Inter-group transactions which result in a "concentration" as defined in the Italian Competition Law need no longer be notified to the Competition Authority.
The Italian Competition Authority ("the Authority") has recently announced that the requirement imposed by the Competition Law (Law No. 287 of 10th October 1990) to give advance notification of certain concentration transactions will no longer apply to transactions which take place:
(i) between a party and one or more undertakings which it already controls (by virtue of holding, directly or indirectly, either an absolute majority of the corporate capital, or an interest corresponding to an absolute majority of the voting rights exercisable in an ordinary general meeting); or
(ii) between undertakings already controlled by the same party, (i.e. where the party in question holds interests in those undertakings satisfying the criteria set out at (i) above).
However, the above-mentioned exceptions will not apply (and notification of the transaction must therefore be given), where in practice no relationship of "dependency" exists between the parties to the transaction. This may be due to provisions imposed by law or contained in the company's by-laws, as a result of resolutions adopted by the company, or by virtue of the purely financial nature of the interest held.
The abolition of the obligation has removed one of the points of criticism of the Italian Competition Law. Notifications of inter-group transactions previously constituted approximately a third of the total transactions notified, although the Authority invariably came to the conclusion that such transactions merely represented group reorganisations and therefore had no external effect on the market. The decision to exclude inter-group transactions will therefore represent a considerable saving for the Authority of both time and money.
In the light of the above, we set out below a brief reminder of the general provisions of the Italian Competition Law with regard to transactions resulting in concentrations of market power.
The Italian Competition Law, introduced in 1990, applies to concentrations, agreements and abuses of dominant positions (the latter two not discussed here) which are not subject to evaluation on the merits under EC law. The provisions of the Italian law are closely modelled on those of EC Competition Law. Where the Authority considers that a transaction under examination falls within the competence of the EC Commission, it is therefore obliged to inform the EC Commission of this fact and transmit any information in its possession to the same. Equally, if the Commission commences formal proceedings in relation to a matter under investigation by the Authority, then the latter is obliged to suspend its own investigation, with the exception of any aspect which is of exclusively national relevance.
With regard to "concentrations" the law imposes an obligation to give advance notification of "relevant" transactions to the Authority. A "relevant" transaction is defined as one in which the total combined domestic turnover of the undertakings concerned exceeds a specified figure (currently Lit. 606 billion), or where the total domestic turnover of the target company exceeds another specified figure (currently Lit. 60.6 billion). Only one of the two thresholds needs to be exceeded for the obligation to be triggered. The figures are adjusted annually in accordance with inflation.
The definition of "concentration" is based on that contained in the 1989 EC Merger Regulation (no. 4064/89) and includes any situation where:
The concept of "control" is given a wide meaning and will include, inter alia, situations permitting a party, directly or indirectly, to exercise a determining influence over the activities of a business.
The obligation imposed is to give notification of a relevant transaction to the Authority in advance, and therefore before the transaction has been completed. The precise moment at which notification must be made is not specified in the Competition Law, and therefore should be considered carefully in relation to the type of transaction concerned. Once notification has been given, the Competition Law does not expressly require the parties to wait for a decision before they proceed with, or complete, the transaction. It should be noted that the tendency is however to wait for a decision from the Authority before proceeding in view of the risks inherent in completing a transaction which may be subsequently prohibited.
In any event, the Authority does, however, have the power to order the suspension of a transaction pending completion of its inquiries where it commences a formal investigation.
On receipt of the notification the Authority has 30 days in which to decide whether or not the transaction is a potentially "prohibited" transaction (i.e. one which would result in the creation or strengthening of a dominant position on the market so as to eliminate or reduce competition on the domestic market in a substantial manner and with lasting effect). The 30 day period is reduced to 15 in the case of a public take over offer, notification of the latter being required to be made to the Authority, where appropriate, concurrently with the notification made to CONSOB, the National Commission for Companies and the Stock Exchange. If the Authority considers the transaction to potentially be a "prohibited" one, it will order a formal investigation, otherwise it will notify the parties within the 30 day period that the transaction does not present grounds for an investigation. This therefore constitutes "clearance" for the transaction.
A formal investigation will last for 45 days (although this may be extended in certain circumstances), at the end of which the Authority will issue its decision as to whether a transaction is to be permitted, prohibited or approved subject to the prescription of any measures considered necessary to restore actual competition.
The Competition Law makes provision for sanctions in the form of substantial administrative fines in a number of circumstances, including failure to give notification in advance of a relevant transaction (fine of up to 1% of the preceding year's turnover), proceeding to implement a concentration which has been prohibited or failure to comply with measures prescribed (fine of between 1 and 10% of turnover of business activities subject to the concentration).
To date, in imposing fines for failure to make notification, it appears that the Authority has taken into consideration whether the parties acted in good faith, their general attitude, whether or not they were co-operative and whether the notification was eventually made spontaneously, albeit late, and finally, whether the transaction was of any significance with respect to the limitation of competition.
The notification itself should be made in accordance with the standard form laid down by the Authority, which specifies the information to be provided regarding the transaction, the undertakings concerned and the relevant market. The Authority has recently indicated that it intends to streamline and simplify the procedure in general for notifying concentrations in order to ensure a faster service and that it hopes to finalise a new simplified form of notification by the end of the year.