Italy: Italian Competition Authority Adopts Guidance On New "sub-threshold" Merger Legislation

The Italian 2022 annual Competition law ("Law n. 118/2022") introduced significant changes with reference to the merger thresholds applicable in Italy.

Article 32 of Law n. 118/2022 amended Article 16 of the Italian Competition Law ("Law n. 287/1990"), governing merger notifications, enlarging the Italian Competition Authority's ("ICA") powers in this respect.

Up to now, pursuant to Article 16, paragraph 1, of Law n. 287/1990 the only relevant thresholds to consider when assessing the need to notify a concentration to the ICA were the followings:

• The total turnover achieved at Italian level by all the companies concerned exceeds EUR 517 million; and
• The total turnover achieved individually at Italian level by at least two of the relevant companies exceed EUR 31 million.

As a consequence of the amendments introduced by Law n. 118/2022, the Italian legislator added a new paragraph 1-bis to Article 16 of Law n. 287/1990. Under this new paragraph, the ICA can now request relevant undertakings to notify also the so-called "sub-threshold" concentration operations (i.e., merger operations that do not fall under Article 16, paragraph 1, of Law n. 287/1990).

Pursuant to the new Article 16, paragraph 1-bis, of Law n. 287/1990, the ICA may in fact also request the notification of relevant operations when the following cumulative conditions are met:

1. Only one of the two turnover thresholds above is exceeded OR the global turnover achieved by all the companies concerned exceeds EUR 5 billion; and
2. The merger entails concrete risks for the competition in the Italian market or in a relevant part therein (also taking into account eventual detrimental effects to small undertakings characterised by innovative strategies); and
3. No more than six months have elapsed since the merger was concluded.

The notification shall be made within 30 days from the receipt of the relevant request from the ICA.

Failure to notify within the above-mentioned deadline leads to the application of administrative pecuniary sanctions pursuant to Article 19 of Law n. 287/1990 (i.e., fines up to 1% of the relevant turnover of the undertakings concerned referring to the last consolidated financial statement).

Law n. 118/2022 also tasked the ICA with the duty to publish specific guidance in order to clarify the procedural aspects to apply the new Article 16, paragraph 1-bis, of Law n. 287/1990. With the adoption of such guidance, the ICA provided for clarifications on the substantial aspects of the new provision and established additional procedural aspects with respect to what was already provided for under Law n. 118/2022.

In October 2022, the ICA, considering the relevance of the amendments made to Law n. 287/1990, launched a public consultation on the draft text of its guidance, inviting relevant stakeholders to send feedbacks.

Based on the comments received, on 2 January 2023, the ICA adopted the final text of the Communication related to the sub-threshold concentration operations (the "ICA Communication"). The ICA Communication clarifies certain elements of uncertainty included in the new provision, especially with reference to the meaning of "concrete risks for the competition in the market" (i.e., point 2) above) and to the chronological application of the new provision (i.e., point 3) above). Furthermore, the ICA also introduced the possibility for interested undertakings to request a preliminary assessment of a "sub-threshold" merger that is deemed to meet the requirements established under Article 16, paragraph 1-bis, of Law n. 287/1990.

In particular, the ICA Communication deals with the following main points:

Procedural aspects

• The notification shall take the same form of the notifications made under Article 16, paragraph 1, of Law n. 287/1990 (the modalities of which are established under Presidential Decree n. 217/1998).
• In the event erroneous/incomplete data are provided to the ICA by the relevant undertakings, the administrative pecuniary sanctions established under Article 16-bis of Law n. 287/1990 will apply (i.e., fines up to 1% of the relevant turnover of the undertakings concerned referring to the last consolidated financial statement).
• With respect to the chronological procedural aspects, the ICA clarified that the new provision does not apply to the merger operations finalised before the entry into force of Law n. 118/2022 (27 August 2022). It also specified that the maximum time limit within which the notification must be made is six months after the closing of the contract or from when the transfer of control takes place.
• The notification shall be sent within 30 days from the receipt of the relevant request from the ICA. In exceptional cases, the 30-day term can be extended up to 60 days upon request of the relevant undertakings.
• If the ICA considers that the notified concentration is liable to be prohibited under the merger provisions, it shall commence the relevant investigation within 30 days of receipt of the complete notification. Otherwise, within the same 30-day term, the ICA shall communicate to the relevant undertakings that it does not intend to initiate an investigation into the notified merger.
• In the event an investigation is initiated, the ICA shall decide whether to clear the merger or not within 45 days from the launch of the relevant investigation.
• The ICA can also make a referral to the European Commission (under Article 22 of EU Regulation n. 139/2004) if the merger at stake is deemed to affect the trade between Member States.

Concrete risks for the competition in the Italian market

• With respect to the definition of the "concrete risks for competition" (i.e., point 2) above), the ICA specified what elements shall be taken into account when carrying out such assessment. According to the ICA, the relevant elements range from the market structure and the characteristics of the operators involved, to the thresholds realised in Italy. When no threshold is realised in the Italian territory, the ICA specified that it may also consider the following elements: the location of the company's head office/productive plants in the Italian territory and the performance of relevant R&D activities for the Italian market.

Voluntary notification

• Additionally, under the ICA Communication, interested companies are allowed to voluntary notify the ICA of the merger operation they are involved in – even before the finalisation of the relevant operation – if they have doubts that the operation at stake may meet the new three "sub-threshold" requirements.
• In the event of a voluntary notification, the ICA, based on the information received by the interested companies, will communicate them whether it intends to request the formal notification of the merger operation within 60 days from the receipt of the voluntary notification.

Overview of current merger notification requirements in Italy

Although the ICA Communication sheds light on some controversial aspects of the new Article 16, paragraph 1-bis, of Law n. 287/1990, it remains to be seen whether a fair balance will actually be struck in practice between, on the one hand, the need to ensure that mergers do not entail any significant risks for the maintenance of fair competition on the market and, on the other hand, the need to avoid unnecessary burdens for companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.