12, 2021, the Italian Regional Administrative Court of Lazio annulled the decision of the Italian Competition Authority (ICA) which found an alleged anticompetitive agreement between the main national telecommunications operators in the context of the well-known 28-day billing case.

In particular, in the ICA’s view, in the context of the compliance with the obligation imposed by the by Law Decree 148/2017 to revert the billing of telecommunication services offers to a monthly basis instead of a four-week basis, the operators would have coordinated their strategies to keep the overall annual cost of the offers unchanged and prevent any potential customer mobility.

The Italian Regional Administrative Court of Lazio held that the decision was flawed by a lack of investigation. Indeed, almost all the evidence used by the ICA could not be lawfully used, as it referred to periods unrelated to the “temporal scope” of the alleged agreement.

Furthermore, the decision was also considered flawed because the ICA’s analysis conflicted with the opinion issued by the Italian Communications Authority during the proceedings, without adequately rebutting it. Indeed, this opinion pointed out that the switch from the 28-day billing to monthly billing had not actually produced the “price increase” to which the alleged agreement was committed. The price increase originated, if anything, from the choices previously made by the individual operators at the time of the introduction of the 28-day billing cycle, which the ICA has never challenged from an antitrust point of view.

In conclusion, the Italian Regional Administrative Court of Lazio held that the ICA did not establish its analysis on sufficient “exogenous evidence” and, as far as “endogenous evidence” was concerned, the alternative explanations provided by the parties, according to which the implemented conducts would have been commercially rational and the exchange of information was merely aimed at complying with the legislative innovations and reacting to the competitors’ behaviour (a view also supported by the Italian Communications Authority’s opinion), had not been rebutted.

Italian Regional Administrative Court of Lazio annuls the ICA’s decision on banks’ agreement on the ‘SEDA’ service

With judgments published on June 30, 2021, the Italian Regional Administrative Court of Lazio annulled the decision of the Italian Competition Authority (ICA) No. 26565 of April 28, 2017, issued at the end of the I794-ABI/SEDA proceedings.

In the challenged decision, the ICA had ascertained the existence of a single and complex anticompetitive agreement aimed at coordinating commercial strategies in relation to the definition of the remuneration model for the Sepa Compliant Electronic Database Alignment (SEDA) service – an optional national service offered by the banking system to beneficiaries/creditors bundled with the Sepa Direct Debit (SEPA DD) service, introduced with the aim of replacing the former direct interbank relationship (RID) service – implemented by the Italian Banking Association (ABI) and 11 national credit institutions. Due to the peculiarities of the case and considering that the alleged infringement was not serious, the ICA did not impose a fine on the parties.

The Italian Regional Administrative Court of Lazio annulled the ICA’s decision, deeming it to be flawed both from a procedural and substantial point of view, with reference to the ICA’s overall analysis of the alleged infringement in light of the findings of the investigation.

From a procedural point of view, the Italian Regional Administrative Court of Lazio upheld the objections raised by the banks with reference to the fact that ICA’s power to impose fines had lapsed due to the late start of the investigation. In this regard, the Italian Regional Administrative Court of Lazio found that, although the time limit laid down in Article 14 of Law 287/1990 is not directly applicable to antitrust proceedings, it cannot justify the completion of a preliminary investigation activity “which is prolonged within a period of time totally free from any constraint and unjustifiably prolonged”, since such a modus operandi would clearly conflict with the principles laid down in Law no. 241/90 on the efficiency of administrative action and the certainty of the operator subject to the procedure, but also with the general principles laid down in Article 6 ECHR and Article 41 of the Charter of Fundamental Rights of the EU on reasonable duration of the process.

From a substantial point of view, the Italian Regional Administrative Court of Lazio held that, unlike the ICA’s arguments, the results of the investigation proved that the parties’ intention was not to alter the competitive dynamics of the pricing of the SEDA service. On the contrary, the Italian Regional Administrative Court of Lazio acknowledged that the banks’ intention was to identify an alternative mechanism to the multilateral interchange fee (MIF) previously provided for the remuneration of the RID service which would allow banks to apply a fee that, while remaining autonomously decided by each payment service provider, would also include an adequate remuneration.

On this basis, the Italian Regional Administrative Court of Lazio annulled the ICA’s decision, thereby rejecting the existence of an anti-competitive agreement between the parties involved in the investigation.

European Commission published a Staff Working document on definition of ‘relevant market’

On July 12, the European Commission published a Staff Working Document setting out the outcome of the evaluation of the 1997 Commission’s Market Definition Notice for the purposes of competition law enforcement. The purpose of the evaluation is to assess whether the Notice – which has remained unchanged since its adoption – needs to be updated.

The Document concludes that the Notice remains a useful and relevant instrument for the purposes to which it is addressed, which are facilitating competition enforcement and compliance in the EU, by providing transparency in the way the Commission perceives the definition of the relevant market and thus allowing the companies to better anticipate possible competition concerns. However, the evaluation results also suggest that there are areas where the Notice may not fully reflect developments in the Commission’s approach and latest developments in EU case law on the relevant market definition.

The Staff Working Document outlines that the Commission has refined its approach to market definition in such a way that is not always reflected in the current Notice. The document therefore highlights that there are areas where the Notice may not be fully up to date. Such areas include:

  • the difference in merger and antitrust assessments and the possibility of defining different markets for the same economic activity;
  • the role of market definition in differentiated markets;
  • the practice of leaving market definitions open;
  • the precedent value of market definitions;
  • the temporal dimension of market definition;
  • the use and purpose of the SSNIP test (small significant non-transitory increase in price test);
  • certain aspects of supply-side substitution;
  • market definitions in rapidly evolving markets;
  • asymmetric constraints;
  • the assessment of geographic markets in the context of globalisation and in markets where there is increased competitive pressure from imports geographic market definition, including clarification of global market definitions;
  • quantitative techniques;
  • the role of trade flows;
  • the assessment of price differences related to geographic markets;
  • the assessment of price discrimination;
  • the use of internal company documentation as an element of market definition;
  • the calculation of market shares;
  • aftermarkets and clusters;
  • chains of substitution; and
  • non-price competition, including innovation.

The evaluation results also indicate that, while the principles of market definition remain unchanged, their application in digital contexts can lead to additional complexities that may not be fully addressed in the Notice. These complexities relate, inter alia, to: (i) defining markets for “multi-sided” platforms, in particular where related services are supplied at zero monetary price; (ii) defining markets with reference to “ecosystems” or data; and (iii) assessing the competitive pressure of online sales on offline sales. The Staff Working Document also points out that digitisation may also increase the need to reflect non-price considerations in substitution assessments and thus in the definition of the relevant market.

Furthermore, the Commission outlines also that the Notice does not reflect certain clarifications stemming from the judgements of the EU Courts and that is does not include the notion of “significant impediment to effective competition” introduced by the 2004 EU Merger Regulation.

ICA clears Telecom Italia’s acquisition of certain businesses from BT Italia

With decision No. 29736 of June 22, the Italian Competition Authority (ICA) has cleared the acquisition of three businesses of BT Italia S.p.A. (BT) by Telecom Italia S.p.A. (TIM), subject to certain conditions.

Under the notified transaction, TIM would acquire from BT: (i) the “PA Business”, which is engaged in the design, sale, management and contract management of telecommunications services to central and local public administrations in Italy; (ii) the “SMB Business”, which is engaged in the promotion, sale and management of telecommunications services mainly on fixed networks to small and medium-sized enterprises in Italy; and (iii) the “Atlanet Business”, which provides contact and call centre services, mainly in support of the SMB Business, through the Palermo contact centre.

Considering that the transaction was likely to give rise to competition concerns, as it could lead to the creation or strengthening of TIM’s dominant position in the market for the provision of retail fixed-line telecommunications services to public administrations, the ICA issued a decision on April 13, 2021 opening “phase II”.

To overcome the critical competition concerns identified by the ICA, TIM submitted a series of commitments on May 7 and 12, 2021 that provide, in particular:

  • the waiver of the originally envisaged non-compete agreement;
  • the waiver of the framework contract for the provision of fixed telephony services in favour of PA under the TF5 tender;
  • a series of transparency obligations to be adopted in the context of future tenders;
  • the adoption of measures aimed at reducing potential difficulties and the duration of the process of migration to the possible new supplier, by limiting it within a defined time frame and ensuring the necessary cooperation with the supplier other than TIM; and finally
  • the appointment of a third, independent expert (the so-called monitoring trustee) to monitor the actual implementation of the measures proposed by TIM.

These commitments have been accepted by the ICA, which, considering the measures proposed by TIM to be suitable to overcome the competitive concerns identified during the proceedings, has cleared the acquisition.