On 27th February 2014, the Italian Competition Authority (“ICA”) imposed an approximately €1.9 million fine on HERA S.p.A. (“HERA”) and Herambiente S.p.A. (“Herambiente”) for violating Section 3(b) of Law No. 287 of 1990 (the “Italian Antitrust Law”), the provision against the abuse of dominant position.

The ICA found Hera and Herambiente jointly liable for abuse of dominance into the paper recycling sector in the Italian Region of Emilia-Romagna.

The FCA found that Hera and Herambiente constituted a duopoly in paper recycling in that region. In particular, the ICA held that the two companies, by leveraging their dominant position in the upstream market (the paper recycling sector), favoured their joint-controlled company Akron S.p.A. (“Akron”) operating in the downstream market of the production of the paper for pulping.

In essence, Hera and Herambiente gathered the recycled paper in a duopoly and sold it directly to Akron without tenders. According to the ICA, this scenario caused the following anti-competitive effects:

Akron paid far lower prices that it would have paid in case of tenders;

Hera and Herambiente applied higher fees to the consumer for collecting the paper in order to recoup from the losses caused by selling the paper for pulping below cost to Akron;

Akron was able to charge higher prices to paper mills as it was the only undertaking operating in the paper for pulping market; and

Hera and Herambiente could profit from Akron earnings in the downstream market (production of paper for pulping) and make the consumer bear the losses in the upstream marker (recycling paper).

In light of the above, the ICA held that such conduct falls within the prohibition in Section 3(b) of the Italian Antitrust Law as HERA and Herambiente, by exploiting their position in the recycling paper market, were able to favour Akron and impede other undertakings to enter the linked market of the paper for pulping.

It is worth noting that HERA and Herambiente did not escape the fine or had it reduced even after their commitment to sell the paper for pulping through tenders. Indeed, the ICA, along with the mentioned fine, required the two companies to disclose the documentation regarding the tenders and to communicate the winner to it.

In our view, the ICA’s decision is welcome in so far as it can help make the recycling sector more competitive and provide the consumer with high cost savings. In such respect, it is hoped that many more sanctions of this kind may come in the near future.