New Italian power to call in below-threshold mergers – guidance now published

The new IAA’s power to review concentrations below thresholds 

As anticipated in one of our previous blog posts, the “2021 Competition Law”, enacted in August 2022, granted the Italian Antitrust Authority (IAA) a new power to request undertakings to notify concentrations falling below the turnover thresholds which trigger a merger filing obligation.

The rationale behind this new provision is, similarly to the recently “revamped” Commission’s policy under Art. 22 EUMR, mainly that of tackling so-called “killer acquisitions” that would have fallen outside of the scope of the current merger review rules. While the digital/media and health/pharmaceutical sectors are identified as the main areas where such concerns may arise, the new power applies across the board to all sectors.

Most recently, the IAA, after a public consultation, on 27 December 2022 published a notice on how it intends to exert its new power (the Notice).

The IAA’s Notice on its new power

The Notice provides helpful guidance on whether a transaction below the standard revenue thresholds (i.e. EUR 517 million obtained by all concerned undertakings, and EUR 31 million obtained by at least two concerned undertakings, all in Italy – pursuant to Art. 16 of the Italian Competition Law) might nevertheless be called-in by the IAA.

First of all, it is clarified that the IAA, in assessing the existence of concrete risks to competition (which is one of the criteria to request a notification pursuant to the new powers), will consider a number of elements, including:

1. the structure of the markets and the characteristics of the undertakings concerned;
2. the nature of the activity carried out by such undertakings and its relevance to consumers and/or other businesses;
3. the competitive constraint exerted by one or more companies.

It is further stated, echoing the criteria of the Commission’s Notices on Horizontal and Vertical Mergers, that it is “unlikely” that the IAA, in the case of “horizontal” mergers, will require notification where, post- merger, the market share of the undertakings concerned is less than 25% and if (i) the HHI (i.e. an indicator of the degree of concentration in the relevant market) is less than 1,000, or (ii) if the HHI is between 1,000 and 2,000 with the increase caused by the transaction being less than 250, or (iii) if the HHI is higher than 2,000, and the increase less than 150. The Notice also states that the IAA is “unlikely” to require notification of a “vertical” concentration where, post-merger, the market share of the new entity is less than 30% and the HHI less than 2,000.

The IAA may however call-in transactions if certain conditions are met (in line with the Commission’s Notice on Article 22 EUMR), and namely if the target:

1. is a start-up with significant competitive potential strength;
2. is an important innovator;
3. has access to competitively significant assets (such as raw materials, infrastructure, data, or intellectual property rights);
4. provides products or services that are key inputs/components for other industries.

The IAA may also consider whether the value paid for the acquisition is particularly high compared to the target’s current turnover.

Notably, the Notice has also introduced the possibility to file a short communication in which undertakings provide a range of information about the transaction (i.e. a brief description of the affected markets and the position of the parties therein, as well as the reasons why the transaction could raise concrete risks for competition) seeking feedback from the IAA, which is envisaged to be provided within 60 days from receipt of a “complete” communication, as to whether the concentration should be formally notified or not.

Finally, the IAA noted that it reserves the right to amend the Notice after one year in light of its application experience.

Some thoughts on the potential impact on business and transactions 

The Notice provides practical insights on the factors that trigger the IAA’s new power and on how undertakings should go about assessing this new call-in risk. At the same time, significant legal uncertainty remains, with a potentially material impact on business and transactional aspects (including e.g. on closing timing, integration planning, conditions (subsequent), allocation of antitrust risk).

As explained, the Notice enables undertakings to voluntarily approach the IAA to verify whether the transaction may be caught by the new regime. However, the current wording of the Notice provides that they should expressly indicate why the transaction may raise concrete competition risks; this could be a disincentive for companies when considering whether to rely on this “self-reporting” tool.

Moreover, the 60 days deadline (after a complete voluntary notification) is not binding for the IAA. Also, the Notice does not specify whether the IAA, in case of failure to respond within 60 days, is deemed to consider the transaction not to require notification. These aspects may further undermine companies’ incentive to make voluntary communications, and lead them to potentially prefer a non-proactive, silent approach.

If you have any questions about the impact of this Notice and the IAA’s extended merger control powers, please get in touch with our antitrust team: we will be happy to discuss it with you.