Margin squeeze under the lens of the Regional Administrative Court of Lazio

With judgment No. 9803, published on 15 September 2021, the Italian Regional Administrative Court of Lazio annulled the sanctions imposed by the Italian Competition Authority (ICA) against a telephone operator for alleged margin squeeze conduct contrary to Article 102 TFEU.

The judgment of the Italian Regional Administrative Court of Lazio, after providing an interesting reconstruction of the constituent elements of the abuse of dominant position by way of margin squeeze and of the criteria required for its assessment, affirms the following principles:

  • For the purposes of establishing a margin squeeze, the "equally efficient" competitor test must be carried out by the ICA taking into account the actual market dynamics, distinguishing for this purpose between competitors in the downstream market and end customers on the basis of an objective analysis of the market and not on the basis of subjective consideration of the dominant operator; the Italian Regional Administrative Court of Lazio also underlined that "the abuse of dominant position by margin squeeze appears incompatible with the vertically integrated operator's intention to damage only a part of the competition".
  • Where the input controlled by the dominant operator in the upstream market is not the only relevant input for the realization of the final product in the downstream market, and therefore there is not a full vertical integration, the existence of a margin squeeze cannot be established in the absence of evidence that the cost of that input has a decisive impact on the determination of prices in the downstream market to such an extent to produce exclusionary effects to the detriment of competitors.
  • The demonstration of the, at least potential, anti-competitive effect is essential for the assessment of the abuse, even where the margin squeeze and the anti-competitive intent of the vertically integrated operator are proven, and it must be supported by "at least, an analysis of the market which explains and demonstrates the reason why the undertakings which are not integrated vertically run the risk of being foreclosed from the market as a result of the ascertained margin squeeze".

European Commission approves EUR1.24 billion Italian state aid scheme in favour of companies hiring young workers in the context of COVID-19

On 16 September 2021, the European Commission approved the EUR1.24 billion state aid scheme presented by Italy to support companies hiring young workers in the current emergency context. The state aid scheme has been approved in accordance with the measures laid down in the "Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak" (which was last amended on 28 January 2021; Temporary Framework), which will apply until 31 December of this year.

The state aid will be granted to companies in the form of an exemption from payment of social security contributions for new open-ended employment contracts – or transformations of fixed-term contracts into open-ended contracts – concluded in 2021 with workers under 36 years of age. The aid will apply for a maximum of 38 months, which may be extended to 48 months for young employees who work in certain Italian regions.

The exemption cannot exceed the annual amount of EUR6,000 per worker. To be eligible for the state aid measure, the employers must not have dismissed employees during the six months preceding the recruitment or transformation of the contract nor during the following nine months.

The Italian scheme has been approved by the Commission, who considered it to be in line with the conditions set out in the Temporary Framework, as last amended on 28 January 2021, in the context of the "Limited amounts of aid" – in favour of "undertakings that find themselves facing a sudden shortage or even unavailability of liquidity" and which may constitute an "appropriate, necessary and targeted solution" for them, in relation to the existing circumstances.

In particular, the Commission has assessed that the aid:

  • will not exceed EUR225,000 per company active in the primary production sector of agricultural products, EUR270,000 per company active in the fisheries and aquaculture sector and EUR1.8 million per company active in all other sectors; and
  • will be granted no later than 31 December 2021.

European Commission opens 'Phase II' investigations of concentration below merger filing thresholds following referral under Article 22, Reg. 139/2004

With a press release of 22 July 2021, the European Commission announced it had opened "Phase II" investigations on a concentration below merger filing thresholds.

On 19 April 2021, the European Commission accepted a referral request under Article 22 of Regulation EU no. 139/2004 on the control of concentrations (EUMR) from the French Competition Authority (joined by the Belgian, Greek, Icelandic, Dutch and Norwegian authorities). The referral decisions of French and Dutch competition authorities were also appealed before national courts (the appeals were dismissed).

Accordingly, even though the concentration was not subject to the obligation to be notified within Member States, the parties notified the transaction pursuant to Article 22, para. 3, EUMR upon the Commission's request.

This is the first referral – and in-depth investigation – under Article 22 EUMR following the publication by the Commission, on 26 March, of the new Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases (for more details on the Guidance, please see the April 2021 newsletter).

The opening of the in-depth investigation confirms the European Commission's interest in thoroughly assessing those concentrations that are not subject to the obligation to be notified, where the requirements provided for by the Guidance are met.

In the transaction in question, according to the European Commission, the alleged competitive concerns underlying the operation involve potential restrictions of competition (relating to vertical foreclosure) and innovation in a market qualified as "emerging".

The European Commission's decision to open "Phase II" investigations has been appealed before the General Court.

Furthermore, on 20 September 2021, the European Commission sent the parties a statement of objections, in view of the potential adoption of interim measures for an alleged breach of the standstill obligation.

Council of State clarifications on parental liability presumption

With judgment No. 6214 of 6 September 2021, the Council of State once again addressed the issue of the so-called parental liability presumption (PLP), providing useful clarifications on the conditions and the limits for the application of such presumption for the purposes of ascribing to the parent company liability for its subsidiary conduct.

The Council of State clarified that where the parent company is a holding, it may be held liable for the conduct of its subsidiary only if it can be considered or behaves as an "undertaking" pursuant to Articles 101 and 102 TFEU, and therefore its activity is not limited to holding shares and exercising the related rights. The Council of State held that the fact that the parent company was a pure holding company with a single managing director, no staff and no operational offices was sufficient to overturn the presumption of parental liability and to shift the burden of proof onto the ICA, which would have had to demonstrate, for the purposes of ascribing to the parent company liability for its subsidiary conduct, the actual exercise of the former's decisive influence over the latter.

The Council of State has also provided clarifications on the standard of reasoning that the ICA must follow where the parent company, to which liability is ascribed pursuant to the parental liability presumption, provides evidence in the proceedings intended to rebut the presumption. According to the Council of State, the ICA – to avoid the presumption of liability turning from relative to absolute – must give "concise, yet serious and proportional account of the reasons why the alleged elements of fact and of law are not sufficient to rebut the PLP presumption itself" to guarantee that the presumption "is actually rebuttable".

Ne bis in idem and competition law proceedings: AG Bobek's interpretation

With opinions delivered on 2 September 2021, cases C-151/20 and C-117/20, Advocate General (AG) Bobek offered some interesting hints on the scope for applying the ne bis in idem principle to proceedings carried out by a national competition authority (NCA).

The AG held that the ne bis in idem principle relates to cases of identity of the offender, of the relevant facts, and of the protected legal interest.

With regards to the criteria to assess whether the protected legal interest is the same, AG Bobek held that it has to be assessed whether there is a "substantive overlap" between the European and national competition rules applied. Such an overlap would be full for situations falling under Article 101 TFEU, because – pursuant to Article 3 of Regulation EU 1/2003 and, for example, differently from Article 102 TFEU – Member States cannot adopt rules "stricter" than Article 101 TFEU. Accordingly, when NCAs apply this provision and the national corresponding rules are protecting the same legal interest. Similarly, for antitrust proceedings relating to facts that have already been fined by sector regulation authority, the guiding criterion to assess a potential violation of the ne bis in idem principle is to analyse whether the legal interest protected by the provisions applied during the two proceedings is the same.

With regards to the sameness of the relevant facts, AG Bobek held that if an NCA took into account "extraterritorial" effects of a given anticompetitive behaviour – provided that it was entitled to do so under national law – during potential subsequent proceedings the ne bis in idem principle is applicable, in so far as the temporal and geographical scope of both proceedings is the same.

Lastly, according to AG Bobek, the ne bis in idem principle should be applied even when one of the proceedings involved the application of a leniency programme. Indeed, it protects not only against the imposition of a "second fine", but also against a "second prosecution" (and the following negative outcomes) for the same matter.

Originally Published 30 September 2021

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