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“August decree”: temporary derogation from the Italian merger control procedure

  • Italy
  • Competition, EU and Trade

21-10-2020

 

I. Exemption pursuant to Art. 75, Law decree 104/2020 (“August decree”)

1. The "August decree" introduced a temporary derogation from the Italian Competition Authority (“ICA”) merger control procedure applicable to concentrations not having a EU dimension.

2. In particular, the August decree provides that such transactions are considered authorized, in derogation from the national law applicable to mergers, to the extent that the involved companies:

i) act in markets characterized by the presence of: (a) labour-intensive services (i.e. services in which the cost of labour is at least 50 % of the total amount of the contract) or (b) services of general economic interest (i.e. television service, construction and operation of the public national telecommunications network, postal service, supply of electricity, etc.);

ii) have recorded budget losses in the last three financial years and which, due to the effects of the health emergency, could cease their activity.

3. In order to benefit of the derogation, the companies concerned must in any case communicate in advance the concentration to the ICA, together with the proposal of measures to avoid any risk of price increases or other burdensome contractual conditions for the end-users as a result of the transaction.

4. The ICA within 30 days of the communication, having preliminary gathered the opinion of the Ministry of the development (“MISE”) and of the competent Regulatory Authority, could impose to the company concerned such measures, with any changes that it deems necessary to protect effective competition and the end-users.

5. In case of failure to comply with these behavioural measures, a fine of not less than 1% and not more than 10% of the turnover of the business activities involved by the concentration might be applied by the ICA.

6. Such a derogation will apply to mergers notified to the ICA by 31 December 2020.

II. Impact of the reform

7. As mentioned above, the derogation will be in force on a temporary basis; it aims to simplify, as well as to accelerate, the acquisition of companies which carry out activities with an impact on the national economy and which have encountered economic difficulties in recent years worsened by the pandemic.

8. From a strictly procedural standpoint, the impact of the reform can be summarized as follows:

i) the transactions "are considered authorized", thus the ICA could not prohibit such operations;

ii) the new provisions seem to imply, given the sensitivity of the sectors concerned (e.g. telecommunications, postal service, television etc.), the need to submit behavioural measures to the ICA in relation to which the authority can then deliver its assessment and, if needed, impose its changes to ensure effective competition on the relevant market;

iii) the ICA’s assessment will always be served to companies concerned within 30 days from the communication of the transaction;

iv) in any event, the obligation to notify in advance the transaction (before closing) and, above all, the possibility to complete the transaction without waiting for the ICA’s assessment on the behavioural measures remain.

9.In sum, in case of acquisition project of an Italian targets acting in the sectors listed in the August decree, the buyer will have to take this new procedural aspect into consideration, at least until 31.12.2020, which could in any case prompt the companies to pursue certain acquisition strategies, considering that the merger clearance process will be much faster and the ICA's assessment on the merit will be much more flexible than in pre-pandemic periods.

10. In this sense, specialist legal assistance is strongly recommended, considering the need, according to the literal reference of the law, to submit behavioural measures to the attention of the ICA that could give rise to a significant impact on the activities of the new entity that will be created following the completion of the acquisition project.

 

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