Italy: Cartels In Italy

Originally Published by Global Competition Review

Public Enforcement Trend Against Cartels: The Increased Role Of Commitments' Decision

While in 2007 the Italian Competition Authority (ICA) reached its personal record in cartel's prosecution by applying fines for €62 million in total, positioning itself, according to its Annual Report published in June 2008 (2008 Report), as the 'top European national competition authority for fining cartels', 2008 has indubitably been a year of decrease: ICA, indeed, applied fines in three cartel cases for 'only' €1.6 million in total.

This contraction in cartels' fines is probably due to some contingencies (for instance, a low number of cases decided in 2008) and to the increase of cartel investigations closed with commitments' decision, in line with that declared by Mr Catricalà in his official speech for the presentation of the 2008 Report: 'commitments' decisions, in a context of economic steadiness, can be a more effective public enforcement tool than the application of administrative fines.'

The current trend followed by ICA in cartels' prosecution is, indeed, to close the investigations, whenever the violations ascertained are not very serious, in line with the provisions of the EC Regulation 1/2003,¹ with the negotiation and acceptance of behavioural or structural commitments, suitable to remove the initial competition concerns expressed in the decision of the ICA to launch the investigation and without ascertaining any violation nor imposing any fine.

In this regard, a recent commitments' decision² of the ICA was deeply criticised by practitioners for its 'regulatory' approach since it, first, admitted the negotiation of commitments in a case where violations would qualify as hard-core³ (ie, in clear breach of the Italian Antitrust Act No. 287/90 (the Law) and of the EC Regulation 1/2003) and, secondly, commitments⁴ went well beyond the initial concerns expressed with the decision to launch the investigation. Any such 'regulatory' approach would result in contrast to the 'enforcing' powers of the ICA, that is, the only ones allowed by the Law.

TAR Lazio, the first instance administrative court which has the exclusive competence to review ICA's decisions, took position on this issue and recently stressed that the commitments proposed by the parties have to be:

It has to be said that apart from the above 'regulatory' episode, ICA refused several times the commitments offered by the parties in cases where a commitments' decision was not opportune and TAR Lazio confirmed the correctness of said approach. For example, in the case on the bids for the supply of ostomy devices,⁶ the judge declared that: 'commitments decisions are not opportune in secret hard-core cartels because the mere fact that ICA expressed a concern that hardcore violations may have taken place justifies its refusal to accept the commitments offered by the parties and to conduct a negotiated procedure, even if, at the end of the ordinary procedure, ICA did not ascertain any violation nor impose any fine; indeed, on the basis of the concerns expressed in its decision to open the investigation, and given the complexity of any antitrust cases, the refusal was legitimate at that time.'

Consistently, in the Particleboards cartel case,⁷ TAR Lazio confirmed that 'ICA correctly refused the commitments offered by the undertakings involved, given that the case concerned a secret horizontal cartel with hard-core violations, such as limitation of production, market partitioning, price fixing and coordination of commercial strategies, whose effects on the markets were also proved by ICA and thus a commitments' decision would not have been admissible in such a case'.

TAR Lazio, moreover, declared in several judgments,⁸ that the choice made by ICA to 'prefer the negotiation of commitments' decision in respect of the ordinary procedure of ascertainment of the infringement is discretionary and the judge cannot interfere as to the opportunity of said choice, save for those cases where the decision to start the negotiated procedure is manifestly arbitrary' (ie, in cases of hard-core cartels, where the deterrent effect of the fine has to be preferred and also the efficacy of leniency programmes has to be safeguarded, because the latter programmes encourage undertakings to submit self-incriminatory evidences in exchange for the immunity from or reduction of the fine otherwise applicable). Indeed, in the Particleboards cartel case, TAR Lazio specified that such discretion has to be exercised consistently with the scope of application of the leniency notice (Italian Leniency Notice)⁹ because the acceptance of the commitments proposed by the parties in hard-core cartel cases risks to undermine the efficacy and attractiveness of leniency programs, which are essential to an efficient functioning of the public enforcement system.

The preference granted by ICA to commitments' decision is also due, as said by the same ICA's chairman in the 2008 Report, to the great advantage of 'avoiding the uncertainties and the costs to be faced in the course of administrative appeals [of ICA's decision] which are the rule in case of imposition of administrative fines'.

This advantage is particularly relevant in Italy, since the review of legitimacy carried out by competent administrative courts (TAR Lazio in first instance and the Council of State in last instance) on the ICA's decisions can extend to the merit as regards fines' calculation. These courts tend to be really strict in verifying that ICA has accomplished the burden of proof and has correctly motivated the gravity of the infringement ascertained and the relevant fines' calculation.

Their judgments, indeed, have often led to the annulment or to the recalculation (reduction) of the fines applied by ICA, which has never adopted its own guidelines for the methods of setting fines in cartel cases but, de facto, applies the Commission's guidelines (the EC Guidelines) in force,¹⁰ sometimes without analytically motivating the discretionary choices made under said guidelines.

In the Particleboards cartel case, TAR Lazio expressed a negative view on said approach and declared that 'it is in any case desirable that the undertakings concerned and also the judge are at least put in a position to check the criteria of calculation applied by ICA and the logical path followed by the latter, in order to verify that it is free from any error and consistent with the criteria applied'.

Most-Recently Decided And Pending Cartel Cases

Notwithstanding the increased role of the commitments' decision throughout 2008, secret cartel's prosecution remains the priority for ICA which continues to apply severe fines whenever the violations ascertained are serious. During the first half of 2009 ICA closed seven cartels investigation, three of which with the imposition of fines for €27 million in total. In relation to such cases, it is interesting to note the following:

• In the Costa Container Lines/Sintermar-Terminal Darsena Toscana case, a price coordination cartel in violation of article 81 of the EC Treaty,¹¹ the ICA reduced by 20 per cent the basic amount of the fine to be applied to Sintermar (calculated, according to the EC Guidelines, on its sales made during 2006, the last full business year of its participation in the infringement), in order to take into account the strong contraction in its business activity registered during 2008.
• In another price increase coordination cartel¹² in violation of article 81 of the EC Treaty, the ICA imposed a total fine of €12.5 million against the 26 producers of pasta implied and the two relevant trade associations. The Court of Rome, which had already opened a criminal investigation to verify, according to a provision of the Italian criminal code,¹³ any speculations on prices and quantities of raw materials and basic food products, asked ICA to have access to all the evidences gathered during the course of the administrative investigation.
• In a cartel case¹⁴ in violation of article 81 of the EC Treaty, consisting in conducts aimed at maintaining the status quo on the market and at avoiding the development of alternative means of supply of the service of collection and recycling of used lead batteries, ICA imposed a total fine of €13.3 million on the undertakings implied, among which there was a consortium. The decision is an example of how consortia established by laws in order to ensure activities of general interest can become problematic from a competition standpoint.¹⁵

In another three cases,¹⁶ ICA closed the investigations with commitments decision, as it deemed the violations ascertained not very serious and received from the undertakings proposal of commitments which satisfied the initial concerns expressed.¹⁷

See in the table below the outstanding ICA's investigation against suspect cartel cases as of the end of July 2009.

The Role Of Private Enforcement In Cartels' Prosecution (Antitrust Class Action Approved)

The European Commission has always stressed the crucial role to be played by private enforcement in order to ensure to any victim of antitrust violations a complete and effective compensation of the damages suffered and, indirectly, to improve or complement the deterrent effect pursued with public enforcement.¹⁹

To this respect, positive signals arise from Italian case law and from the Italian Parliament.

Case law shed some light on several crucial points, such as: standing of the parties, burden of proof of the casual link between the defendant's infringement and the alleged damages suffered by the plaintiff and time limit to bring a private antitrust action.

As regards standing of the parties, in line with the recommendations expressed by the European institutions²⁰ that any victim of antitrust violations should be entitled to seek damages' compensation, a recent follow-on case decided by the Rome Court of Appeal²¹ has acknowledged that also indirect purchasers (ie, not direct counterparties of the infringement's authors) are legitimated to bring actions to recover the damages suffered, which have likely been passed-on downstream till the last level of the purchase chain, inevitably linked to and influenced-by what happened in the upstream markets. As regards the burden of proof, a recent Court of Cassation's judgment²² clarified that, even if in follow-on actions, also, the plaintiff has to prove a direct causal link between the defendant's infringement and the alleged damages suffered, the plaintiff can submit the ICA's decision and the proof of the surcharge paid, as an evidence of the damages caused; based on such elements, the judge may infer the existence of a causal link between the anti-competitive conduct and the damages proved, but without omitting to take into proper account also the evidences submitted by the counterparty, aiming at disproving such assumptions or at proving the existence of a sufficient alternative causal link which autonomously or concurrently caused the alleged damages suffered by the plaintiff. As to time limit to bring antitrust damages' actions in Italy, the Court of Cassation seems now firm in acknowledging that the five-year period should start running only from when the plaintiff is, or had he been reasonably diligent should have been, in the position to bring the action, that is to say from the moment in which he could have become aware of the damage and of its unlawful source: 'in cases of follow-on actions, such awareness can be assumed when the ICA's decision becomes of public knowledge.'²³

On the legislative side, the most important novelty is the entry into force of the class action. The Italian Parliament, indeed, approved on 9 July 2009 a law²⁴ that introduces a damages' compensation class action for consumers and final users who are victim to unfair trade practices or anti-competitive conduct. Only 11 Tribunals will constitute competent courts for the purposes of the action. While the action will become enforceable before such competent courts from January 2010, under the enacted law, damages may be claimed in respect of infringements following the measure's publication in the Official Gazette (due on early August 2009). Some scholars have questioned the legality of the law due to its retroactive implications. The legislator may amend the law to clarify this issue.

The action, structured as an opt-in action, can be brought individually by any consumer, user, member of a class, through an appointed consumers' association or committee. At the first hearing, the court will decide on the admissibility of the action. The action may be declared inadmissible in four cases: conflict of interest;²⁵ action manifestly not grounded on points of law; the court not deeming sufficient homogeneity between the individual rights of the members of the class adhering to the class action; and the court not deeming the plaintiff able to properly represent the interests of the class' members.

Before declaring the action admissible, the court may decide to suspend the proceeding where on the same facts relevant to the decision is pending a proceeding before the Italian Competition Authority or is pending the relevant appeal before the competent administrative courts. If the action is declared admissible, it is required to be properly published in order to allow the opt-in procedure. The maximum term for the opt-in procedure is 120 days. Members of the class adhering to the class action expressly waive the right to bring any similar individual action against the same defendant. Equally, no other class action against the same defendant and on the same facts is allowed once the first class action brought is declared admissible.

At the end of the proceeding, the judge may order the compensation for damages²⁶ and in cases where the exact amount of damages cannot be proven the judge may exercise discretion, according to a provision of the Italian civil code,²⁷ in determining the exact amount of damages due to all the members of the class action or alternatively the judge may establish a common criterion of liquidation of the damages due.

As class action is not yet enforceable it is only possible to foresee that it may likely obtain more success in the form of follow-on class action for recovering the damages suffered by victims of a cartel (more probably, in a price-fixing cartel where the ICA had made some calculation of the illegal surcharge applied by the cartel members), given the high burden of proof that has to be accomplished in standalone actions.

Indeed, even if ICA's decision are not legally binding on national judges (differently from what happens, according to article 16 of the EC Regulation 1/2003, with European Commission's decision) they are de facto taken into high account by civil judges. Very recently, the Court of Cassation²⁸ declared²⁹ that 'ICA's decisions, or the judgments of the administrative courts confirming or reforming such decisions, play a significant role in the ascertainment, by the civil judge, of the anticompetitive conduct, constituting a privileged evidence of the existence of the violation ascertained.

Leniency Programmes And Private Enforcement In Italy: Lack Of Protection To Corporate Statements And Documents Submitted By A Leniency Applicant

As declared by the Commission in its white paper on damages actions for breach of the EC antitrust rules (White Paper):³⁰ 'it is important, for both public and private enforcement, to ensure that leniency programmes are attractive.'

The attractiveness of leniency programmes, as said above under the public enforcement section, is indeed crucial to encourage undertakings to come forward with evidences' submissions and corporate statements enabling the antitrust authorities to uncover secret cartels and to accomplish the high burden of proof required by administrative courts in the subsequent review of the fines applied.

In the Annual Report published in June 2009, ICA declares to agree with the concerns expressed by the European Commission in the White Paper as regards the need of an adequate protection to be given to 'corporate statements made by leniency applicants and to the investigations of competition authorities, against disclosure in private actions for damages [...] in order to avoid placing the leniency applicant in a less favourable situation than the co-infringers'.

Such declaration is particularly relevant since the text of the Italian Leniency Notice, indeed, does not prevent ICA from supplying information or documents, or both, gathered during its investigation in response to a court's request for information and a provision of the civil procedural code³¹ provides for a possibility of request of information or documents to administrative authorities.

To this particular respect, as well as in regard to other private enforcement issues, likely changes may be required to be implemented in Italy if an EC directive,³² currently under discussion before competent European institutions, will enter into force.³³

A possible consequence of the current lack of protection to corporate statements or documents submitted by leniency applicants is that companies may be inclined to self-assess the risk of private (most probably, follow-on) actions and decide to run for leniency only in those cases where such a risk is estimated as low³⁴ and, on the contrary, the benefit of the immunity or reduction from otherwise applicable high fines is deemed as of great relevance.

Footnotes

1. Whereas No. 13 of the EC Regulation No. 1/2003: 'commitments' decisions are not appropriate in cases where the Commission intends to impose a fine'.

2. ICA 's decision No. I 681 of 20 December 2007, Fuel prices.

3. Violations at issue were the exchange of sensitive information on prices, the fixing of the level of recommended prices to be applied to end-users and the prevention to third parties to have access to the distribution network.

4. Such as: the opening in large service station of new self service points of sale applying to end users lower prices, measures to allow entry of supermarket chains into the fuel distribution market and the investigated fuel companies' infrastructure made partially available by independent third parties.

5. TAR Lazio's judgments No. 2900 and 2902 of 7 April 2008, Tim-Vodafone- Wind.

6. TAR Lazio's judgment No. 5578 of 6 June 2008, Bids for the supply of ostomy devices.

7. TAR Lazio's judgment of 21 November 2007 on the refusal of the commitment's appeal.

8. TAR Lazio's judgments No. 2900 and 2902 of 7 April 2008, Tim-Vodafone- Wind and No. 424 of 8 February 2008 Jet fuel.

9. ICA 's communication published on 15 February 2007.

10. European Commission's 2006 Guidelines on the method of setting fines imposed pursuant to article 23(2)(a) of Regulation No. 1/2003.

11. ICA 's decision No. I 685 of 29 January 2009.

12. ICA 's decision No. I 694, Pasta price list of 25 February 2009.

13. A rt. 501-bis of the Italian criminal code.

14. ICA 's decision No. I 697, Recycling of used lead batteries, of 29 April 2009.

15. However, it has to be said that the regulation of the sector, as amended, no longer reserved to the consortium an exclusive role in the market nor imposed or facilitated the restrictive conducts, which the ICA instead ascertained as having been implemented by the same even after the liberalisation of the market.

16. T he case No. I 604E, National association of film distributors, was closed without the ascertainment of any violation.

17. ICA 's decisions No. I 704, MAV-Interbank Fees, of 9 A pril 2009; No. I 707 FVH-Liquigas-Butangas-Quiris/IPEM, of 20 May 2009 and No. A 396 Gargano Corse/ACI , of 11 June 2009.

18. Banca Monte dei Paschi di Siena, Banca Nazionale del Lavoro, Banca Sella Holding, Barclays Bank, Deutsche Bank, Intesa Sanpaolo, IC BPI and Unicredit.

19. To this respect, see the White Paper on damages actions for breach of the EC antitrust rules, published by the Commission on April 2008, which makes reference to the two famous cases decided in 2001 and 2006 by the European Court of Justice: C -453/99 Courage and Crehan and Joined Cases C-295−298/04 Manfredi.

20. See the White Paper on damages actions for breach of the EC antitrust rules and in the proposal of council directive on rules governing actions for damages for infringements of articles 81 and 82 of the T reaty.

21. judgment No. 1337 of 31 March 2008, International Broker v refining companies.

22. Court of Cassation judgment, SAI /Nigriello, of 2 February 2007.

23. In the Judgment SAI/Nigriello cited above.

24. Legislative Decree No. 1195B.

25. Presumably, between the consumers' association or the committee and the members of the class.

26. Damages, according to general principles of law, consist in out of pocket loss plus loss of income.

27. Article 1226 of the Italian Civil C ode.

28. T he last instance court, which carries out a judicial review on points of law.

29. In the Judgment No. 3640/2009, National association of labour consultants/Inaz Paghe Srl.

30. Published in A pril 2008.

31. Article 213 of the Italian Civil Procedural Code.

32. Reference is made to the proposal for a Council Directive on rules governing actions for damages for infringements of articles 81 and 82 of the Treaty.

33. A s regards corporate statements, article 9 of the draft EC Directive provides that: 'Member States shall ensure that national courts at no point in time order the disclosure of corporate statements or settlement submissions'.

34. For instance, because of the nature of the infringement at issue – for example an anti-competitive conduct not clearly qualifying or suitable to be proved as an hard-core violation, thus not easily to be confirmed illegal before a judge even in a follow on private or class action – or because of the difficulties for the claimants to prove the effective damages suffered or the casual link among the damages suffered and the alleged anti-competitive conduct.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.