In summer 2023,[1] a law decree (“Asset Decree”) was issued that gave the Italian Competition Authority (AGCM, “ICA,” or “Authority”) new regulatory powers. These powers allow the Authority to act in all sectors of the economy by imposing remedies upon undertakings even in the absence of findings of infringement or wrongdoing. Such actions are intended to address issues that hinder or distort optimal functioning of the markets to the detriment of consumers, even when no anti-competitive conduct occurs. The remedies that the Authority can impose on individual undertakings or categories thereof must be designed to remove specific obstacles to or distortion of competition identified via market study. This new competition tool (“NCT”) is similar to the tools of other national competition authorities—like the CMA in the UK and the Bundeskartellamt in Germany. Equipped with this tool, the AGCM serves as an ideal platform for complainants, including those protesting restrictive state measures and attempting to clear bottlenecks and market failures from malfunctioning markets.
However, this power also has the potential to wield great impact on the freedom of enterprise and economic initiative enshrined in the Italian Constitution. The Asset Decree expressly states that it must be exercised under strict adherence to EU law and principles—which include the protection of competition and economic freedom—and only after a market study has been conducted and stakeholders consulted to guarantee that all sides are heard. The law also confirms that the ICA can impose remedial measures within limits of necessity and proportionality. In other words, such measures should be designed to be the least restrictive and harmful for the freedom of enterprise and economic initiative while effectively removing the identified competition distortions, bottlenecks, and market failures.
The legal provision on the NCT in the Asset Decree is brief and rather vague, therefore on May 7, 2024, the ICA issued a notice specifying how it intends to apply these powers (the “Notice”).[2]
Background, scope, and procedure
Although the Notice is a soft-law instrument, it contains important procedural provisions that have substantive effects on the adversarial process and the right of defense. Undertakings that are potential targets of restrictive obligations, even with no finding of infringement, are guaranteed this process and right.
The Notice clarifies from the outset that the NCT is applicable to any sector of the economy without industry-related restrictions, as previously confirmed by the Council of State (the top Italian administrative court) in an opinion it issued on the scope of the new legislative provision.[3] Doubt had been raised because the NCT was introduced in relation to suspected price discrimination and price gouging in the air travel industry along certain Italian routes (including via use of algorithms). However, the legislative provision on the NCT does not limit it to a specific sector of the economy.
The Asset Decree expressly states that before establishing and imposing any remedies, the Authority must carry out a sector-specific investigation and market consultation on suspected obstacles to and distortion of competition. Further, it gives undertakings the right to suggest commitments that would remove the concerns flagged during the investigation. The ICA can then make those commitments binding if it believes they would be effective.
The Asset Decree refers to existing provisions of the Italian Antitrust Law (Law 287/90) governing the Authority’s investigations of antirust infringement to establish the scope of its investigative powers in the context of the NCT. These powers include levying fines on undertakings and individuals that fail to comply with ICA orders and requests for information. The ICA also has the power to carry out dawn raids, but those raids can take place only on the premises of undertakings: other premises, such as the private premises of managers, are excluded (differently from dawn raids in the context of antitrust infringements). However, the Asset Decree does not provide additional procedural rules applicable to the NCT, and those applicable to antitrust infringement proceedings are not entirely suited to this context. The two spheres call for inherently different forms of investigation and adversarial process, as those related to the NCT are not necessarily designed to uncover the wrongdoings of specific undertakings.
The type and extent of the remedies that the ICA can impose in the context of the NCT are also unspecified in the Asset Decree. The decree merely mentions “any structural or behavioral measure that is deemed proportionate and necessary for the purpose of removing distortion of competition.”
Against this backdrop, the Notice aims to round out the Asset Decree with procedural rules specifically applicable to NCT investigations (and once these are sufficiently tested in the real world, they may be funneled into a formally binding regulation). The Notice sets up a procedure with five phases:
- opening a fact-finding investigation into the identified sector of the economy (“opening the sector inquiry”);
- either (a) ending proceedings due to lack of sufficient findings of distortion or (b) opening a further investigation for preliminary identification of the types of remedies and measures that could be implemented or imposed on undertakings to remove concerns identified during the first phase (“opening remedial phase”);
- (optional) undertakings involved submit commitments that may be deemed adequate to remove the identified distortion of competition (“submission of commitments”);
- remedies and market testing are established (“establishment of remedial measures”);
- remedial phase closes following market testing and observation of the undertakings (“conclusion of remedial phase”).
The sector inquiry is begun by publishing a decision in the ICA official bulletin and on its website that contains the preliminary competition allegations or concerns regarding a specific market or economic sector. Publication of this decision allows the ICA to exert its investigative powers, as well as to launch a public consultation (or “call for input”) to obtain preliminary contributions from stakeholders. During this phase, the Authority can also publish a preliminary report (“PR”) on the results of the investigation conducted up to that point and set a term of at least 30 days for interested persons and entities (including sector regulators and other public authorities) to submit their observations.
At the end of this phase the ICA can either (a) decide to end the proceedings due to lack of sufficient elements to identify and impose adequate remedies or (b) issue and publish a decision (a resolution on findings, or “RF”) to start the remedial phase if the initial investigative phase revealed possible distortion of competition that could be addressed with remedial measures. The RF identifies (i) competition concerns capable of obstructing or distorting competition and the consequent harm to consumers, (ii) the type of remedial measures that might be deemed necessary, proportionate, and adequate to remove the concerns about competition, and (iii) the undertakings concerned that could be on the receiving end of the remedial measures. Further, the RF also sets a term of at least 45 days to allow the undertakings concerned to submit written observations (and possible commitments) and to give them the right to be heard before the ICA case team responsible for the proceedings.
If commitments are submitted, a sub-proceeding for ICA assessment of suitability of the commitments to remove the concerns begins. A decision is made about whether to reject the commitments as manifestly inadequate or publish them for market testing and observations from interested third parties (that must be submitted within 30 days of publication.) The undertakings concerned are then granted 30 additional days to reply to market observations and propose changes to the original commitments. If the ICA finds the final commitments proposed suitable, it issues a decision to make them binding and closes the proceeding.
If no commitments are submitted or the commitments submitted are rejected and depending on the results of the fact-finding investigation and the contributions from the relevant undertakings, the ICA establishes the remedial measures by resolution (definition of remedies, or “DR”), communicates them to the undertakings concerned, and publishes them both in its bulletin and on its website. In the same DR, it sets a deadline (at least 30 days) by which the undertakings concerned and other interested third parties may submit written comments (market consultation).
Once the term to comment on the DR has ended, the undertakings concerned receive a draft decision—similar to a statement of objections—stating the outcome of the whole investigation and the established remedial measures. The decision also sets a 45-day term to submit closing observations and documentation. The undertakings concerned have 10 days after receiving the draft decision to request a final hearing before the ICA board. Interested parties involved in the proceedings can also request to be heard at the final hearing. Other public authorities and institutions with regulatory or policy roles in the relevant sector may be asked to provide non-binding opinions or comments. The entire proceeding ends with the adoption of a final decision that sets out the remedial measures and is published in the official bulletin and on the website.
Final remarks
Coordination between the ICA and regulatory authorities in sectors such as energy, media and telecommunications, transportation, life sciences, and pharmaceuticals is likely to be challenging. The ICA must apply the NCT without overstepping the boundaries and limits imposed by the principle of proportionality. However, the top administrative court has confirmed that the ICA has a duty of cooperation and coordination with other authorities in cases where their respective remits may overlap. Failure to correctly comply with this duty would make a decision of the ICA invalid.
Further, the NCT can be combined with existing ICA advocacy powers (Articles 21–22 of Law 287/90), pursuant to which not only it can send recommendations to public bodies (including regulatory authorities, the Parliament, and the government) about changes in the rules or practices and actions to be taken to improve competition in a certain market or sector, but it also has the power to challenge the enforceability of administrative acts before courts on the grounds of their incompatibility with national and EU competition rules and principles. As part of NCT investigations, these advocacy powers can complement remedial measures or replace them.
[1] Article 1, para. 5, Law Decree No. 104 of August 10, 2023.
[2] Comunicazione relativa all’applicazione dell’articolo 1, comma 5, del decreto-legge 10 agosto 2023, n. 104, convertito con modificazioni dalla legge 9 ottobre 2023, n. 136 – AGCM provision No. 31190 of May 7, 2024, available here.
[3] Opinion No. 61 of January 29, 2024.
