Enforcement proceedings in dominance in Italy

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The IAA (for public enforcement) and National Civil Courts (for private enforcement) are competent for the enforcement of article 3 of the Law and article 102 of the TFEU.

With reference to private enforcement, the Legislative Decree 3/2017, which implements the Directive 2014/104/EU of the European Parliament and of the Council, of 26 November 2014, on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and of the European Union, identifies the business sections of the first instance courts of Milan, Rome and Naples as the only competent courts for antitrust private enforcement.

Public enforcement is carried out by the IAA, empowered to establish the existence of anticompetitive behaviours and to impose administrative fines if necessary. The IAA can start an investigation at its own discretion, or at the initiative of a third party.

The authority has comprehensive powers of investigation towards private and public administrations. Pursuant to article 14, paragraph 2 of the Law, the IAA may request entities to supply any information in their possession and exhibit any documents of relevance to the investigation. In addition, it ‘may conduct inspections of the undertaking’s books and records and make copies of them, availing itself of the cooperation of other government agencies where necessary’ (dawn raid) with the assistance of the financial police.

Dawn raids may only be conducted by the IAA at the companies’ premises. Searches and seizures ordered by the authority do not need to be authorised by a judge or magistrate.

During the inspection, the officials are empowered to access premises, check all electronic and paper files and, if necessary, make copies of them and request information to be given verbally for the explanations on facts or documents relevant to the investigation. An immediate response is generally not required, and a written response may be provided to the IAA within a reasonable time frame. An employee or company representative is not required to answer any question that would lead to self-incrimination.

All the activities performed during the inspections, in particular, all statements collected and documents acquired, have to be recorded in the minutes of the inspection (article 10 of Presidential Decree No. 217/1998).

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

According to the Law, the IAA is empowered to impose administrative fines when it ascertains the existence of an abuse of dominant position.

Firstly, pursuant to article 31 of the Law, for the computation of fines, the IAA may refer to the criteria set forth by Chapter I, Parts I and II of Law No. 689/1981 (general legislation concerning penalties for administrative offences).

Article 15 of the Law states that the IAA may impose a fine of up to 10 per cent of the worldwide turnover realised by each undertaking during the previous financial year. The percentage applied specifically depends on the duration and the gravity of the infringement.

The Authority adopted in 2014 its guidelines on sanctions aimed at defining a specific method for the determination of fines. These guidelines state that the basic amount of the fine to be considered is calculated on a percentage of the value of the company’s sales directly or indirectly related to the infringement by the undertaking in the relevant market during its last full year of participation. Such basic amount is determined to take into consideration the gravity of the competition infringement. The resulting basic amount is then multiplied by the years of participation of the company in the contested infringement.

The guidelines also provide for an entry fee that is determined by increasing the basic amount by a percentage ranging between 15 per cent and 25 per cent of the value of sales, in case of most serious violations.

Specific mitigating or aggravating factors are also listed in the guidelines. In addition, it is also possible that the fine would be increased by up to 50 per cent if the company responsible has a particularly high total turnover worldwide compared with the value of sales of goods or services actually affected by the infringement, or else belongs to a group of a significant economic size.

Finally, it the above-mentioned 10 per cent limit for the total amount of the fine has to be taken into account (article 15 of the Law).

Regarding parental liability, according to European principles, parent companies may be held liable for infringements of competition law committed by the wholly (or almost) owned subsidiary. Indeed, according to European decisions, this liability subsists, because the companies represent a single economic entity. In this regard, in the abovementioned case No. I811 - Finanziamenti Auto, the IAA has attributed the liability for the infringement to parent companies that do not hold all (or almost all) of the share capital of their subsidiaries. In view of the novelty of this approach, the IAA, therefore, considered that such parent companies should not be required to pay the fine jointly and severally with their subsidiaries in the case at stake. Pursuant to article 8 of the Law, antitrust rules apply to undertakings. The IAA follows the EU principle according to which the concept of undertaking encompasses every entity engaged in economic activity. Therefore, individuals may be fined if and insofar as they are undertakings for the purposes of antitrust law, and, hence, if they engage in economic activity in their own right. This is the case, for example, for sole traders or self-employed professionals.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The IAA is empowered to impose sanctions directly without petitioning any authority.

What is the recent enforcement record in your jurisdiction?

During the past year, the IAA closed six abuse of dominance proceedings, two accepting the commitments proposed by the parties, one without finding any infringement and the others ascertaining the violation of article 102 of the TFEU or article 3 of the Law.

With reference to the latest cases, the IAA imposed fines for a total amount of approximately €140 million. More specifically in recent cases Nos. A511 and A512 ENEL/ACEA - Condotte anticoncorrenziali nel mercato della vendita di energia elettrica the IAA imposed a fine of €109 million on two major players in the electricity supply market for infringement of article 102 TFEU. The IAA may impose interim measures and adopt commitment decisions in the context of, inter alia, abuse of dominance proceedings.

Until recently, the Authority rarely adopted interim measures, substantially in line with the position taken by other national competition authorities and by the EU Commission.

The most recent IAA decisions seem to depict a changing of the aforesaid approach. The IAA has recently adopted an interim measure in case A521 - Attività di intermediazione della domanda di servizi taxi nel comune di Torino ordering Società Cooperativa Taxi Torino to suspend the application of the non-compete clause (see question 16).

In case A503 - SIE/Servizi di rassegna stampa nella Provincia di Trento, the IAA imposed on SIE SpA, publisher of L’Adige (first newspaper in the Autonomous Province of Trento), the release of licences concerning the content of the newspaper L’Adige on FRAND terms (fair, reasonable and non-discriminatory) to the operators of press reviews’ market. The case has been closed by the IAA with the ascertainment of the violation of article 3 of the Law. On 20 July 2016, the IAA successfully adopted another interim measure in the case A495 - Gara TPL Padova, recently closed with commitments. The alleged abusive conducts concerned the omitting or delaying in the transmission of information, necessary to draft the tender notice.

Moreover the IAA is inclined to close the proceedings by adopting or accepting the commitments proposed by the parties, when possible. As indicated above, in the past year, the IAA concluded two proceedings with the acceptance of commitments and in two other proceedings, the IAA published the proposed commitments inviting third parties to submit any observations on them.

The average length of abuse of dominance investigations before the IAA is about 240 days from the opening of the proceedings; it is relevant to consider that the IAA could postpone the date of the conclusion of the investigations for more than a year.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

Contractual clauses in violation of article 101 or 102 of the TFEU or article 2 or 3 of the Law could be declared null and void (pursuant to article 1418 of the Italian Civil Code). On this point, there is a debate among legal scholars on whether abuse of dominance has this effect on the validity of the agreement, since only article 101 of the TFEU and article 2 of the Law specifically state ‘any agreements or decisions prohibited pursuant to this article shall be automatically void’.

The entire contract shall be declared void only if the clauses in violation of antitrust law do not undermine the entire agreement, meaning that the parties would not have entered it without such infringing clauses. Whether the infringing clause declared null and void is by law replaced by the mandatory rules, the validity of the rest of the contract is not affected (see article 1419 of the Italian Civil Code).

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

The Legislative Decree 3/2017, implementing Directive 2014/104/EU, identifies the business sections of the first instance courts of Milan, Rome and Naples as the only competent courts for antitrust private enforcement (see question 26).

Such sections are also competent to decide on requests for interim relief related to infringements of competition law, including the refusal to supply or to grant access to ‘essential facilities’.

It is relevant to mention the decision of the Supreme Court in Cargest No. 11564/2015, a standalone action. In this case, the Supreme Court annulled the judgment under appeal, stating that the Court of Appeal had mechanically applied the principles of the burden of proof. In particular, according to the Supreme Court, the Court of Appeal had not evaluated the opportunity to exercise, ex officio, its powers of investigation. The Supreme Court reached this solution considering the difficulties that the claimants face in their attempt to prove an anticompetitive infringement in standalone actions, without a previous decision of the Authority. Thus, it is necessary to grant judicial protection also through a specific interpretation of procedural provisions that have to be functional to the implementation of competition law and has to ensure the right of defence. Claimants have the onus of proving serious grounds capable of demonstrating that the conduct could restrict the freedom of competition.

Regarding case law following the above-mentioned Cargest decision, the Italian courts seem to rigorously follow the principles set out by the Supreme Court. For example, the business section of the Civil Court of Milan, in its decision dated 13 April 2016, totally rejected the claims raised by the company ArsLogica Sistemi against IBM Italia, alleging abuse of a dominant position. The judge accepted the allegation of IBM, objecting that the claimant did not offer the court serious grounds capable of demonstrating the relevant market and the dominance of IBM.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

A company that suffered damages by abuse of dominant position in violation of article 3 of the Law or article 102 of the TFEU can directly claim damages from the dominant undertaking before civil courts.

The plaintiff filing an action for damages has to prove that it was harmed by the anticompetitive conduct.

More precisely, it must prove: the existence of abusive conduct by the defendant; unfair damages; and the existence of a causal link between the abusive conduct and the damage suffered.

One of the main changes introduced by Legislative Decree 3/2017 implementing Directive 2014/104/EU could be seen in the strengthened mechanism of disclosure of evidence in the context of antitrust damages actions. The judge has now the possibility to order the disclosure of evidence that lies in the control of the defendant or a third party as well as of evidence included in the file of the IAA. The set of conditions regarding the disclosure of evidence entails substantial innovation for the applicants’ position in the proceedings, with reference to the extremely high standard of proof and the structural information asymmetry between the parties that characterise, in general terms, antitrust damages actions.

Another topic that it is necessary to mention concerns the rules governing the effect of national decisions: an infringement of competition law found by a final decision of the IAA or by a reviewing court is deemed to be irrefutably established for the purposes of an action for damages. This provision entails nothing less than a ‘procedural revolution’. Indeed, according to the case law of the Italian Civil Supreme Court, the defendants in damages actions could call into question the findings contained in the decisions of the IAA, though subject to strict conditions (it should be remembered that, in Italy, the ‘technical aspects’ of the decisions of the IAA did not fall within the borders of the power of judicial review of the administrative courts). The new provision definitely deprives the defendants of this possibility.

The trend of follow-on actions before civil courts is increasing. Damages actions regarded different sectors: inter alia, telecommunications, energy, transport, airports. A significant number of actions in this respect followed the IAA decision on the cartel of the car insurance market. With reference to the abuse of dominance cases, the main actions regard the telecommunication sector. Most of the cases were decided or are pending before the Court of Milan; the situation is due to the economic context of the region where most of the biggest Italian companies are based. By contrast, other competent courts have dealt with a few cases in this respect.

In this context, it is relevant to recall the proceedings that followed case No. A377 where the IAA found that SEA (the managing body of Malpensa airport) had abused its dominant position in applying unfair prices. In particular, in the recent case No. 2110/2018 before the Court of Milan, three air carriers operating at Malpensa Terminal 1 (namely Brussels Airlines, American Airlines and Aegean Airlines) asked the court to award them compensation for damages suffered. However, the court, partially upholding the argument raised by SEA, held that the limitation period had expired for part of the unlawful conduct. More specifically, according to the court, the case was not covered by Directive No. 2014/104/EU, and, therefore, the limitation period had to be calculated according to the principles elaborated by the case law.

To what court may authority decisions finding an abuse be appealed?

The decision of the IAA can be appealed before the Regional Administrative Court of First Instance (TAR Latium), whose judgment can be appealed before the Supreme Administrative Court (Consiglio di Stato), both located in Rome.

Pursuant to article 33, paragraph 1, of the Law, administrative courts have jurisdiction over appeals of the decisions of the IAA.

Thus, the decision of the IAA can be appealed before the Italian administrative court of first instance within 60 days from its notification, whose judgment can be appealed before the Supreme Administrative Court.

The appeal before the administrative courts is essentially limited to the review of the legality of the IAA’s decisions. It represents control of legality based on three aspects: lack of jurisdiction, violation of law and misuse of power. Pursuant to the relevant case law, the review should be limited to aspects such as logical faults, clear error in evaluation, error in investigation or motivation. The judge also has to verify the correct application of the law and its interpretation. In these terms, the administrative courts are empowered to exercise effective control on the economic assessment of the Authority and the real limit for the administrative courts lies in the prohibition of replacing the Authority in its activities.

Pursuant to article 134 of the Administrative Code, the administrative judge has full jurisdiction on fines and may remove or reduce the amount of fines imposed by the IAA.

The judgment of first instance can be appealed before the Supreme Administrative Court within 30 days from its notification or three months of its publication. Exceptionally, the judgments of the Supreme Administrative Court could be appealed before the Italian Civil Supreme Court for jurisdictional and competence issues or for revocation.