What is the legal framework in your jurisdiction covering the behaviour of dominant firms?
The control of the abuse of dominance is regulated in Italy by article 3 of the Law No. 287/1990 (the Law). Specifically, article 3 of the Law basically is consistent with article 102 of the Treaty on the Functioning of the European Union (TFEU), providing a prohibition of any abusive conduct carried out by an undertaking holding a dominant position within the domestic market or in a substantial part of it.
Procedural and enforcement rules provided by Presidential Decree No. 217/1998 are applicable in the abuse of dominance proceedings.
Finally, in addition to the provisions contained in the Law, article 2597 of the Italian Civil Code applies to legal monopolies and imposes an obligation to conclude contracts with third parties upon their request and under non-discriminatory conditions.
Definition of dominance
How is dominance defined in the legislation and case law? What elements are taken into account when assessing dominance?
The Italian Antitrust Authority (IAA) relies on the traditional notion of dominance applied at European level and therefore acts in accordance with the European Law and case law.
A dominant position can be seen as a position of economic strength enjoyed by a company; such position enables said company to prevent an effective competition on the relevant market, as it gives the company the power to behave independently with respect to its competitors, customers and ultimately, the final consumers.
In order to evaluate the dominant position of a company, the IAA usually carries out a comprehensive analysis of different elements, such as market shares, the structure of the market, the existence of barriers to entry, characteristics of the product, the level of production and the countervailing buyer power of customers.
Purpose of legislation
Is the purpose of the legislation and the underlying dominance standard strictly economic, or does it protect other interests?
According to article 41, paragraph 1, of the Italian Constitution, ‘private-sector economic initiative is freely exercised’. Constitutionally, the valorisation of private initiative meets limits stated in paragraph 2 and 3 of the same article: ‘It cannot be conducted in conflict with social usefulness or in such a manner that could damage safety, liberty and human dignity. The law shall provide for appropriate programmes and controls so that public and private-sector economic activity may be oriented and coordinated for social purposes.’ A deep tension exists between the private initiative and the public power, which could exercise strong control over it in the name of public interest. Effectively, the first interpretation given to the analysed provision exalted the public intervention in the national economy in order to control and plan it, preventing the growth of market power. The process of European integration and social changes modified the perception of this provision, giving adequate importance to the freedom of market competition and its safeguard. In these terms, the text of article 41 seems compatible with the new ‘economic constitution’, where market and competition deserve the same protection as other general interests. The Italian rules on competition law were approved in this context.
Thus, Italian antitrust law is certainly primarily aimed at maintaining the efficiency of the market, striking a balance between private economic initiative and market protection. However, it has to be noted that in recent years the IAA increased its focus on consumer welfare, interpreting it very broadly, and this has sometimes led it to pursue, at the same time, consumer welfare and consumer protection goals. Specifically, in carrying out its enforcement action, the IAA interpreted antitrust law by taking account of different factors. In sectors that are characterised by a rigid and complex regulatory and operating mechanism, the IAA also considers different interests not directly related to efficiency and consumer welfare (ie, in the pharmaceutical sector, the IAA also took into account public expenditure and public health protection).
Sector-specific dominance rules
Are there sector-specific dominance rules, distinct from the generally applicable dominance provisions?
In Italy, article 102 of the TFEU or article 3 of the Law are applicable to any sector or industry.
The independent regulatory agency for telecommunications (AGCOM) has the power to monitor, investigate and control dominance in the telecommunications sector to protect pluralism. In this context, the AGCOM does not impose fines for the abuse of dominance, but can impose regulatory measures to ensure the correct functioning of the telecommunications sector.
Similarly, the Authority for Regulation of Energy, Networks and Environment (ARERA) - formerly the Authority for Electricity, Gas and Water (AEEGSI) - ensures that the access to essential energy infrastructures is permitted under transparent and non-discriminatory conditions. If the regulatory measures are infringed, the ARERA can issue individual measures. Also, in this case, its regulatory powers are not intended to impose sanctions for the abuse of dominance, but rather to ensure the correct functioning of the energy sector, while the IAA remains the competent authority to apply article 3 of the Law and article 102 of the TFEU in Italy. Recent experience has shown effective cooperation between the authorities charged with different measures and approaches. For example, in the recent cases Nos. A511, A512, A513 (Enel, A2A, Acea), closed with the imposition of fines totalling €109 million on Enel and Acea groups for abusive and exclusionary conduct against competitors, ARERA provided information and data analysis concerning the dynamics of the market and customer mobility. Moreover, it would be useful to recall case No. A498A, ENEL Servizi di dispacciamento area Brindisi, closed with acceptance of commitments, and case No. A498B, Sorgenia Servizi di dispacciamento area Brindisi, closed without ascertaining any violation, due to the absence of a dominant position. The IAA launched both investigations following a complaint of the then AEEGSI (now renamed ARERA).
The IAA often engages in agreements with other sector agencies, or authorities; in this respect, the IAA recently signed a memorandum of understanding with the Italian Medicines Agency (AIFA) in order to increase enforcement actions in the pharmaceutical sector by strengthening the respective investigation powers and facilitating the exchange of data. Under the agreement, the IAA and AIFA commit themselves to inform each other on cases concerning alleged violations of rules enforced by one of them.
Exemptions from the dominance rules
To whom do the dominance rules apply? Are any entities exempt?
Dominance rules apply to both private and public undertakings, including those in which the state is the majority shareholder.
The only exemption regards undertakings that, by law, are entrusted with the operation of services of general economic interest, or operate on the market in a monopolistic situation, only so far as this is indispensable to perform the specific tasks assigned to them (see article 8, paragraphs 1 and 2, of the Law).
Transition from non-dominant to dominant
Does the legislation only provide for the behaviour of firms that are already dominant?
Dominance rules apply to companies that already hold a dominant position. The situation in which a company is attempting to become dominant is covered by merger control rules and has no relevance with reference to the abuse of dominance rules.
Is collective dominance covered by the legislation? How is it defined in the legislation and case law?
Collective dominance is covered by article 3 of the Law as it prohibits the abuse of a dominant position by one or more undertakings. It is worth considering that in 2005 the IAA launched an abuse of dominance case (A357 - Tele2/Tim-Vodafone-Wind) to ascertain whether certain telecommunication undertakings were collectively dominant in the wholesale market for services for accessing the mobile network and, if so, whether they had abused such joint dominance or not. In its final decision, the IAA closed the proceedings without being able to prove that a collective dominance existed.
Does the legislation apply to dominant purchasers? Are there any differences compared with the application of the law to dominant suppliers?
Even if dominance on the supply side is more common than dominance on the purchase side, Italian antitrust rules also cover the situation in which the dominant undertaking is the purchaser. There are no differences in the application of the law. In the case of a dominant purchaser, dominance has to be evaluated in relation to the possibility of suppliers switching to other customers. Economists and legal scholars consider the market in which only a few players operate as an oligopsony and where only one player operates, as a monopsony.
As one example, this situation exists in the pharmaceutical sector. Although in most economic sectors the demand is constituted by those who are purchasing and support the costs, for prescription drugs the expenses are supported by the National Health System, that effectively has a monopoly on the demand side, and, because of that position, negotiates the price of each drug with pharmaceutical companies.
A strong position on the demand side also characterises the large-scale food distribution sector, in which there are alliances of food retail chains, created with the aim of bargaining prices with producers taking advantage of the effect of combined volumes.
Market definition and share-based dominance thresholds
How are relevant product and geographic markets defined? Are there market-share at which a company will be presumed to be dominant or not dominant?
Generally, the IAA follows the European soft law and case law with regard to market definition. Specifically, a relevant product market comprises all those products or services that are regarded as interchangeable or substitutable by the consumer. Such an analysis is carried out considering the products’ characteristics, their prices and their intended use. The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services and in which the conditions of competition are sufficiently homogeneous and can be distinguished from neighbouring areas. The market in which it is relevant to assess a given competition issue is therefore established by the combination of the product and geographic markets.
A recent trend of the IAA that has to be taken into account is characterised by a case-by-case approach in the definition of the market both in dominance and in cartel cases.
In this sense, the decisions in the pharmaceutical sector represent an interesting example. Whether according to the EU principles, the relevant market is generally defined by considering the third (ATC3) level of the anatomical therapeutic chemical classification (ATC) in which pharmaceuticals are grouped in terms of their therapeutic indication (ie, their intended use), in its recent enforcement practice, the IAA often narrowed or specified the definition of the relevant market using a case-by-case approach.
In the Aspen case (A480 - Incremento prezzo farmaci Aspen), for example, the IAA considered as relevant the market of the active substance (ATC5).
Another case that could be mentioned in this sense is the cartel case Roche-Novartis (I760 - farmaci Avastin e Lucentis) in which the IAA adopted a very peculiar approach, considering as competitors in a sole market two drugs (Avastin and Lucentis) in different ATC classes; the Authority based the said definition on the sole medical practice to use the oncologic drug (Avastin) as off-label for treatment in the ophthalmic field.
Moreover, in the recent case No. I811 - Finanziamenti Auto, the IAA - contradicting previous decisions of the IAA itself and the European Commission - has defined the relevant market of car sales through financing, including both leasing and consumer credit. The Law does not provide for market-share thresholds with respect to the definition of dominance and of collective dominance. Market shares are generally used by the IAA as an indication of dominance along with many other factors. Specifically, an undertaking could be considered as dominant even with a market share of less than 40 per cent, because of its strength in the relevant market, its vertical integration, the high concentration of the relevant market, the modest competitors’ market share, etc.
Abuse of dominance
Definition of abuse of dominance
How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?
Article 3 of the Law does not define the concept of abuse of dominance but only lists examples of abusive behaviours that relate to both exploitative and exclusionary practices.
In particular, article 3 provides a non-exhaustive list of some examples of abuse, stating that it is prohibited:
- to directly or indirectly impose unfair purchase or selling prices or other unfair contractual conditions;
- to limit or restrict production, market outlets or market access, investment, technical development or technological progress;
- to apply to other trading partners objectively dissimilar conditions for equivalent transactions, thereby placing them at an unjustifiable competitive disadvantage; or
- to conclude contracts subject to acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Abuse of dominance occurs when an undertaking in a dominant position engages in practices that influence the structure of a relevant market by reducing, hampering or eliminating the competition. The simple dominant position on a relevant market does not constitute abuse, but the dominant firm holds a ‘special responsibility’ not to allow distorting effects on the competitive structure of the market.
Abuse of dominance is defined more in terms of the effects of conduct on the market rather than in relation to the form or type of conduct. The European Commission thus defines abuse as conduct that has the ability, by its nature, to foreclose actual or potential competitors from the market, and thus has the likely effect that ultimately prices will increase or remain at a supra-competitive level. If conduct has exclusionary effects and it does not create any efficiencies, such conduct is presumed to be an abuse.
Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
Both exploitative and exclusionary practices may constitute an abuse of a dominant position pursuant to article 3 of the Law (see question 10). It should be noted that the majority of the proceedings conducted by the IAA so far consisted of exclusionary practices.
Link between dominance and abuse
What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?
Between dominance and abuse there must be a causal link, but the IAA considers conducts as abusive in the meaning of the Law, even when there is no intention of the dominant company to abuse its dominant position.
When a company is in a dominant position, its abuse generally affects the market in which it is dominant, but it could also be possible that said abuse has its effect on a downstream, upstream or neighbouring market, and not necessarily on the one in which the company holds a dominant position. In any case, there must be a link between the dominant position and the alleged anticompetitive behaviour.
What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?
Following the EU principles, the IAA could consider, as justification, efficiencies that are sufficient to guarantee that no real harm to consumers is likely to arise. In this context, the dominant undertaking shall demonstrate that:
- the efficiencies have been, or are likely to be realised as a result of the conduct (for example, they may include technical improvements in the quality of goods, or a reduction in the cost of production or distribution);
- the conduct is indispensable to the realisation of those efficiencies: there must be no less anticompetitive alternatives to the conduct that are capable of producing the same efficiencies;
- the likely efficiencies brought about by the conduct outweigh any likely negative effects on competition and consumer welfare in the affected markets; and
- the conduct does not eliminate effective competition, by removing all or most existing sources of actual or potential competition.
When exclusionary intent is shown, efficiencies could not be used as a defence.
Specific forms of abuse
Types of conduct Types of conduct
Even if rebates are, in general, standard commercial practices, in certain circumstances they may be unlawful if offered by a dominant undertaking and may result in price discrimination between smaller and larger customers. Loyalty rebates are reductions in the list price of relevant products offered as an explicit or implicit reward in exchange for a relationship of substantial exclusivity. Said rebates are structured to provide benefits to customers that maintain or raise their purchasing (often also imposing heavy penalties in case they switch their purchasing expenditure towards another supplier). Loyalty rebates generally have similar effects to exclusive dealing, since they basically ‘force’ a customer to purchase its total supply (or a significant part of it) from a specific supplier.
In its recent enforcement actions, the IAA carried out some investigations on alleged rebate schemes. Among these, in the case No. A487/Compagnia italiana di navigazione-trasporto marittimo delle merci da/per la Sardegna, the Authority imposed a fine of approximately €29 million on Moby SpA and Compagnia Italiana di Navigazione SpA for a complex and aggressive anticompetitive strategy aimed at preventing effective competition. More specifically, the aforesaid Italian sea carriers have implemented anticompetitive conduct granting various kinds of a rebate to loyal customers and imposing unjustified economic and commercial penalisations for the others. The payment of the fine has been suspended by the Regional Administrative Court of first instance (TAR Latium), with order No. 4047 of 4 December 2018.
Similarly, in case No. A484 - Unilever/Distribuzione gelati, the IAA fined the undertaking Unilever Italia for the infringement of article 102 of the TFEU in the industrial ice cream market. According to the Authority, the rebates granted by Unilever to retailers - which depended upon the achievement of specific obligations or selling targets - were, on the one hand, the incentive for the exclusive dealing and the instrument through which Unilever enforced it; on the other hand, especially in the case of retroactive rebates, said rebates were a direct instrument to restrict competition in the market. The IAA’s decision has been confirmed by the Regional Administrative Court of first instance (TAR Latium), with judgment No. 6080 of 31 May 2018.
Finally, it would be useful to recall also Case No. A493 Poste Italiane/Prezzi di recapito, where the company Poste Italiane SpA took advantage of its widespread presence throughout the Italian territory, to offer terms that could not be matched by competitors including rebates and selective conditions in order to subtract the mail volumes given to competing companies. On 8 August 2018, the IAA initiated proceedings (Case No. A493B) for non-compliance against Poste Italiane.
Tying and bundling
Tying is a form of abuse of dominant position expressly considered in article 3 of the Law. The IAA would specifically seek action when an undertaking is dominant in the tying market, the tying and tied products are distinct products and the tying practice is likely to lead to anticompetitive foreclosure.
In this regard, in the recent Case No. A508 SIAE/Servizi intermediazione diritti d’autore, the Authority found SIAE responsible for the ties between the services of management of copyright and protection against plagiarism.
Exclusive dealing is one of the most economically significant forms of exclusionary abuse. Such practices have the effect of foreclosing entry of or expansion by competitors.
In its recent enforcement actions, the IAA carried out some investigations on alleged exclusivity clauses. In the ongoing proceedings No. 523 - Ticketone / Condotte escludenti nella prevendita di biglietti, the Authority alleges that Ticketone concluded exclusive contracts with the most important promoters of live music events active in Italy, acquiring the right to distribute almost all of the access rights to live music concerts organised by the promoters. On these bases, the IAA alleges that this conduct could constitute an abuse of a dominant position with potential foreclosure effects on the market of ticketing services for live music events.
A further example is the ongoing proceedings No. A521 - Attività di intermediazione della domanda di servizi taxi nel comune di Torino, where the Authority has opened a proceeding into Società Cooperativa Taxi Torino, the managing company of the radio taxi service in Turin, for alleged abuse of its dominant position. The investigation concerns non-compete obligations and exclusion from the aforesaid cooperative for the members who infringed those obligations. According to IAA, the non-compete obligations are intended to prevent the simultaneous use by taxi drivers of multiple intermediaries foreclosing the entry of potential competitors on the market of the intermediation of demand for taxi services in the city of Turin.
In its recent enforcement actions, the IAA carried out some investigations on alleged exclusivity clauses. In this sense, it is relevant to recall the abovementioned case Unilever Italia (A484), where the infringement was realised through a combination of exclusive dealing and pricing policies (see question 14). Also, in the case Poste Italiane/Prezzi di recapito (A493 - see question 14) the complex strategy carried out by Poste Italiane included exclusive dealing.
The IAA has always held that predatory pricing is abusive when a dominant undertaking charges prices at a level that pursues no other economic purpose than to drive out its competitors.
The leading case in this respect is the Diano case (A267 - Diano), where the IAA established the primary test for the predatory pricing analysis; specifically: if the price is lower than the short-run average incremental costs, it will be presumed predatory; if the price is higher than long-run average incremental costs, it will be presumed not predatory; and if the price falls between the above two costs, it is necessary to assess case-by-case whether the price is predatory considering the competitive context of the dominant firm’s behaviour, and in particular, evidence of the specific intent to drive out a competitor. The ‘range’ between the short-run average incremental costs and the long-run average incremental costs has to be taken into account.
In this context, it is relevant to mention the decision of the Supreme Administrative Court - Consiglio di Stato (Judgment No. 2302/2014) which confirms the annulment of the decision of the IAA in the case Poste (A413 - Servizi postali) regarding, inter alia, an alleged case of predatory pricing, due to the wrong assessment of the long-run incremental costs.
Price or margin squeezes
Margin squeezing constitutes a type of abusive conduct in which a vertically integrated undertaking that is dominant on an upstream market may be able to exclude or inhibit those competing against its own downstream activities. Said conduct occurs when the relations between the upstream price decided by the dominant undertaking (which could be unfairly high) and the price offered by the same in the downstream market (which could be unfairly low) determines a ‘squeezed’ margin or profit for a competitor on the downstream market that could be basically forced out of the downstream market. Such type of abuse is increasing in significance and concern in the context of pricing for access to networks. The crucial problem in this context regards the price at which the network owner can be required to provide access and thereby to facilitate competition on the downstream market.
In the ongoing proceedings No. A505 - Monte Titoli/Servizi di post-trading, the IAA alleges that Monte Titoli could have adopted a margin squeeze strategy aimed at excluding competitors from the downstream market of custody services for financial instruments. More specifically, Monte Titoli would apply (primary) settlement fees to banks directly connected to the T2S platform that were not sufficiently differentiated from those applied to banks not directly connected to T2S. In these terms, Monte Titoli did not allow its competitors (ie, the directly connected parties) to offer (secondary) settlement services at competitive conditions.
It is relevant to mention also the decision of 15 May 2015 issued by the Supreme Administrative Court (Consiglio di Stato) in the case of Telecom Italia that confirms the IAA’s previous decisions in this context. The Court considered as a margin squeeze in violation of dominance rules the conduct of a dominant undertaking that granted rebates to consumers on the downstream market that its competitor on the downstream market (while being equally efficient) was not able to match, because of the high prices that the dominant undertaking charged on the upstream market.
Similarly, in cases No. A500A - Vodafone-Sms Informativi Aziendali, A500B - Telecom Italia-Sms Informativi Aziendali, the IAA fined Vodafone Italia and Telecom Italia for abusive conduct in the bulk SMS market. According to the Authority, both companies abused their dominant position in the upstream market of SMS termination services through conducts aimed at excluding or limiting the ability to compete for customers in the downstream bulk SMS market. Such acts, in particular, consisted of applying prices that would leave an insufficient margin, for any efficient competitor, to cover their own specific costs for providing the bulk SMS service to customers.
It should finally be noted that the Court of Appeal of Milan recently ruled on a follow-on action concerning an abuse of dominant position realised through a margin squeeze conduct (ascertained in the case A357 - Tele2/Tim-Vodafone-Wind). By its judgment No. 1/2017 on 2 January 2017, the Court confirmed that the margin squeeze because of price discrimination on wholesale prices of the mobile termination constitutes an unfair restraint of the competition.
Refusals to deal and denied access to essential facilities
A dominant undertaking is required, in the absence of objective justification, to maintain contracts in force with existing customers and to permit access to essential facilities to competitors. An essential facility is a facility or an infrastructure without access to which competitors cannot provide services to their customers.
Refusals to deal and denied access to essential facilities constitute some of the most common types of abuse that lead to an entry barrier for competitors into a relevant market. The IAA has recently investigated different cases in this respect.
Among these, it is relevant to mention case No. A507 / Servizio rifornimento carburante avio aeroporto di Bergamo concerning two alleged cases of abuse of a dominant position in the management of the unique fuel depot at Bergamo airport. The preliminary investigations showed that the depot was an essential facility because it was not duplicable and was necessary to provide onboard services. The Authority has alleged that the undertaking JV Orio - the owner of the depot - abused its dominant position by repeatedly refusing access to the depot to competitors in order to maintain its position of substantial monopoly in the downstream market of onboard services. The proceeding was closed with the acceptance of the commitments proposed by the companies, without ascertaining the conduct.
Moreover, it would be useful to recall the Acido colico case (No. A473 - Fornitura acido colico) closed with the acceptance of the proposed commitments. These proceedings were aimed at verifying if Industria Chimica Emiliana SpA (and its subsidiary Prodotti Chimici ed Alimentari SpA ) abused its dominant position in the relevant market of production and sale of cholic acid (used to produce a drug for liver diseases). The IAA believed that the aim of such conduct was to modify the competitive structure of the market by refusing to supply the input (the cholic acid) to produce an active ingredient based on such acid.
Another interesting case in this context is the SEA/Convenzione ATA case (A474 - SEA/Convenzione ATA), upheld by the Regional Administrative Court of First Instance (TAR Latium) on 23 January 2017, where the IAA alleged that SEA abusively interfered in the auction process for the sale of Società Acqua Pia Antica Marcia’s in favour of ATA, frustrating the outcomes of the bid, with the aim of restricting access to Cedicor, a competitor of ATA, to the airport infrastructure-management market (see question 24).
In the case A503 - SIE/Servizi di rassegna stampa nella Provincia di Trento, the IAA found that the refusal to license the content of a newspaper edited by a publisher in a dominant position to the operators of the press reviews market constitutes a violation of article 3 of the Law.
Finally, the Nuovo IMAIE case (A489 - Nuovo IMAIE-Condotte anticoncorrenziali), concerning the collective management of intellectual property rights and recently closed with the acceptance of commitments, involved, inter alia, the licensing of an exclusive database on FRAND terms.
Predatory product design or a failure to disclose new technology
While in different jurisdictions price discrimination is simply applied outside the context of dominance legislation (as, for example, with the US Robinson-Patman Act), in Italy price discrimination is the only prohibited as an abuse of dominant position. Price discrimination occurs when different prices are applied by a dominant company to equal buyers and no discrimination exists when different situations are treated in a different manner. Due to the difficulties to prove that the selective prices are not justified by economies of scales, mere price discrimination proceedings are very rare.
In this context, we can mention the recent Akron case (A444 - Akron gestione rifiuti urbani a base cellulosica) in which the IAA assessed that Hera, the holding company, abused its dominant position, inter alia, offering a special price to its subsidiary Akron, lower than the one available in a competitive market.
Exploitative prices or terms of supply
Exploitative prices or terms of supply are forms of abuse expressly provided for in article 3 of the Law (see question 10); these exploitative practices are less common than the exclusionary abuses.
Dominant firms cannot impose exploitative contractual terms and conditions that are unfairly troublesome for customers. In recent years, there have been no cases regarding exploitative terms of supply.
A dominant firm can charge a certain price in order to maximise its profits. However, as the dominant firm holds a ‘special responsibility’ not to avoid distorting effects to the competitive structure of the market, the imposition of unfair prices may be in violation of article 102 of the TFEU and article 3 of the Law. Unfair pricing may be either unfairly low, intended to eliminate any competition on the market, or unfairly high, intended to achieve larger profits for the dominant undertaking than it would earn in a competitive scenario.
Specifically, the recent Aspen case (A480 - Incremento prezzo farmaci Aspen) may be of relevance in this context. The IAA ascertained that the companies of a multinational pharmaceutical group, Aspen, fixed prices for life-saving and irreplaceable drugs for haematological or oncological patients, resulting in price increases of up to 1,500 per cent. The IAA’s decision has been confirmed by the Regional Administrative Court of first instance (TAR Latium), with judgment No. 8945 of 26 July 2017.
Abuse of administrative or government process
The abuse of the administrative process constitutes a peculiar type of abuse; in recent years, there has been an increasing number of investigations relating to this kind of conduct.
An important decision of the IAA in this respect was the Esselunga-Coop Estense case (A437 - Esselunga/Coop Estense), confirmed by the Supreme Administrative Court (Consiglio di Stato), in which it was ascertained that Coop Estense abused its dominant position to the detriment of its competitor Esselunga, by acting in an obstructive and dilatory way, aimed at jeopardising the administrative procedures necessary for Esselunga, to obtain the authorisation to start a commercial activity and to open two sales outlets in the area of Modena. The conduct carried out by Coop Estense had led the public administration to adopt decisions that prevented Esselunga from entering the relevant market of supermarkets and hypermarkets in the Province of Modena.
Another interesting case to be mentioned is the Pfizer case (A431 - Ratiopharm/Pfizer), upheld by the Supreme Administrative Court, concerning the scope and limits of the use of the patent system by pharmaceutical companies. The judges upheld the Authority’s statement that the complexity of the patent system had been exploited by the dominant company merely to reduce competition without any justification in terms of innovation. In addition, the Supreme Administrative Court provided clear indications about the circumstances in which otherwise legitimate protection of rights and interests may become an abuse of dominant position.
Mergers and acquisitions as exclusionary practices
In the enforcement activities of the IAA, this type of abuse has only been analysed a few times.
In this context, see the decision (upheld by the Regional Administrative Court of First Instance - TAR Latium) in the SEA/Convenzione ATA case (A474).
According to the decision, SEA’s abuse of dominance relates to Società Acqua Pia Antica Marcia’s disposal of its 98.3 per cent stake in ATA Ali Trasporti Aerei SpA and ATA Ali Servizi. Specifically, SEA, as sole operator of the airport infrastructures of Linate and sub-grantor to ATA, interfered with several conducts in the process of the auction process for the sale of the company Società Acqua Pia Antica Marcia (see question 19).
It is also relevant to consider the Acido colico case (A473) in which the alleged abusive conduct carried out by Industria Chimica Emiliana SpA (refusal to supply) started after the acquisition of its subsidiary Prodotti Chimici ed Alimentari SpA, active in the downstream market. Said acquisition allowed Industria Chimica Emiliana SpA to enter this market.
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).
Sanctions and remedies
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.
Unilateral conduct by non-dominant firms
Are there any rules applying to the unilateral conduct of non-dominant firms?
Article 3 of the Law only applies to companies holding a dominant position on a relevant market.
It is relevant to mention that article 9 of Law No. 192/1998 prohibits the conduct of an undertaking that abuses the economic dependence of another company. The economic dependence occurs when a company has market power over another company so as to be able to impose unfair conditions in a contract. Any contract, or severable clause thereof, resulting from such abuse is void. Whether an abuse occurred is analysed based on an assessment whether the allegedly dependent undertaking had the possibility to find alternative business partners. The IAA is competent in this field if the abuse of economic dependency may affect competition and the market. However, only in one case, the IAA indeed ended proceedings regarding this kind of practice with a fining decision (RP1 - Violazioni dei termini di pagamento), imposing fines for a total amount of €800,000 on Hera for repeated infringement of the Italian applicable law on payment terms. Economic dependency law can also be enforced through the court system in damages actions and there have been several cases in this respect since its introduction.
Moreover, article 62 of Law No. 27/2012 prohibits certain types of conduct by the supplier of agricultural and food products in Italy. These prohibitions largely concern practices that could, in theory, be sanctioned under the abuse of dominance rules, but they do not require the relevant authority to ascertain a dominant position on the relevant market.
Update and trends
Are changes expected to the legislation or other measures that will have an impact on this area in the near future? Are there shifts of emphasis in the enforcement practice – for example, that enforcement is expected to focus on a particular business sector in the time to come, or that, more generally, economic considerations are given greater weight than in the past?
35 Are changes expected to the legislation or other measures that will have an impact on this area in the near future? Are there shifts of emphasis in the enforcement practice?
Recently, the IAA has adopted Guidelines on antitrust compliance providing important guidance to undertakings on the content of the compliance programme and the criteria that the IAA will adopt in its assessment for the purposes of awarding mitigation.
According to these Guidelines, the undertaking wishing to benefit from the mitigation shall submit a request to the IAA setting out the reasons why the compliance programme adopted is adequate for the prevention of competition infringements and the concrete initiatives taken by the undertaking to grant the effective and efficient implementation of the programme.
The IAA distinguishes between compliance programmes adopted before the opening of proceedings and those adopted afterwards.
Relating to the first scenario, in the view of the effectiveness of the programme, the Guidelines provide different mitigation of lines as follows.
In the case of adequate compliance programmes that have worked effectively to enable the prompt detection and interruption of the infringement before the opening of proceedings, the Guidelines provide mitigation up to 15 per cent.
As regards programmes that are not manifestly inadequate, provided that the undertaking adequately amends the programme and begins its implementation after the opening of proceedings (and within six months of the opening of proceedings) the Guidelines provide mitigation up to 10 per cent.
Finally, for programmes that are manifestly inadequate, only if the undertaking introduces substantial changes to the programme after the opening of proceedings (and within six months of the opening of proceedings) the Guidelines provide mitigation up to 5 per cent.
With reference to compliance programmes adopted after the opening of the procedure (second scenario), the IAA may grant a reduction of up to 5 per cent of the fine.