The Italian government has passed new legislation, which will bring about significant changes to the Italian merger control regime and introduce a new source of financing for the Italian Antitrust Authority (“IAA”). These changes will affect all companies registered in Italy with a turnover exceeding €50 million. The changes implemented by the new legislation include:
- changes to the thresholds for merger notification in Italy, which will mean that only major transactions need to be notified to the IAA; and
- abolition of the merger filing fees payable for transactions that require notification. The previous filing fees will be replaced by a new statutory payment, payable to the IAA by all companies registered in Italy that have a total turnover exceeding €50 million. This requirement arises irrespective of any obligation to notify a transaction to the IAA.
Changes to the merger filing thresholds
Currently, transactions must be filed with the IAA prior to their implementation if:
- the parties’ combined turnover in Italy exceeds €474 million; or
- the target’s turnover in Italy exceeds €47 million.
As of 1 January 2013, transactions will only need to be notified to the IAA if they meet both of these thresholds.
Whilst on first reading this change appears minor, on closer inspection its impact is significant. The previous thresholds created a situation where a filing obligation was triggered in a significant number of cases even when the transaction had negligible, if any, impact in Italy. For example, a filing obligation would have arisen where turnover of the acquiring group in Italy was in excess of €474 million, even where the target itself only achieved limited sales in Italy.
The main benefit arising from this amendment will be the removal of the unreasonably low bar for notifying foreign-to-foreign deals that have limited effects in Italy. This will allow companies and foreign investors to possibly avoid the related administrative burden and costs that are related to having to make a filing.
However, a controversial effect of the new jurisdictional test is the risk that a number of transactions, that raise antitrust concerns, will now not be caught by the new regime and therefore escape assessment by the IAA. However, the rationale behind the new legislation is to release the IAA’s resources and staff from dealing with smaller merger control transactions, and to enable the IAA to focus more on serious antitrust infringements and the new powers and functions entrusted to it under the new legislation.
This concern that a number of transactions, that raise antitrust concerns, will now not be caught is shared by most commentators and stakeholders as well as the IAA itself, so it cannot be ruled out that the IAA will recommend that the Italian government implements further changes to the merger regime in the near future.
One of the proposed and most suitable options to strike a balance between the two approaches would be to set a minimum threshold (significantly lower than the envisaged €47 million) for the Italian turnover of the target company, in line with the best practices identified by the International Competition Network.
The merger filing fee will be abolished
From 1 January 2013, the merger filing fee, which was previously only payable when companies engaged in a transaction that qualified for review by the IAA, will be abolished. The merger fee will be replaced by a mandatory annual fee, which is applicable irrespective of whether a company is involved in any merger activity in that year.
The revenue lost by the IAA, from the removal of the merger filing fee, will be recovered by the new annual fee, which requires all companies registered in Italy, with turnover exceeding €50 million, to pay a fee equal to 0.08% per thousand Euros of Italian turnover earned by that company in the last financial year. This annual fee will be subject to maximum and minimum levels; for 2013, the minimum fee payable will be €4,000 and the maximum fee will be capped at €400,000.
In a recent notice, the IAA has clarified which companies shall be subject to the payment of the annual fee and how payment should be made:
- Public limited companies registered outside of Italy will not have to pay the fee, unless they have secondary offices or local branches permanently established in Italy and registered with the Italian Chamber of Commerce.
- Any Italian public limited company, irrespective of the fact that it belongs to a group of companies, is subject to the payment of the fee as long as it individually exceeds the €50 million threshold.
- However, the €400,000 cap applies equally to groups of companies. Therefore, where multiple companies within the same group trigger the €50 million threshold, the aggregated fee payable by the group as a whole will not exceed €400,000.
- Where payment is due from companies belonging to the same group, the holding company is able to pay the fees for each company under its control. Therefore, the entire contribution can be made by the holding company in one single transfer.
The fairness of this annual fee has been widely debated in Italy because it will result in a tax being paid by a number of companies purely due to the level of their Italian turnover, and irrespective of whether they involved in any acquisitive activities that year. However, a change to this tax cannot be excluded in the short run as the IAA is currently soliciting responses to a number of changes contained in the new legislative framework.
Companies that meet the requirements will need to pay the fee for 2013 by 30 October 2012 by a wire transfer to the bank account of the IAA and in accordance with the terms and instructions provided on the IAA’s website.