The Italian Annual law on competition – what’s new in the Italian competition authority’s toolbox?

After a lengthy and winding legislative path, the long-awaited Italian Annual Law on Competition (ALC) entered into force on 27 August 2022. This, alongside the Legislative Decree implementing the so-called ECN+ Directive at the end of 2021, has refreshed the Italian Antitrust Authority’s (IAA) powers and represents a major turning point for the enforcement of competition law in Italy, introducing radical changes in both antitrust and merger control areas.

Merger control – concentrations below the filing thresholds are no longer safe from antitrust scrutiny!

The IAA will now have the power to review M&A transactions falling below applicable thresholds, echoing a general trend which culminated in the most recent change of enforcement policy by the EU Commission and EU Courts concerning the referral mechanism under Article 22, as well as the litigation on the Illumina / Grail case.

More specifically, the IAA will now be able to review concentrations falling below the Italian merger control thresholds if:

• at least one of the applicable Italian filing thresholds is met, or, in any case, if the worldwide turnover of the undertakings concerned is higher than €5bn; and
• there is a concrete risk that the concentration would harm competition in the Italian market (or in a relevant part of it). Specific relevance is given in this respect to prejudicial effects towards small enterprises with innovative strategies, confirming the IAA’s focus on nascent competition and/or innovation, but without limiting the scope of the provision to digital markets.

If these conditions are met, within 6 months from closing the IAA may request the undertaking(s) acquiring control to notify the transaction within 30 days. A failure to do so will be treated as an omitted filing and the IAA will have the power to impose a fine up to 1 per cent of the turnover generated in the previous financial year. This new tool will render merger control in Italy more complex to address in multi-jurisdictional analyses, as ruling out the need to notify for a transaction in Italy it will now often be necessary to conduct a preliminary analysis of its effects, and the increased uncertainty may require a more frequent use of the pre-notification procedure. Furthermore, the risk of a post-closing review will need to be factored in for the transaction documents and timeline.

Other relevant amendments on merger control

Firstly, a long overdue change is that a finding of dominance will no longer be technically necessary in order to prohibit a concentration. Indeed, the current substantive test for review of mergers consisting of the “creation or strengthening of a dominant position on the national market” has been replaced by a “significant impediment to effective competition” within the national market or substantial part thereof (SIEC) test, thus mirroring the current EU legal framework and practice.

Secondly, cooperative, fully-functioning joint ventures will be reportable irrespective of their “concentrative” or “cooperative” nature: in fact, again in line with current EU merger control, full-function joint ventures will be reviewed under merger control irrespective of having as object or effect the coordination of independent undertakings. To the contrary, joint ventures without full-functionality will be assessed pursuant to the criteria set forth for horizontal agreements (including an assessment of the parties being active on the same market of the joint venture or in a downstream or related market).

Finally, the same criteria for the calculation of the relevant turnover in case of banks, financial institutions and insurance companies adopted at the EU level will now also apply in Italy, eliminating the 1/10th asset rules applicable in Italy prior to this change.

It is also worth noting that an extension of the current, quite tight timeframe for the merger review process by the IAA (30 days for phase I, and only 45 days – plus up to further 30 days – for phase II, subject to other exceptional circumstances, e.g. “pull and re-file”) has not been included, despite many parties having advocated for this change.

Abuse of economic dependence – a rebuttable presumption for digital platforms

Existing rules on abuse of economic dependence (arising where one undertaking is able to cause an excessive imbalance of rights and obligations in its commercial relationship with another with no need to demonstrate market dominance, the s.c. “relative market power”) have been fostered by providing:

• A rebuttable presumption of economic dependence for customers of digital platforms when the relevant platform represents a key gateway (e.g. due to available data it can leverage or network effects) in reaching end users and/or suppliers. This provision will apply from 1 October 2022.
• A non-exhaustive list of conducts which might be considered abuses of economic dependency for digital platforms, such as: (i) providing insufficient information or data on the scope or quality of the service provided; (ii) the imposition of unjustifiably onerous contractual conditions; or (iii) conducts prohibiting or making more difficult the use of alternative suppliers.

Over the last few months, we have seen a material increase in the number of IAA investigations for abuses of economic dependence in Italy and this trend will likely continue. On this basis and in light of the ALC, companies active in the digital space will likely need to assess more often their conducts also under the abuse of economic dependence standard. This will also call into question the relationship between this provision, Article 102 TFEU (abuse of dominant position), and the Digital Market Act recently approved at EU level.

Settlement procedure

The settlement procedure has now been introduced in Italy: the IAA may grant a deadline for companies to submit a settlement proposal whereby they admit their participation to an infringement of Articles 101 and/or 102 TFEU (or national equivalent) against a discount on the fine for the infringement. The procedural details for the settlement procedure, the assessment criteria and the extent of the discount which could be granted on fines in cases of successful settlement have been left to the IAA to define through an ad hoc notice.

New pre-investigation powers

The IAA will be able now to issue requests for information and/or documents “at any point in time”, both in the context of 101/102 TFEU (or national equivalent) as well as within the merger control framework. Furthermore, it will have the power to impose fines for failure or delay in providing the requested information or in case of incorrect, partial or misleading information of up to 1 per cent of the worldwide turnover generated in the previous financial year. This will likely stimulate the IAA to increase the scope of its pre-investigation activities, while at the same enhancing companies’ cooperation, as until now companies were not technically bound to respond to pre-investigation questionnaires.

Conclusion

The approval of the ALC reflects a significant moment for antitrust development in Italy. The new toolkit in the IAA’s hand ranges from new investigation powers before the launch of a formal proceeding to the potential review of below-threshold merger filings, to a strengthened provision on abuse of economic dependence which may allow the IAA to maintain its role in the digital sector despite the DMA. Companies will have to navigate the complexities, risks and opportunities stemming from these legislative changes, as they should expect the IAA’s appetite to use these new powers will not remain dormant.