Antitrust Bites - Newsletter

2023 IN NUMBERS: AN OVERVIEW OF FINES IMPOSED BY THE ITALIAN COMPETITION AUTHORITY

In 2023, the Italian Competition Authority (ICA) imposed fines of over EUR27.8 million on undertakings for infringing competition law.

In three investigations the ICA found violation of the prohibition of agreements restricting competition. For these infringements sanctions for a total amount of more than EUR12.7 million were applied. In 2022 the investigations into anticompetitive agreements found five infringements, with sanctions of approximately EUR13.6 million.

One investigation was concluded finding a violation of abuse of dominant position, with a fine exceeding EUR15 million. In 2022, the investigations on abuses of dominant position found three infringements, with sanctions of more than EUR10.9 million.

By applying for the first time Article 16 bis of Law No 287/1990, introduced by Annual Law for Market and Competition 2021 (Law No 118/2022), the ICA has also applied sanctions – totaling EUR33,000 – for failure to respond in time to requests for information related to concentrations between companies.

Regarding consumer protection, 32 out of 86 proceedings concluded by the ICA (in 2022 there were 117 proceedings) found violations for unfair commercial practices and/or consumer rights and five for failure to comply with previous ICA decisions (9 in 2022). Forty-six proceedings (including one for unfair clauses) ended with acceptance of commitments submitted by the undertakings.

ICA imposed penalties totaling more than EUR42 million (in 2022 it was more than EUR78 million), including sanctions above EUR2 million for failure to comply with previous ICA decisions and other sanctions – slightly above EUR40 million – for unfair commercial practices and violation of consumer rights.

 

The Revised Market Definition Notice: Key innovations introduced by the Commission

The European Commission has updated the Notice on the definition of the relevant market for the first time since its adoption in 1997, concluding its process on February 8. The revision journey began in 2020, following a thorough assessment of the Communication, which led the Commission to determine that updates were necessary to align with new market developments.

The definition of the relevant market is a crucial step in the Commission’s evaluation process for mergers and most antitrust cases. The updated Notice adapts to the increasingly interconnected and globalized nature of trade that characterizes certain markets. Although it largely confirms the consolidated approach adopted by the Commission and EU case law in evaluating markets in highly dynamic and innovative sectors, the Notice introduces several novelties, specifically:

• new parameters to refer to in defining the relevant market;
• clarifications on quantitative techniques for defining the relevant market, such as the SSNIP test;
• the definition of the relevant market in the presence of multi-sided platforms, after-markets, bundles and digital ecosystems.

Firstly, the updated Notice places greater emphasis on non-price related elements for identifying relevant markets, such as the level of product innovation and its quality in various aspects, including sustainability, resource efficiency, durability, the value and variety of uses offered by the product, the possibility to integrate the product with other products, the image conveyed, or the security and privacy protection afforded.

The Notice then clarifies the quantitative techniques the Commission can use to define a relevant market, such as the SSNIP test (“small but significant and non-transitory increase in price”), which assesses whether a hypothetical monopolist would profit from permanently increasing prices by 5-10% in a given market. The Commission examines practical limitations that may make the application of the SSNIP test difficult in concrete situations, such as in the context of zero-price products and in highly innovative sectors, concluding that in most such cases, the test should only be used as a conceptual framework for interpreting other available evidence.

Moreover, innovating from the past, the Notice has provided guidance on how to proceed with defining the relevant market:

• in the presence of multi-sided platforms – where the demand of one user group impacts the demand of others – re-emphasizing the relevance of non-price parameters, such as product functionalities, intended use, evidence of past or hypothetical substitution, barriers or costs of switching;
• in after-markets, where the consumption of a durable product (primary product) leads to the consumption of another connected product (secondary product);
• for bundles; and
• for digital ecosystems, which can be thought of as consisting of a primary core product and several secondary (digital) products whose consumption is connected to the core product – to which the Commission suggests applying principles similar to those applied to after-markets.

 

French Competition Authority launches public consultation on artificial intelligence

In its press release of 8 February 2024, the French Competition Authority (Autorité de la concurrence) announced the launch of a public consultation regarding the competitive situation in France in the generative artificial intelligence (AI) sector, defined as the creation of content from a large input dataset, through the use of techniques such as so-called deep learning and neural networks.

In the decision launching the consultation, the French Authority is asking the parties interested in participating to express their views by answering a series of questions regarding:

• the resources needed to train and develop the foundation models, with particular reference to computing power, data, and technical skills, to understand whether access to such resources could be considered a barrier to entry or expansion in the AI sector;
• the competitive landscape of the sector in France, with particular regard to the characteristics of the main players and possible competitive issues (for example, the existence of exclusivity clauses and possible difficulties in accessing the resources needed to train and develop foundation models);
• the minority stakes held by some of the major players in the sector in certain innovative companies operating in the generative AI sector, to understand whether the acquisition of such stakes (which in principle falls outside merger control thresholds) may have harmful effects on competition and whether the current merger control rules need to be revised to allow an antitrust assessment over such acquisitions;
• the difference between generative AI and other major digital innovations and the evolution of the generative AI sector over the next five years, with the aim of understanding whether the current regulation applicable to the sector can ensure competition in the market or whether regulatory initiatives are needed to support the relevant competitive dynamics.

Interested stakeholders are invited to submit their comments by Friday, 22 March 2024.

 

Jurisdiction in actions for damages for cartel

The Opinion of Advocate General (AG) Emiliou in Case C-425/22 has been published. The case was for a reference for a preliminary ruling on the interpretation of the jurisdiction rules of Regulation (EU) No 1215/2012 in an action for damages for breach of Article 101 TFEU.

The question submitted to the Court of Justice concerns the possibility for a parent company to invoke the competition law concept of economic unit to establish the jurisdiction of the courts where it has its registered seat to hear and determine its claim for damages for the harm suffered by its subsidiaries.

The AG refers to the court’s case-law on Article 7(2) of Regulation No 1215/2012. By way of exception to the general rule of the forum of the defendant’s domicile, the rule confers, in matters relating to torts, delicts and quasi-delicts, jurisdiction on the court of “the place where the harmful event occurred or may occur.” The AG recalls in particular how the Court has already clarified that the criterion of the “place where the harmful event occurred” does not cover the place where the damage to the assets of an indirect victim (such as the parent company acting for compensation for the damage suffered by the subsidiaries) occurred.

The AG then goes on to consider the notion of economic unity, recalling how the term was developed by the Court to describe, in essence, the term “undertaking” and that a parent company and its subsidiary form an economic unity when, in principle, the latter is subject to the decisive influence exercised by the former and does not act autonomously.

The Advocate General questions whether the concept of economic unity can be used in the application of Article 7(2) of Regulation No 1215/2012 in such a way as to give a forum actoris to an alleged indirect victim of a cartel restricting competition.

The AG considers that the question must be answered in the negative. First, because the approach is not supported by the Court’s previous case-law. Secondly, to accept the position would be contrary to the rationale of the rule, which is to ensure respect for the principle of proximity of the Court to the evidence (it’s considered that the Courts whose jurisdiction may be conferred under Article 7(2) of Regulation 1215/2012 are the best placed “in particular on grounds of proximity and ease of taking evidence”). Moreover, the position would also not fulfill the requirement of foreseeability of the forum and the objective of consistency between the forum and the applicable law. Finally, the AG explained that the conclusion it reaches does not hamper the efficiency of enforcement of the rights arising from infringement of competition law.

In conclusion, the AG considers that the term “the place where the harmful event occurred” does not cover “the registered office of the parent company that brings an action for damages for the harm caused solely to that parent company’s subsidiaries by the anticompetitive conduct of a third party, and where it is claimed that that parent company and those subsidiaries form part of the same economic unit.”

 

Council of State rules on the scope ratione materiae of the new powers conferred on the ICA by the Asset Decree

On January 29, 2024, the Council of State published opinion No. 61/2024. The opinion addresses the request made by the Italian Competition Authority concerning the scope of application of the new investigative powers granted to the ICA by Law Decree No. 104/2023 (the so called Asset Decree), to clarify whether it should be limited, ratione materiae, to the air passenger transport sector or could be extended to all fact-finding investigations.

The asset decree, in Article 1, paragraphs 5 and 6, introduced new powers for the ICA, which, in carrying out fact-finding investigations pursuant to Article 12, paragraph 2, of L. 287/1990, may: (i) order inspections; (ii) formulate requests for information, backed by sanctions in the event of non-compliance or incomplete or untruthful answers; (iii) impose behavioral and/or structural measures; (iv) accept and make binding commitments voluntarily offered by the undertakings concerned; and (v) impose sanctions in the event of non-compliance with the measures or commitments undertaken.

The Council of State observes how, on first analysis, the text of the provision, included in the body of the “provisions for the transparency of prices charged on domestic flights” seems to limit the powers to the objective sphere of air transport. But taking a teleological and systematic hermeneutic approach shows that regulatory intervention is aimed at ensuring the restoration of effective competition. Especially in situations where the attenuation of competitive confrontation between operators depends on the very structure of the market. In particular, the fact that the provisions under consideration are included in a regulatory provision that’s aimed at the “protection of users, in the field of economic and financial activities and strategic investments,” suggests that a sectorial limitation of the power of intervention attributed to the Authority to a specific product sector would contravene the rationale of the provision.

The Council of State points out that a restrictive interpretation of the new provision, which would circumscribe the scope of application of the new powers assigned to the Authority, would result in unequal treatment with respect to economic sectors other than air transport. And this would violate the principle of proportionality and prohibition of discrimination between economic operators of constitutional and Euro-unitary inspiration. A restrictive interpretation would also determine an inconsistency between the content of the measures provided for by the legislation in question and the purpose pursued through their provision.

Moreover, the newly introduced powers don’t have such special characteristics as to require that they be confined, exclusively, to the air transport sector. On the contrary, they appear susceptible of being applied to any economic sector affected by an investigation. In support of these arguments, the Council of State reported the outcome of a comparative analysis with the powers conferred on other competition authorities active in the European panorama. The analysis showed that none of these institutions has ever had remedial powers that can be activated only as a result of market investigation activities carried out in certain sectors of the economy.

The Council of State concluded that Article 1, paragraphs 5 and 6, of the Asset Decree must be interpreted as meaning that the new powers conferred on the ICA operate without sectoral and/or product-related restrictions.