Italy: A Case Between "Pure" Competition Rules And Statutory Policies: The Telecom - TMC Merger

In the summer of 2000 the main Italian telecommunications company, Telecom Italia S.p.A., former State –owned corporation and monopolist of the telecommunication system and now private-owned and no longer the only tlc operator in Italy, decided to merge, through an important subsidiary, SEAT PAGINE GIALLE S.p.A, active mainly in the field of advertising (the so-called and widely known "yellow pages"), with an other company, the Cecchi Gori Communications S.p.A., which runs two non-crypted television channels (TMC and TMC2).

Such a merger raised a lot of issues, part of which have been dealt with in a decision by the Italian antitrust Authority. The Authority (decision C/4158 of the 23 of January 2001) recognized that the merger could have caused many problems to competition in different relevant markets and focused especially on the danger of Telecom acquiring a dominant position in the new market resulting from the interaction of telecommunications and television, for instance, the possibility of transmitting TV contents by the web. In fact, Telecom Italia, still resulted holder of the so-called "local loop" or "last mile" (the last part of the wire connecting each user) and both Telecom Italia and Pagine Gialle run the two most visited sites in the Italian web (Tin.it and Virgilio.it respectively), while Cecchi Gori Communications held a movies library of interesting contents which could have been provided through the net.

Despite of this, among others, danger for the market, the Authority decided to give clearance to the merger, provided that the involved companies submit to some undertakings. Such undertakings, however, do not seem strong enough not even to lessen the harm to competition that could result from such a merger.

Since the merger impacted also into the telecommunications field, it had to be examined also by an other independent Authority (the "Autorità per le Garanzie nelle Comunicazioni"), which has been established by a statute (L.287/97), the principal aim of which was to lead the Italian telecommunications from a nationalized to a liberalized system. Such statute contains a rule (art.4.8) that prohibits the national monopolist of telecommunication to run, even indirectly, non crypted TV channels; by way of substantial construction of this rule ("substantial" since Telecom Italia is no longer formal monopolist in the telecommunications, though it still holds a largely dominant position) the Authority decided not to allow the merger.

As it appears even from this very short brief, this merger case is very complex and raises several issues. We mention but a few:

1. the "pure" competition issues, addressed and not satisfactorily solved by the antitrust Authority;
2. the issues raising from application of statute 287/97, and subsequent legislation, which establishes how the liberalization process in the field of telecommunications should be carried out in Italy and which are too politically sensitive;
3. the issue of the relation between two independent Authorities, whose competences have seemed, to a certain extent, to overlap, while the law fails to decide which one shall prevail.

The decisions of both Authorities have been challenged in front of the administrative courts, especially the Administrative regional court (TAR) of Lazio. The Court has reversed the decision of the Authority for the Telecommunications and so an appeal has been filed to the supreme administrative court (Consiglio di Stato), while the proceeding against the Antitrust Authority decision is still pending in front of the TAR itself, where "pure" competition arguments will be debated.