This month we invite you to Italy, where the competition authority proposed a settlement regime in antitrust proceedings.

The new Italian antitrust settlements’ prospected regime

On March 22, 2021, in its proposal to the Presidency of the Council of Ministers for the annual law on competition, the Italian Competition Authority (“ICA”) envisaged a prospected settlement regime in antitrust proceedings.

A. new procedural efficiency tool

Unlike in several Member States, no settlement procedure is currently in force in Italy.

The new Italian prospected regime seeks to align with the EU cartel settlement procedure introduced by 2008 “Settlements Package”, the latter having been widely applied (35 out of 58 cartel cases have been settled since the introduction of the tool in 2010).

In the EU settlement procedure, interested parties benefit from an expedited procedure and are guaranteed 10% reduction in the applicable fine in exchange for (i) acknowledging liability for the alleged infringement of competition law and (ii) waiving certain procedural rights (most notably, full access to file and the right to an oral hearing).

Compared to the EU cartel settlement procedure, the ICA’s prospected settlements:

• double the fine reduction, from 10% to 20%, and
• widen the scope of application of the settlement procedure, making infringements of Art. 101 and 102 of the TFEU (and their national equivalents) eligible for settlements (not only cartel proceedings).

B. Procedural milestones of the new Italian prospected regime

The Italian prospected regime follows EU cartel settlement procedure, namely:

1. After having initiated proceedings and before the Statement of Objections (“SO”), the ICA can set a deadline for expressing, in writing, interest in participating in settlement discussions.
2. The ICA may set a new time limit for companies to commit to pursue the settlement procedure based on the positive outcome of the negotiations and acknowledge both their own participation in the infringement and their liability.
3. After the issuance of the SO, companies confirm, in their briefs, that the SO issued reflects their settlement proposals.
4. The ICA then adopts an infringement decision (without prior oral hearing) reducing the applicable fine by 20%.

At any point during the settlement procedure, the ICA can discontinue the settlement discussions in relation to all or to some of the parties, should it deem the efficacy of the procedure to have been compromised, thereby allowing Hybrid settlement proceedings (i.e. where not all the parties to the proceedings engage into settlements).

C. Conclusive remarks

The ICA’s recommendation is not yet a legislative proposal, nor any official statements have been released in such respect by the Italian Legislator.

The ICA’s proposal would require an amending legislation modifying the Italian antitrust law and implementing provisions aimed at further specifying the procedural steps of the new tool.

If approved, this proposal will expand the ICA’s enforcement powers in relation to the infringements of Art. 101 and 102 of the TFEU (and national equivalents), contributing to the achievement of efficiency in the enforcement of antitrust law and ensuring coherence in the application of Italian and UE settlement procedures, when compared to the fragmentation which can be observed at EU level where cartel settlements are governed by the 2008 Settlements Package.

It is difficult to foresee the impact of this new tool on the enforcement of Italian competition law since the ICA has so far widely relied on commitment decisions, allowing to close proceedings without the finding of an infringement. It remains to be seen how the interplay between the latter and the prospected regime would unfold.

The experience gathered at EU level indicates that the success of the new tool will depend on the degree of legal certainty surrounding its application and the identification of appropriate procedural safeguards for the parties concerned, especially since the acknowledgment of the “participation in and liability for the infringement” undoubtedly impacts follow-on private antitrust litigation, which is on the rise in Italy much like in the rest of the EU.

The Belgian Competition Authority sanctions Caudalie for minimum resale price practices and restrictions on the active and passive sales of its approved distributor selling online

In the context of the sale of its cosmetics to its distributors belonging to the selective distribution network that it had established, the Belgian Competition Authority criticized Caudalie for imposing minimum resale prices on its distributors by setting a maximum level of rebate. In practice, Caudalie required that its distributors apply a maximum rebate between 5 per cent and 15 per cent on the recommended price.

To ensure its distributors respected the recommended prices, Caudalie had set up, according to the Belgian Competition Authority, an internal surveillance network: this included call-to-order letters, threats of pure and simple termination of the commercial relationship, and blocking orders when they refused to cooperate. Certain distributors themselves participated in the monitoring of the prices charged by the other members of the network.

In parallel, Caudalie has also been sanctioned for limiting its distributor’s passive and active sales. This concerns two mechanisms: on the one hand, the prohibition on distributors established in a Member State to apply, in another Member State, prices lower than the minimum prices imposed in this Member State. And on the other hand, the prohibition on distributors of a Member State present online, to sell in a Member State other than the one in which they are established. Certain documents proved that the selective distributors could only make deliveries in the country where the site was hosted, unless Caudalie agreed otherwise. For two of these distributors, Farmaline and Newpharma, this resulted either in an order to stop supplying Caudalie products in countries other than Belgium, or in respecting the national prices applied on the websites hosted in other Member States.

The Competition College fined Caudalie €859,310 for these practices implemented between November 2014 and January 2018 and accepted the commitments proposed by Caudalie (communication to distributors on their pricing freedom and communication to distributors on the measures that may be adopted by Caudalie to preserve its network, its brand image and ensure quality service to consumers without limiting sales inside the EU).

It is regrettable that the Belgian Authority did not wish to open the discussion on a brand’s legitimacy to limit massive rebates in the context of selective networks that may harm its brand image. This discussion should take place on the occasion of the reform of EU rules on vertical agreements.

The French Competition Authority prohibits a merger for the second time

The transaction consisted in the takeover of Pipeline Méditerranée-Rhône (hereafter “SPMR”) by the Ardian group, and therefore the takeover by the Ardian group of the Pipeline Méditerranée-Rhône oil pipeline (hereafter “PMR”), a network of pipes supplying depots in the Southeast of France with refined products.

After the merger, Ardian would have become the main shareholder of SPMR, which is controlled today by five operators. The group would thus have been able to determine alone the PMR’s commercial and pricing policy.

Moreover, the Authority ruled that the PMR was an essential facility, placed consequently in a monopoly position that could not be challenged by any competitor due to the significant investments that were necessary for the construction of this oil pipeline.

Other blocking element was the State’s insufficient control to face Ardian’s post-merger market position on the market for the transport of refined petroleum products by oil pipelines in Southern France. The Authority found that although the government could exercise a certain control over SPMR through its energy policy and the principle of continuity of supply in petroleum products within French territory, this would not have been sufficient to eliminate the risk of distortion of competition.

The commitments proposed by the Ardian group were rejected by the Authority. The Authority also considered that Ardian had not sufficiently demonstrated the efficiency gains that could offset and/or eliminate the risks set out above. Accordingly, in a decision dated May 12, 2021, the French Competition Authority prohibited the contemplated merger.