Antitrust Bites – Newsletter

EU Commission publishes Staff Working Document on revision of the VBER

On 8 September, the European Commission published a “Staff Working Document” summarizing the findings on the functioning of the EU Vertical Block Exemption Regulation (VBER) No. 330/2010 (which will expire on 31 May 2022) together with its Guidelines, which the Commission will evaluate in order to decide whether to let the Regulation expire, extend it or modify it.

This evaluation aims to provide an assessment of how the Regulation and the Guidelines function in the light of the changes that have significantly characterized the market since their last revision – in 2010 – which include the growth of online sales and the development of new tools such as search engines, online marketplaces and price comparison tools.

In this context, the Commission has identified three main gaps and critical issues in the Regulation and the Guidelines:

• the absence of provisions providing practical guidance on restrictions on sales through marketplaces or on the use of price comparison websites;
• the lack of clarity and the complexity of certain provisions, such as those concerning the hardcore restrictions (e.g. RPM) and the excluded restrictions (e.g. non-compete clauses), as well as those concerning the distribution models (e.g. franchising and selective distribution); and
• the existence of divergent approaches by national competition authorities and national courts on different provisions (e.g. the provision concerning the RPM clauses) and on some new kinds of restrictions, not covered by the Regulation but increasingly widespread (e.g. the parity clauses).

The Commission supports the maintenance of the Regulation and the Guidelines, even though it considers it necessary to amend the legislation with reference to those areas that are less clear, have gaps, or are no longer appropriate in the light of recent market developments, as stated above.

In this regard, in the coming weeks the Commission will launch an impact assessment and stakeholders will be able to provide their feedback on the critical issues identified in the Staff Working Document in the last quarter of 2020.

The ICA against excessive prices: investigation launched into abuse of dominant position against transport company Caronte & Tourist

With the resolution of 4 August, the Italian Competition Authority (ICA) started an investigation to ascertain whether Caronte & Tourist – an operator considered in a dominant position in the maritime transport of passengers and vehicles in the Stretto di Messina – has applied excessively onerous prices and contractual conditions in violation of the prohibition of abuse of dominant position laid down by Article 3, paragraph 1, letter a) of Law n. 287/90.

In the resolution, the ICA represented that, at a first analysis, it would seem that the operator charges unjustifiably high prices compared to the prices applied on other routes, which are not balanced to the hypothetical costs of providing the service.

In the last ten years, the AGCM has ascertained in only one case an abuse of dominant position for excessively onerous prices (case A480 – Incremento Prezzo Farmaci Aspen of 2016). Recently, however, the ICA has hypothesized that phenomena of alleged “excessive price increases” may constitute violations of the consumer protection legislation, having started proceedings for unfair commercial practices in cases of price increase of certain products during the COVID-19 emergency.

Derogation from the antitrust control of merger operations

Article 75 of Decree Law No. 104/2020 (the so-called Decree August published in the GU on 14 August 2020, not yet converted into law, entered into force on 15 August 2020) introduced a temporary derogation from antitrust control for some merger transactions that do not have an EU dimension, with the declared aim of safeguarding the continuity of the company in the context of the current economic scenario resulting from the health emergency.

The exemption applies to mergers – for which the obligation to notify the Antitrust Authority, pursuant to Law No. 287/1990 – concerning companies:

• operating in markets characterized by the presence of:

• labour-intensive services, according to the definition set forth in art. 50 of the Code of Public Contracts (i.e. services in which the cost of labour is at least 50% of the total amount of the contract); or
• services of general economic interest, pursuant to art. 14 of the Treaty on the Functioning of the EU; and

• which have recorded budget losses in the last three financial years and which, also due to the effects of the health emergency, could cease activity.

The provision states that merger transactions that meet these requirements are deemed to be authorised in derogation of the procedures laid down in Law no. 287/1990 on the antitrust control of mergers, as they respond to important general interests of the national economy.

The companies interested in benefiting from the derogation are required to notify in advance the merger transactions to the AGCM, together with the proposal of behavioural measures suitable to prevent the risk of imposition of prices or other contractual conditions burdensome for users as a result of the transaction itself.The rule provides that the AGCM, within 30 days of the communication, having obtained the opinion of the Ministry of Economic Development and the Regulatory Authority of the sector concerned by the transaction, prescribes the above measures, with any amendments and additions deemed necessary to protect competition and users, also taking into account the overall sustainability of the transaction. In cases of non-compliance, the sanctions provided for by art. 19 of Law no. 287/1990 shall apply.

The provisions of art. 75 of the August Decree apply with effect from 15 August 2020 to concentration transactions notified by 31 December 2020.

Recent Dutch approach on the inability-to-pay defence

With a decision of 18 August 2020, a Dutch appeal court approved a request for reduction of a fine imposed by the Dutch competition authority (Authority for Consumers and Markets (ACM) to an undertaking for practices contrary to art. 101 TFEU, thus diminishing the mentioned fine of 99% compared to the amount resulting from the first instance judgement.

Indeed, despite the original fine having already been lowered following the first instance judgment, the fined undertaking claimed before the competent appeal court the lack of proportionality of the amount, in the light of its current bad financial situation (allegedly partly due to the fact that the fine had already been paid), asking also to speed up the judgement because of an imminent bankruptcy procedure.

The appeal court required the ACM to deliver an opinion on these issues. Although the ACM did not agree with the interpretation of the inability-to-pay doctrine put forward by the appellant, it proposed a further reduction of the fine, up to EUR10,000, for the following reasons:

• the fact that, in view of the ongoing proceedings before the court of first instance concerning the appellant’s parent company (jointly and severally liable for the payment of the fine), the appellant should have had to wait too long before any certainty could be reached about the amount of the final fine;
• the appellant’s current financial position and the alleged urgency; and
• the COVID-19 crisis and the consequences suffered by the appellant.

In the absence of any objection by the appellant, the appeal court concluded for the proportionality of the fine as redetermined by the ACM.

This ruling may open the way to a more flexible approach by national courts and/or competition authorities regarding the inability-to-pay defence that takes into account the economic impact of the COVID-19 pandemic.

European Commission approves Italian aid scheme to support large enterprises

On 17 September, the European Commission authorized an Italian aid scheme of EUR44 billion to support large enterprises affected by COVID-19, which follows the scheme to help small and medium enterprises (SMEs) already approved at the end of July.

The scheme at issue, notified by Italy under the State aid temporary framework, comprises four complementary measures:

• equity injections;
• mandatory convertible bonds;
• convertible bonds upon request of either the beneficiary or the bondholder; and
• subordinated debt.

These will be administrated by an ad hoc special purpose vehicle, Patrimonio Rilancio.

The support measures will be granted to large enterprises that were not in difficulty on 31 December 2019, that have faced a severe reduction of revenues in the course of 2020 and that are regarded as strategic for the national economy and the labour markets.

The Commission considered this scheme to be in line with art. 107, par. 3 TFEU and the conditions laid down in the Temporary Framework, for the following reasons:

• as regards recapitalization measures:

• support is available to companies to the extent strictly necessary to ensure business continuity and to restore the capital structure existing prior to COVID-19;
• it provides an adequate remuneration for the State;
• repayment from beneficiaries is encouraged (e.g. through a dividend ban);
• safeguards are in place to make sure that these measures are not unduly used; and
• aid to an individual undertaking above a EUR250 million threshold has to be notified and assessed separately;

• with respect to measures in the form of subordinated debt:

• the relevant limits on turnover and wage bill of the beneficiaries are not exceeded; and
• they can only be granted until 31 December 2020.