Italy: "Just One Cornetto, Give It To Me…": The Unilever Italian Ice Cream Saga Comes To An End

On 11 July 2023, the Italian Council of State ("CdS") delivered a judgment that finally closed the Unilever Italian ice cream saga, by upholding the Italian Competition Authority ("ICA") decision fining Unilever for over EUR 60 million for abuse of a dominant position.

The ECJ preliminary ruling

The saga reached its apex when the CdS referred two questions to the European Court of Justice ("ECJ") for a preliminary ruling, which shed further light on the notion of "single economic entity" under EU antitrust law and on the delimitation of the burden of proof looming over antitrust authorities.

To recap, as we highlighted in our previous article, in its preliminary ruling, the ECJ stated that (i) abusive conduct carried out by distributors can be attributed to the producer in a dominant position (i.e., Unilever Italia MKT, hereinafter "Unilever") if the distributors are part of the distribution network of the dominant producer and the conduct implements a distribution policy that was decided unilaterally by that undertaking and with which the relevant distributors were required to comply; and (ii) the "As Efficient Competitor" ("AEC") test is not mandatory for a competition authority to establish abuse of dominance. Nevertheless, a competition authority must demonstrate with reference to tangible evidence that the conduct was actually capable of restricting competition on the basis of merit, particularly when the dominant undertaking challenges whether its conduct is abusive.

The CdS judgment

The final judgment delivered by the CdS strictly applies these two general principles expressed by the ECJ in its preliminary ruling.

As a consequence, the CdS rejected the appeals lodged by Unilever in their entirety.

Firstly, the judgment confirmed the absolute dominant position of Unilever in the Italian packaged ice cream market, in respect of the market shares held by Unilever at the time of the ICA decision, as well as for the capillarity of its presence on the whole Italian territory and for the relevance of its brands ("Algida" and "Carte d'Or").

Secondly, following the guidance received by the ECJ, the CdS confirmed that the abusive effects deriving from the distribution system put in place by Unilever shall be attributed to the latter and not to its distributors.

In fact, Unilever unilaterally defined the "operating plan" by which it had set commercial purchasing and sales targets for its distributors, also fixing the minimum levels of the targets to be achieved, a discount grid and the final list price to be charged not only to its intermediate distributors but also to the final resellers, along with exclusive clauses in favor of Unilever ice creams.

Furthermore, by means of standard pre-filled contractual forms, Unilever – reinforcing its role as single regulator of the entire distribution network – managed to regulate both the contractual relationship between itself and its distributors and the one between the distributors and the final resellers. The economic commercial freedom of both distributors and final resellers was thus completely annulled as a result.

Therefore, by exploiting its dominant position, Unilever managed to unilaterally plan an anti-competitive business policy to be applied to the entirety of the Italian market. And as, a consequence, notwithstanding the fact that different legal subjects were formally involved, the CdS has traced the entire distribution system at stake back to a "single economic entity" headed by Unilever.

In the CdS opinion, the ICA thus correctly considered the described conduct as an abuse of a dominant position under Article 102 TFEU, with the single distributors being mere "implementers" of the Unilever overall abusive policy.

Thirdly, with reference to the AEC test and the related burden of proof looming on antitrust authorities, the CdS confirmed the view of the ICA.

Unlike the Intel judgment, where the ECJ recognised the relevance of the AEC test to prove the anti-competitive effects produced by loyalty rebates adopted by a dominant undertaking, in the case at stake, the ICA was right in considering such test not relevant to the case.

In the Unilever model, loyalty rebates were indeed only a part of an overall commercial policy (including exclusive clauses and strict contractual conditions unilaterally imposed on the distributors) that the ICA had found to be abusive in its entirety. As stated in the Intel judgment, the AEC test may be of help when only the rebates are deemed to be anti-competitive. The different factual background between the Intel and the Unilever cases thus justifies the conclusion reached by the ICA not to examine the AEC test due to its irrelevance in this case.

Conclusion

In conclusion, the CdS judgment confirms the novelty of the Unilever preliminary ruling.

In the first place, abusive conduct may be the result of a bilateral contractual arrangement, and thus be attributed to the dominant undertaking, if the abusive conduct may in any case be traced back to the latter (to be understood as a single economic entity with its not-so-independent commercial partners).

In the second place, while it confirms a general burden of proof on antitrust authorities to assess evidence that the contested conduct did not actually produce anti-competitive effects, it narrows down the possibility for dominant undertakings to invoke the AEC test to justify complex abusive conduct.

The judgment (in Italian only) is available here.

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