The Italian Competition Authority fines four taxi firms for foreclosure of open platforms (Consortaxi / Taxi Napoli / Radio Taxi Partenope / Desa Radiotaxi)

On 15 September 2020, the Italian Competition Authority (“ICA”) found that four taxi firms had entered into an agreement having as its object the prevention of competition by app providers in Naples. Due to the seriousness of the breach of Article 101 TFEU, a request by the parties that a symbolic fine be imposed was dismissed by the ICA. However, the ICA reduced the fines by 80% to around Euro 17,000 in light of the negative impact of the Covid-19 pandemic on the taxi sector.

The case

In February 2019, the ICA opened proceedings against four taxi firms active in Naples [1] following complaints by Mytaxi (currently Free Now, a joint venture between Daimler and BMW), and DigiTaxi. The ICA sought to ascertain whether the firms were foreclosing the market in breach of Article 101 TFEU by prohibiting taxi drivers from using apps provided by open platforms. Interim measures were not adopted since the consortia undertook to terminate their agreement in March 2019, soon after the opening of the investigation.

In November 2018, the four taxi firms entered into an agreement by which they mutually committed to include exclusivity clauses in their arrangements with taxi drivers and to prohibit taxi drivers from using any app other than those approved by the firms. Following the execution of the agreement, taxi drivers were warned by the firms that they could face sanctions for the use of open platforms since those platforms were not approved by the Municipality and therefore illegal. Those who did not comply with the exclusivity clause were excluded from the platform and their agreements with the firm were terminated.

As a consequence, around 70% [2] of the taxi drivers in Naples were prohibited from using Mytaxi, DigiTaxi and similar platforms. The number of taxi drivers using the Mytaxi platform significantly decreased while the agreement was in place. However, as soon as the agreement was terminated, the number of taxi drivers using the platform started to pick up dramatically. During the investigation, the ICA found that the consortia had also put in place procedures to keep each other informed about the infringement of the exclusivity clauses by taxi drivers and consequent measures taken by the firms.

The main defence of the undertakings involved in the proceedings was related to the duty of taxi drivers and taxi firms to comply with regulations imposed by the Municipality on the public transportation service. According to the taxi firms, the agreement was aimed at allowing the firms to ensure regulatory compliance by taxi drivers and at having real time information on the availability of the fleet. In addition, the firm formally organised as a mutual entity (“cooperativa”) argued that the Italian Civil Code [3] sets out non-compete obligations on members of such a form of corporation, therefore the agreement could not be considered unlawful.

Moreover, according to the taxi firms, open platforms offer a service different from that of conventional taxis firms and, therefore, the consortia did not foreclose the entry into the market by actual or potential competitors as open platforms operated in a distinct market. Indeed, conventional taxi firms mainly offer their services by phone/radio while apps have different characteristics and functionalities.

The ICA dismissed the firms’ arguments finding that the agreement they entered into breached Article 101 TFEU, being aimed at implementing a coordinated strategy between competitors in order to impede the market entry by new players. As such, the agreement was anticompetitive by object.

More specifically, none of the defences raised by the firms convinced the ICA. With respect to market definition, the ICA found that open platforms and conventional taxi firms provide the same service since they are both intermediaries between users and taxi drivers and because the costs for taxi drivers to use either platform (open or conventional) were comparable. In addition, the ICA highlighted that the taxi firms did not have a duty to monitor the compliance of taxi drivers using their platform with regulations and that the taxi firms would not have real time information on the availability of the fleet regardless of whether open platforms were used by taxi drivers. With respect to the argument related to the rules of the Italian Civil Code applicable to “cooperative”, the ICA concluded that the non-compete provision must be applied to the minimum level required to safeguard the aim of the corporation; this cannot entail prohibiting taxi drivers from using alternative platforms if they ensure a certain level of service to the cooperative.

Finally, the ICA found documentary evidence proving the foreclosing aim of the agreement entered into by the four taxi firms, which can in no event be justified.

For those reasons and taking also into account the combined market share of the parties, the ICA found that the collusive conduct of the taxi firms constituted a very serious infringement of Article 101 TFEU [4]. Therefore, the ICA did not accept the request of the parties to impose a symbolic fine. However, after having calculated the theoretical fines, the ICA then reduced the amounts by 80%, in light of the negative impact of the Covid-19 pandemic on the taxi sector.

Concluding remarks

The ICA had previously opened similar cases against taxi firms active in Rome, Milan and Turin [5] but on different legal and factual grounds. In the Milan and Rome cases, the ICA concluded that the exclusivity clauses imposed on taxi drivers were anticompetitive vertical arrangements. In none of those cases did the ICA impose monetary sanctions. It is interesting to note that in both cases the first instance administrative judge (Tribunale Amministrativo Regionale – Lazio) annulled the ICA’s decisions for insufficient inquiries and inadequate statements of reasons [6] while in the second instance, the Supreme Court [7] (Consiglio di Stato) confirmed the breaches. In the Turin case, which is still ongoing, the ICA imposed precautionary measures due to an alleged abuse of a dominant position. That decision was annulled by the first instance judge and reinstated by the Supreme Court [8].

In the present case related to taxi firms in Naples, the ICA imposed fines but it reduced them by 80% in light of the impact of the Covid-19 pandemic. In this respect, it is worth mentioning that the ICA departed from the ordinary method which would consider the last approved financial statement relevant for calculating the fine. Under Article 34 of the Guidelines on fines issued by the ICA [9] , the specific circumstances of a case may justify the deviation from the ordinary calculation method. The ICA applied such a principle recognising that the COVID-19 outbreak had an unprecedented negative effect on the taxi business in general and on the consortia involved in the case and the last approved financial statements did not reflect the current and likely future financial conditions of the parties involved.

Footnotes

[1Consortaxi, Taxi Napoli, Radio Taxi Partenope, Desa Radiotaxi.

[2Representing the aggregate market shares of the four consortia.

[3Article 2527, paragraph 2 (“[…] those who carry out businesses in competition with that of the mutual entity (cooperativa) are not entitled to participate to this latter”).

[4Decision No. 28353 of 15 September 2020.

[5Decisions No. 27244 and 27245 of 27 June 2018..

[6Decisions No. 5358/2019, 5359/2019, 5417/2019, 5418/2019, 5419/2019, 7463/2019.

[7Decisions No. 3501, 3502 and 3503 of 4 June 2020, No. 7991 of 14 December 2020, No. 8061 of 15 December 2020.

[8Tribunale Amministrativo Regionale Decision No. 27327 of 10 October 2018 and Consiglio di Stato decision No. 1547 of 3 March 2020.

[9Resolution No.25152 of 22 October 2014.

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Author

  • Herbert Smith Freehills (Milan)

Quotation

Francesca Morra, The Italian Competition Authority fines four taxi firms for foreclosure of open platforms (Consortaxi / Taxi Napoli / Radio Taxi Partenope / Desa Radiotaxi) , 15 September 2020, e-Competitions September 2020, Art. N° 98792

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