An extract from The Dominance and Monopolies Review - 7th edition


i Overview

A dominant firm violates Article 3 only if it commits an abuse. Dominance itself is not an offence.

Dominant firms have a special responsibility not to impair undistorted competition in the relevant market. As a consequence, conduct that would normally be lawful may be considered anticompetitive if engaged in by a dominant firm.

Article 3 applies to both anticompetitive conduct aimed at excluding competitors (exclusionary abuses) and the exploitation of dominant firms' market power (exploitative abuses).

The list of abuses provided in Article 3 of the Competition Act is not exhaustive, and the ICA has often fined sui generis anticompetitive practices. The crucial challenge is to identify the practices that pose unacceptable competitive dangers. In this respect, the ICA has traditionally adopted a case-by-case approach, which does not seem to reflect a coherent theoretical framework.

Behaviour is considered unlawful if it may hinder the (limited) level of competition still existing in the market or the development of that competition. To establish an abuse, it is sufficient to demonstrate a potential prejudice to competition. It is not necessary to prove that the conduct had actual anticompetitive effects.

Abuse is an objective concept. An anticompetitive intent is not a prerequisite for a finding of abuse. However, the existence of an exclusionary intent may play an important role in the assessment of an alleged abuse, in particular when the contested conduct is part of a plan aimed at eliminating competitors. An exclusionary intent may also justify a finding of abuse when the dominant firm exercises a right in an objectionable manner to pursue an objective different from that for which the right was granted in the first place.

A conduct does not infringe Article 3 if it is objectively justified. This may be the case, in particular, if the conduct is objectively necessary to protect the dominant firm's or third parties' legitimate interests or leads to a cost reduction.

ii Exclusionary abusesExclusionary pricing

The ICA issued its first decision on predatory pricing in 1995 in Tekal/Italcementi. In accordance with EU case law, the ICA held that prices below the average variable cost (AVC) must be presumed unlawful, while prices between AVC and the average total cost (ATC) are unlawful if they are part of an anticompetitive plan. The contested conduct was considered abusive even though it was not proven that the dominant firm was able to recoup the losses incurred by selling at below-cost prices. The ICA's view is consistent with the principles established by the ECJ, and contrasts with US case law, which requires the proof of a reasonable likelihood of recouping the losses suffered by selling below cost.

In Caronte, the ICA used different cost benchmarks. Instead of relying on the AVC and ATC, the ICA focused on the short-run average incremental cost (SRAIC) and long-run average incremental cost (LRAIC). According to the decision, prices below SRAIC must be presumed exclusionary, while prices at least equal to SRAIC, but below LRAIC, are unlawful if they are part of an anticompetitive plan. However, a few years later, in Mercato del calcestruzzo cellulare autoclavato, the ICA made reference to average avoidable cost (which was considered equal to the AVC) and the ATC.

More recently, in TNT/Poste Italiane, the ICA used the LRAIC benchmark in the analysis of the pricing policies of the incumbent in the postal sector. However, the ICA adopted a strict approach in calculating the LRAIC. The latter was considered essentially equal to the average operating cost reported by regulatory accounts, which typically also include a share of common costs. The decision was annulled by the TAR, whose judgment was upheld by the Council of State.

In a few cases, the ICA and national courts have held that even above-cost prices offered to strategic customers (selective discounts) may be abusive. This may be the case, in particular, if they are part of a broader exclusionary strategy implemented through different abusive practices, or the dominant firm uses privileged information that it holds because of its status of incumbent and vertically integrated operator but that is not available to rivals, to implement win-back or retention policies. Furthermore, according to the ICA and the TAR, a discount may be per se abusive, regardless of the relationship between price and cost, if it is the result of a privilege exclusively conferred on the dominant firm by sector-specific rules incompatible with EU rules.

A vertically integrated firm active in the supply of an input and a final product may infringe competition rules if it sets its upstream or downstream prices so as to squeeze competitors' margins. For instance, in Telecom, the ICA held that the Italian incumbent in the electronic communications sector abused its dominant position by charging competitors more than it charged its commercial divisions for the relevant inputs, thus reducing rivals' margins and excluding equally efficient firms. A price squeeze may also be the result of discounts offered to retail customers.

Exclusive dealing

Exclusive dealing obligations may constitute an abuse under Article 3 when the conduct may significantly foreclose access to the market. In Diritti calcistici, the ICA found that Mediaset, the main Italian TV operator, violated Article 102 of the TFEU on the market for the sale of TV advertising lots. In 2004, Mediaset concluded with the major Italian soccer clubs various contracts concerning the broadcasting rights of their home matches for the 2004 to 2007 seasons. Moreover, Mediaset negotiated with the same clubs exclusive pre-emption rights for the broadcasting of their matches through all platforms from 2007 to 2016. Through exclusivity, 'English clauses' and pre-emption rights, Mediaset rendered the relevant TV content de facto unavailable for a long period for its competitors.

The ICA may also find an abuse even when a dominant firm imposes de facto exclusivity through the threat of retaliation and other measures, or uses contractual clauses that lead to an exclusive commercial relationship, especially within the framework of a broader exclusionary strategy that includes other practices aimed at limiting competitors' access to suppliers, distribution channels or customers.

The ICA has also held that loyalty discounts and rebates, conditioned upon the customer obtaining all or most of its requirements from a dominant supplier, or reaching a given target, may infringe competition rules, because they tend to eliminate or restrict purchasers' freedom to choose their supply sources, thus hindering rivals' access to the market or development. The loyalty-inducing effect is stronger when loyalty discounts are applied retroactively to all units purchased during a given reference period.

Furthermore, according to the ICA, loyalty discounts may be anticompetitive because they imply discrimination between customers.

The treatment of loyalty discounts is consistent with the traditional formalistic approach of the EU institutions. The ICA does not consider it necessary to apply a price-cost test to establish whether a loyalty discount scheme is capable of excluding an AEC, especially when the contested conduct is part of a broader exclusionary strategy.


Article 3(d) of the Competition Act prohibits firms in a dominant position in the market for a particular product or service (the tying product or service) from conditioning the sale of that product or service upon the purchase of another (the tied product or service). Tying may also be obtained through price incentives such as, in particular, bundled discounts and rebates. For instance, in Albacom Servizio Executive, the ICA found that the incumbent in the telecommunications sector infringed Article 3 by making certain rebates on the price of a monopolised service conditional upon attaining certain traffic volumes in a liberalised service. In SIAE, the ICA held that the collective management organisation holding a legal monopoly had abused its dominant position by imposing on the authors it represented contractual clauses tying the provision of copyright management services covered by the legal monopoly to other management services open to competition.

Refusal to deal

Refusal to deal may amount to an abuse when it may substantially weaken competition in the market where the dominant firm operates or in a different market and is not objectively justified. Refusal to deal encompasses a considerable range of practices, including the refusal to supply products or services, to provide information and to grant access to an essential facility. Practices such as refusal to begin negotiations, refusal to renew a contract or unilateral termination of a contract may be considered instances of refusal to deal. The imposition of onerous conditions by a dominant firm, dilatory strategies and other forms of constructive refusal to deal might have the same effect as an outright refusal to deal. Differences in the processes for the management of requests for services submitted by internal divisions and by competitors may amount to a constructive refusal to deal if they entail more complexity and, possibly, higher costs for competitors.

The ICA defines the notion of essential facility in accordance with principles established by EU case law. Intellectual property rights and information required to carry out an economic activity may also be considered essential facilities.

The ICA has applied the principles on refusal to deal and essential facilities in a number of cases, especially in liberalised sectors. In its decision practice, the ICA has made extensive reference to EU competition law principles. However, it has often adopted a broad and flexible interpretation of the requirements set by the ECJ's case law.

A refusal to deal is not abusive if it is objectively justified. This may be the case, for instance, when the dominant firm does not have enough capacity to satisfy third parties' demand, the customer is insolvent or does not respect the contractual terms, or the firm requesting access does not meet the technical or security requirements needed to access an infrastructure.

In principle, lack of capacity on a facility (capacity saturation) should constitute an objective justification. In exceptional circumstances, however, a dominant firm may be obliged to invest in the development of the facility. Indeed, in Eni-TTPC, the ICA held that the interruption of the expansion of a pipeline used for the international transport of gas and the termination of the 'ship or pay' agreements entered into by the firm managing the facility – a dominant firm's subsidiary – with independent shippers amounted to an abuse of dominant position. The ICA did not apply the essential facility doctrine since alternative infrastructures could be used to transport gas into Italy, and the dominant firm was not under an obligation to invest in the development of the pipeline. Nonetheless, the ICA held that the interruption of the expansion was abusive due to the interference of the mother company in the subsidiary's investment decisions. In a similar case, the Commission adopted a different approach, as it explicitly relied on the essential facility doctrine. In particular, the Commission held that the different infrastructures used to transport gas into Italy, taken as a whole, constituted a single essential facility, and stated that the incumbent may have an obligation to invest in the development of an infrastructure if a system operator not vertically integrated in the sale of gas would do so.

iii Discrimination

Article 3(c) prohibits dominant firms from applying dissimilar conditions to equivalent transactions, thus placing a trading party at a competitive disadvantage. Charging different prices may be abusive only if it is not economically justifiable. For instance, charging lower prices to customers that purchase a larger amount of products, based on objective parameters, may be justified.

In many cases, the ICA has fined dominant firms for having favoured their subsidiaries or commercial divisions active in downstream markets to the detriment of competitors by granting preferential access to certain resources or applying discriminatory conditions. Non-price discrimination may also amount to an abuse of dominance. Furthermore, discriminatory practices may be prohibited when they aim at penalising customers that also deal with other operators in order to prevent the entry or limit the growth of competitors.

iv Exploitative abuses

A firm may abuse its dominant position if it directly or indirectly imposes unfair selling or purchasing prices. To establish an exploitative abuse, it may be necessary to engage in an in-depth cost analysis aimed at verifying whether the difference between the costs actually incurred and the price actually charged is excessive. If this analysis cannot be carried out or is inconclusive, the ICA may compare the prices imposed by the dominant firm with those charged by the same firm or competitors for the same product or service in other markets or in the past. In some cases, the ICA applied both the aforementioned tests in the assessment of prices charged by the dominant firm.

In 2016, in Aspen, the ICA applied a two-stage test to determine whether the prices charged by the dominant firm were excessive and unfair: first, it considered the disproportion between prices and costs; then it took into account a number of additional factors that confirmed the unfairness of the prices (including the historical prices for the products concerned, the lack of economic justifications for the price increases, the absence of any non-economic benefits for final users, the nature of the products, the characteristics of the dominant firm and the harm caused by the practice).

In some cases, the ICA has fined a dominant company for having charged prices remunerating activities or services that were not rendered. In these cases, prices were considered by definition unfair. Article 3 also prohibits the direct or indirect imposition of unfair non-price trading conditions.