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Italy & COVID-19: An overview of EU and national case law

The health crisis has struck the entire world, challenging leaders to take unprecedented measures in order to control the spread of Covid-19. On 10 March 2020, Italy, in particular, was the first European Country to implement the strict lockdown, thereby leading the way for other countries.

The economic consequences of the virus have, by now, been enormous. The OECD Economic Outlook, in June 2020, estimated a change in the 2020 Italian GDP ranging from -11.3% to -14%, depending on whether a second wave of infections, coupled with the related second lockdown period, will hit the country. Along with France, Spain and the UK, which show similar numbers, Italy has been – from an economic point of view – one of the most damaged countries in the OECD area. [1]

As has always happened in times of economic crisis - one only need recall the financial crisis of 2008, which originated in the US and subsequently spread to Europe - Competition Law policies and the role of Competition Authorities have been deeply challenged. Furthermore, in this case, the economic crisis is rooted in an unprecedented pandemic and health emergency, drawing attention not only to economic issues.

As for antitrust policies, the question of sustainability of competition in times of Covid is part of a debate that has already developed in recent years on both sides of the Atlantic. The New Brandeisian Movement, [2] and Tim Wu in the US, [3] have challenged the Chicagoan economic approach and the consumer welfare test, calling for a more political deal and a competition protection test. [4]

As regards the role of antitrust authorities, since the start of the crisis antitrust authorities have been dealing with the necessity to balance competition concerns with the supply of essential products. Indeed, as also underlined by Frédéric Jenny, the expectation that market forces will meet the increased demand for essential goods such as sanitizing products, could impose high costs on society in terms of supply shortages. [5]

This raises the two issues regarding, on the one hand, price gouging of scarce or basic products and, on the other, the need for companies to collaborate in order to speed up the production of essential products. The crisis may therefore impact competition analysis both as a reason for exemption (e.g. for certain types of cooperation agreements) and as an aggravating factor (e.g. for excessive prices). [6]

Commissioner Vestager’s statements well underline this need for a balance: indeed, she argues that competition authorities should watch over virus-profiteering companies and that “a crisis is not a shield against competition law enforcement”. [7]

In particular, the ICA has made an intense effort in the field of consumer protection, an area which, especially in the context of the crisis, has been closely linked to the control of excessive prices. Indeed, the ICA’s dual competence – as antitrust supervisory body and as consumer protection watchdog – has proved, during the crisis more than ever, to be an extremely useful tool.

In the antitrust realm, assuming that a second wave of infections will not strike the country, the Italian Competition Authority will now have to concentrate its attention on the long-term impacts that the crisis, and its response by governments, will have on competition.

In this complex landscape, competition policy should be seen as an instrument to reach efficiency and innovation, rather than as an obstacle to the achievement of industrial policy goals.

As underlined by George Cary, Maurits Dolmans et al., European competition authorities may try to broaden the concept of dominance in several ways, e.g. through the definition of narrow markets or finding temporary dominance as in the ABG Oil case; the implementation of the United Brands test does not appear to be a suitable instrument for rapid interventions. [8]

The above-mentioned interventions are strictly aimed at mitigating the potential distortions on competition caused by the lockdown and the peak of the health crisis in the short term.

In such a scenario, the analysis carried out by Frédéric Jenny is particularly helpful. Indeed, he foresees that competition is likely to decrease in the long-term due to the concomitant impact of three factors: (i) the dynamic of exits from the market and mergers that will follow the economic shock in several sectors, leading to increased concentration; (ii) protectionist strategies that some countries may adopt in order to restore their domestic production after the financial aid phase; (iii) the increased public policy scrutiny over some industries aimed at bringing back strategic value chains produced externally in order to avoid future shortages. [9]

Moreover, competition authorities “will have to take a longer and more dynamic view of the process of competition than they have in the past and adapt their reasoning with respect to state aid, crisis cartels or mergers to circumstances of disequilibrium caused by an exogenous shock to the economic system”. [10]

There are three issues, in this regard, that appear to be at the crossroads between competition and industrial policy in the aftermath of the health crisis, namely the review of mergers, state aid and control of foreign direct investment.

The relationship between merger control and industrial policy is certainly not a new issue in the debate, being a hot topic at least since the 2008 crisis, with very recent developments even before Covid-19. The health crisis has sparked the discussion, also in light of the 2019 Alstom/Siemens case and the letter that the ministers of France, Germany, Italy, and Poland issued to the Commissioner Vestager just before the lockdown period calling for a review of competition law.

A strict interpretation of merger control may be accused of hampering the creation of European champions that could challenge the power of foreign companies in many industries.

In this regard, it seems important to recall, first and foremost, that merger control also serves to prevent the creation of a monopoly position, within the relevant national market, from distorting the incentives of national champions to expand internationally towards easier collection of monopoly rents.

As explained by Damien Gerardin and Ianis Girgenson in the aftermath of the 2008 crisis, in this sense merger control could actually enhance the efficiency of industrial policies. [11]

More recently, Assimakis Komninos, Jan Jeram and Iakovos Sarmas pointed out that the health crisis could reawaken the Failing Firm Defence (FFD). In this regard, they argued that the Commission should evaluate the parties’ arguments with a long-term view: the time horizon of the analysis is indeed likely to change the evaluation.

The authors also highlighted the possible tension between merger control and State aid. Indeed, they underlined that overly rigid interpretation of the FFD could end up shifting the efforts aimed at saving companies in financial distress away from the private users – i.e. possible acquirers and consumers – to the public and, therefore, at taxpayers’ expense. [12]

Another interesting argument that seems to call for more permissive merger control is advanced by Nicolas Petit and Jorge Padilla. The authors indeed argued that the crisis represents the opportunity to drive inefficient firms out of the market, thus cleansing the economy and enhancing its productivity via better resource-allocation.

On the one hand, therefore, horizontal state aid – i.e. not based on efficiency parameters – could keep ‘zombie’ firms alive and should be avoided; on the other hand, preventing efficient firms from acquiring inefficient ones may not lead to optimal outcomes, either. [13]

Political consequences aside, the contribution has the fundamental merit of putting the spotlight on productivity, which in the long run is the real engine of growth, and on the role of competition law as a tool for lowering the barriers to exit. Nonetheless, as pointed out by Pedro Caro de Sousa, it is not clear if the current crisis and the possible recession that will follow it are going to remove only the most inefficient firms, nor how efficiency may be factored into the mergers review. [14]

Moreover, there is the concern that a state aid policy implemented at a national level – as provided by the Temporary Framework issued by the European Commission [15] – could end up distorting the level playing field across Europe, widening the gap between companies on the basis of the spending power of the State where they are headquartered. [16]

In particular, some have observed that there may be a risk of distortion of competition among firms belonging to EU Member States that are more likely to grant state aid and other companies based in other EU Member States that are less able to provide such aid. However, it is also true that EU financial measures to help address the effects of the COVID-19 pandemic may contribute to overcoming this alleged risk.

Finally, Mario Siragusa and Cesare Rizza also underlined how merger control – for the purposes of competition law – may not be a suitable instrument for avoiding the risk of hostile takeovers by third country state-owned companies, or tout court by foreign companies that are not subject to the same standard of competition rules as in Europe. [17] Yet here too, another tool could nonetheless mitigate the risk and allow for industrial policy consideration, i.e. the foreign investment screening. On April 9, following the guidelines issued by the European Commission on the implementation of tools to protect the European companies from hostile foreign takeovers in light of the crisis, [18] Italy strengthened its FDI screening mechanism, extending its scope to other strategic sectors. [19]

In this respect, Michele Carpagnano has pointed out that, on the one hand, while broadening the scope of screening, the government may risk hindering the ability of Italian companies to attract foreign capital; on the other hand, the burden of proof on the Government remains high and, furthermore, an application of the new rules under the principles of necessity and proportionality could avoid such risk. [20]

Note from the Editors: although the e-Competitions editors are doing their best to build a comprehensive set of the leading EU and national antitrust cases, the completeness of the database cannot be guaranteed. The present foreword seeks to provide readers with a view of the existing trends based primarily on cases reported in e-Competitions. Readers are welcome to bring any other relevant cases to the attention of the editors.

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  • Italian Competition Authority (Rome)


Gabriella Muscolo, Italy & COVID-19: An overview of EU and national case law, 13 July 2020, e-Competitions Italy & COVID-19, Art. N° 95614

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