Antitrust bites - Newsletter

Antitrust law and so-called ‘overabundant’ temporary groups of undertakings: the clarifications provided by the Council of State

With decision no. 8400 of 30 September 2022, the Council of State, overturning the ruling of the Administrative Regional Tribunal of Lazio, annulled the decision (No. 27993/2019, adopted at the outcome of the I821 proceeding) by which the Italian Competition Authority (AGCM) fined some companies active in the surveillance services sector as they would have coordinated to participate in certain public tenders, infringing Article 101 of the Treaty on the Functioning of the European Union (TFEU).

In its ruling, the AGCM argued that the fined security companies, through the use of the tool of the temporary group of undertakings (RTI) and subcontracts in an anticompetitive manner, pursued the anti-competitive goal of sharing the market for public tenders in some Italian regions, violating Article 101 TFEU.

In the decision, the Council of State affirmed – and confirmed – several principles of particular interest on the matter of “overabundant” RTIs, i.e. temporary groups in which each of the participating undertakings fulfils the requirements to participate in tenders.

It should be considered, as specified in the decision at issue, that the participation in public tenders in overabundant RTIs is forbidden only when pursuing anticompetitive objectives. Therefore, there are cases in which participation in overabundant RTIs is not unlawful, but justified in light of the specific circumstances of the case.

As clarified in the decision, the anticompetitive nature of overabundant RTIs is in principle excluded when the characteristics of public tenders are such “as to make it objectively difficult, for economic operators, to participate individually,” by reason of the size of the investments, tools and requirements for the participation in tenders.

In the case at hand, the Council of State considered participation in overabundant RTIs to be an “almost physiological occurrence” insofar as it gave the operators “the security of being able to rely on the already experienced organization of the other participants” to the RTI as well as a guarantee on the sharing among the participants “of the risk of non-performance/delayed performance/insolvency of the contracting administration”.

Commission’s Informal Guidance on competition law enforcement and Commission’s Temporary Framework on antitrust enforcement in the context of the pandemic crises

On 3 October 2022, the European Commission adopted the revised version of the Notice “on informal guidance relating to novel or unresolved questions” related to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), according to which undertakings may seek informal guidance from the Commission on the application of competition law, under certain circumstances.

As concerns the application of competition law, it is normally up to the undertakings, as recipients of antitrust rules, to autonomously evaluate whether their conduct may fall within the scope of Articles 101 and 102 TFEU, which respectively concern anticompetitive agreements and the abuse of dominant position. This system enables the European Commission to provide undertakings with informal guidance on the application of antitrust rules where there is an effective and genuine uncertainty as to their application.

In 2004, the Commission adopted the previous version of the “Notice on informal guidance relating to novel or unresolved questions”, to identify the circumstances under which the Commission could provide undertakings with its informal guidance. The 2004 Notice provided for very strict criteria that limited the cases in which the Commission could adopt informal indications on the application of antitrust law.

The new version of the Commission Notice on informal guidance updates the criteria under which the Commission may provide undertakings with its informal guidance on the application of antitrust law in cases which present novel or unresolved questions, including situations of emergency and crisis. This is to increase the degree of legal certainty in favor of the undertakings requesting the Commission’s informal guidance, which will take the form of “guidance letters”.

In particular, the revised tool:

• increases the Commission’s flexibility in evaluating the cases in which it has the possibility to adopt its own informal indications on the application of antitrust law, and enables the Commission to evaluate the relevance of such cases in order to reach its own enforcement priorities and EU interests;
• broadens the definition of “novel” issues which pose a question of application of the law for which there is no “clarification”, including also the cases in which there would be “no sufficient clarification”.

The adoption of the updated version of the Notice is accompanied by the information on the withdrawal of the Temporary Framework adopted by the Commission in April 2020 for assessing the agreements between undertakings in the context of the COVID-19 pandemic. The Temporary Framework – the withdrawal of which is justified by the upgrade of the health situation in Europe – enabled the Commission to positively evaluate, under certain circumstances, the cooperation agreements between undertakings aimed at facing emergencies caused by the pandemic.

Right of defense in pre-trial proceedings: an interesting ruling by the Regional Administrative Court of Lazio

With decision no. 12507 of 3 October 2022, the Regional Administrative Tribunal of Lazio (TAR Lazio) annulled the decision by which the Italian Competition Authority (AGCM), had found an agreement restricting competition and applied penalties of approximately EUR115 million.

The TAR Lazio annulled the Authority’s measure, deeming some formal complaints to be well-founded and absorbable.

First, the TAR Lazio, applying now well-established case-law, judged the proceeding to be vitiated due to the excessive duration of the pre-investigation phase, since the AGCM had deliberated the initiation of the proceedings more than a year after receiving the report and in the absence of any activity on the part of the Authority of such complexity as to justify the delay.

Secondly, the TAR Lazio detected an infringement of the right of defense of the parties to the proceedings, resulting from the allocation of an excessively short deadline for concluding remarks, albeit formally longer than the 30-day deadline stipulated by presidential decree no. 217/1998.

The deadline initially allotted to the parties – equal to the legal minimum – had subsequently been extended by only 15 days and ran from July 30. The AGCM also only granted the parties full access to the documents at the end of August, when less than 20 days remained until the deadline expired. Such a short deadline was judged by the TAR as “wholly insufficient for the purpose of responding to an accusation laid in a document of more than 100 pages”.

In the opinion of TAR Lazio, the short deadline for preparing the defensive act made “evident” the compression of the parties’ right of defense, also in view of the complexity of the analyses carried out by the AGCM, of the high amount of the fine (approximately EUR 112 million), of the overall duration of the proceedings – “ended after about two and a half years from the report and three from the conclusion of the agreement” – and of the circumstance that, in similarly complex cases, the parties were given terms of more than 100 days to prepare their defenses.

Concentrations ‘below the threshold’ and the possible application of Article 102 TFEU: AG Kokott delivers his opinion

On 13 October 2022, Advocate General (AG) Kokott delivered his opinion in Case c-449/21, Towercast v. Autorité de la Concurrence, on a reference for a preliminary ruling from the “Cour d'appel de Paris” (the Paris Court of Appeal).

The main dispute concerns the question of the complementary or supplementary application of Article 102 TFEU to national merger control rules. The case originates from an appeal lodged by the French company “Towercast” against the decision of the “Autorité de la concurrence” (the French competition authority) rejecting a complaint lodged by Towercast on an alleged abuse of a dominant position by the French company TDF Infrastructure Holding SAS (TDF).

In the French market for terrestrial television broadcasting, TDF has the largest market share compared to its two other competitors, Towercast and Itas. TDF's acquisition of Itas remained below the thresholds provided for in Article 1 of the Merger Regulation and Article L. 430-2 of the Commercial Code and was therefore not subject to the ex ante control by the French Authority. Towercast's appeal was dismissed because the abuse of a dominant position had not been demonstrated and because, with the adoption of Regulation 4064/89, a clear distinction was drawn between merger control, on the one hand, and anti-competitive practices under Articles 101 and 102 TFEU, on the other. Thus, Article 102 TFEU would no longer be applicable if no anti-competitive conduct distinct from the merger were to occur.

The Paris Court of Appeal referred the question to the Court: whether Article 21(1) of the Merger Regulation must be interpreted as precluding a merger below the Community threshold and the national threshold for ex ante control from being regarded as constituting an abuse of a dominant position within the meaning of Article 102 TFEU.

The AG, recognizing that Article 102 TFEU is primary law, said Article 21 of the Merger Regulation may exclude the applicability of Regulation no. 1/2003 to concentrations, but regardless of this, the prohibition in Article 102 TFEU remains directly applicable, being sufficiently clear, precise and unconditional as not to require a secondary law provision for its implementation.

Moreover, concentrations below the thresholds and not subject to the notification requirement cannot limit or exclude the applicability of Article 102 TFEU. This finding follows from the fact that the thresholds regulate the division of competence between national authorities and the Commission, establishing the applicable law, and are determined on the basis of the legislator's assessment, which, if exceeded, could adversely affect the market structure.

In conclusion, in the AG's opinion, Article 21(1) of Regulation no. 139/2004 must be interpreted as not prohibiting a national competition authority from reviewing a concentration which has no Community dimension within the meaning of Article 1 of that regulation, is below the thresholds for mandatory ex ante assessment laid down in national law, and has not been referred to the Commission under Article 22 of that regulation, to determine whether it constitutes an abuse of a dominant position under Article 102 TFEU.

The ‘significant impediment to effective competition’ test: AG Kokott's conclusions regarding a merger in the mobile phone industry

On October 20, 2022, Advocate General (AG) Kokott delivered his opinion in Case C-376/20, brought by the European Commission against the judgment of the General Court that had annulled the European Commission’s decision to oppose the proposed acquisition of two British mobile operators.

The Commission had prohibited the merger in question on the grounds that the acquisition, as it related to an oligopolistic market, would result in a significant impediment to effective competition due to uncoordinated effects related to the elimination of important competitive constraints. In the judgment under appeal, the General Court, upholding the parties’ view, had annulled the Commission’s decision on the grounds that the conditions for a veto measure had not been adequately demonstrated. In particular, the court of first instance underlines that the Commission had not demonstrated that the transaction was likely to significantly impede effective competition in the markets according to a level of “strong probability”.

The AG concludes that the judgment of the General Court should be set aside, considering it to be incorrect because the General Court required an enhanced evidentiary standard for the assessment of horizontal mergers with unilateral effects, which is not reflected in European law. The notion of “significant impediment to effective competition”, the AG notes, is unitary and includes both the hypothesis of the establishment and strengthening of dominance and that of uncoordinated effects in oligopolistic markets. From the unity of the notion derives the symmetry of the evidentiary requirements that must be met to assess the potential restrictive effects on competition of the merger transaction. According to the AG, there is no justification for imposing higher levels of proof in the case of mergers that give rise to non-coordinated effects in oligopolistic markets.

The AG identifies the “balance of probabilities” as the standard of proof that the Commission must meet whenever it makes a merger decision. Under this standard, it is necessary to examine the extent to which the merger transaction to be assessed could harm competition by achieving a significant impediment to effective competition.

Since this is an assessment of a probabilistic nature, it follows that judicial review can only be limited to verifying the material accuracy of the facts and looking for manifest errors of assessment, as the court cannot replace itself for the Commission’s assessments.