Antitrust Bites – Newsletter

ICA opens investigation for abuse of dominant position in the markets of raw materials for the production of lightweight and ultralightweight plastic bags

With a decision published in the Bulletin of 8 April 2024, the ICA opened an investigation to establish whether Novamont has violated the prohibition of abuse of a dominant position in the markets of raw materials for the production of lightweight and ultra-lightweight plastic bags. According to Italian law, those bags can only be marketed if they’re produced with biodegradable and compostable material.

Novamont produces bioplastics and, primarily, the raw material known as Mater-Bi. This biodegradable and compostable bioplastic is normally used to produce lightweight and ultra-lightweight bags, packaging, garbage bags, products for agriculture and products for foodservice like cutlery, cups, straws, and plates.

According to investigative hypothesis elaborated by ICA, Novamont allegedly entered into two “groups” of agreements. One was with the users of the lightweight and ultra-lightweight bags produced by Novamont. The other was with the processors, ie those who purchase the raw material from Novamont to produce lightweight and ultra-lightweight bioplastic bags.

The first type of agreements, concluded with large-scale retail distribution purchasing centres and other operators, would require users to buy plastic bags made exclusively of Mater-Bi, against payment by Novamont of a fixed or variable amount depending on the volume of purchases. The agreements with processors would distinguish between “premium partners” and “basic partners,” depending on whether the purchasers use Mater-Bi in all or most of their products.

According to the ICA, these agreements – which would act on two levels of the supply chain, being aimed at both processors and users – could constitute an abuse of a dominant position since they could restrict the entrance of raw materials competing with Mater-Bi suitable for the production of lightweight and ultra-lightweight bags in accordance with Italian legislation. And they could also restrict the production and marketing of such bags produced with raw materials different from Mater-Bi.

The subjects who may be negatively affected by the infringements under investigation or by the measures adopted as a result of the investigation can intervene in the proceeding brought against Novamont by 8 May 2024.

 

UK Antitrust Authority: Update to report on AI foundation models

On 11 April, the UK antitrust Authority, Competition and Markets Authority (CMA), published an update to the report on foundation models released in September 2023. The update contains the results of its review – launched in May 2023 – of the impact of foundation models, ie AI-based systems, on competition and consumers.

The update report, in providing an overview of the development of the foundation models sector since September 2023, gives an update of the principles that the CMA has already outlined in the previous version of the report. Its aim is to ensure the effectiveness of competition and consumer protection in the context of the development of foundation models. It also identifies three key risks to competition related to developments in AI foundation models.

The CMA identified the following three risks that could counteract fair, open, and effective competition:

• Companies controlling the critical inputs for the development of foundation models (eg computing, data and technical capabilities) could restrict access to them to companies interested in using them.
• Major players in the industry could exploit their market power to restrict competition in the deployment of foundation models.
• Partnerships involving key players in the market could reinforce or extend their positions of market power.

 

Abuse of dominant position: ICA initiates interim proceedings against Ryanair

On 3 April 2024, within the scope of an investigation that began on 14 September 2023 to determine potential abuse of dominant position by Ryanair in the airline transport market, the ICA decided to start an interim proceeding against Ryanair to prevent the behaviours currently exhibited by the carrier from causing severe and irreparable damage during the period needed to complete the investigation.

In its opening decision dated 14 September 2023 (for more details, see Antitrust Bites – September 2023), the ICA accused Ryanair of practices designed to hinder customer bookings through travel agencies – both physical and online – by implementing several measures intended to block or complicate the use of their service purchased via travel agencies.

Ryanair is alleged to have:

• prevented agencies from using its website to buy airline tickets on behalf of clients;
• provided agency customers with derogatory information about the agencies;
• offered only a subgroup of travel agencies (excluding those online) the chance to access an inventory – which was, however, limited – of Ryanair flights via GDS (Global Distribution System) platforms.

These practices, aimed at excluding travel agencies from the markets for booking and selling tourist services to centralize both activities through the carrier’s channels, were considered by the ICA sufficient to constitute a possible abuse of dominant position by Ryanair in the airline transport market.

From November 2023, following the start of the investigation, Ryanair reportedly intensified its exclusionary conduct, culminating, at the end of January 2024, in Ryanair adopting a specific contract as the only method of distribution. Among other provisions, the contract required the consumer to be redirected to the carrier’s website to buy tickets and eliminated the pricing autonomy of individual agencies. In the Authority’s view, the contract significantly consolidated the effects of the abusive conduct, effectively imposing a new business model on the agencies with the aim of reducing their competitive pressure.

In light of the conduct observed at the start of the proceeding, and, even more so, following its intensification, the ICA judged that the periculum in mora requirement had been met and decided to initiate the interim proceeding to adopt an urgent cautionary measure to suspend the conduct implemented by Ryanair. The ICA considered both the tangible risk of travel agencies losing commercial autonomy in the Italian market and Ryanair consolidating its dominant position in the market. This measure would allow travel agencies, pending the conclusion of the main proceeding, to access the carrier’s flight offerings under the same technical-economic conditions offered by Ryanair and to buy airline tickets for clients.

 

New Q&A on foreign subsidies regulation

The European Commission has updated the Q&As concerning Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market (FSR).

The Commission clarified that:

• To calculate the thresholds to trigger the obligation to report a transaction to the Commission under the FSR, financial contributions granted in the three years before the concentration to companies that have been divested or closed must be taken into account.
• Managers of investment funds are exempted by the obligation to report financial contributions received in the last three years prior granted to funds other than those used in the transaction not only in the case expressly provided for by the FSR, ie when EU Directive 61/2011 applies to them, but also if they demonstrate that they are subject to a legislation which is equivalent to that of such Directive in a non-EU country.
• The supply and purchase of goods and services at market terms and in the ordinary course of business do not fall within the obligation to report under FSR, unless financial services are concerned. The rationale behind the exception is to avoid a situation in which financial services such as loans, guarantees or credit facilities, provided by third countries, and which could amount to foreign subsidies that potentially distort the internal market, fall outside the scope of the reporting obligation.
• The Commission’s assessment on whether a foreign subsidy distorts the internal market is limited to the notified concentration and does not extend to other concentrations that may be directly facilitated by the potential subsidy.

 

ICA publishes results of its fact-finding investigation into the hearing aid market in Italy

On 26 March 2024, the ICA published a report of a fact-finding investigation launched on 12 September 2023 to investigate the dynamics and operating mechanisms of the distribution and sale of hearing aids in Italy. The report looks into public procurement for the needs of the National Health System and the related Regional Health Systems. At the end of the investigation, the Authority sent a report to Parliament and other competent institutions to point out the critical issues it had found.