On May 20, 2019, the Italian Competition Authority (the “ICA”) issued a decision in the merger control proceedings opened in connection with Sky Italia S.r.l.’s (“SKY”) acquisition of control over R2 S.r.l. (the “Decision”). Owned by Mediaset Premium S.p.A. (“MP”), R2 S.r.l. (“R2”) provides technical and administrative platform services for broadcasting by means of Digital Terrestrial Television (“DTT”).
The Decision cleared the notified transaction, albeit imposing remedies on SKY.
The notified transaction and the opening of proceedings
SKY notified the acquisition of R2 on November 28, 2018. On March 7, 2019, the ICA opened an in-depth investigation into the transaction, alleging that SKY’s acquisition of sole control over R2 (the “Transaction”) was part of a set of arrangements between SKY and MP – concluded on March 30, 2018 – that had “technical-functional” and “economic-contractual” links with the Transaction.
According to the ICA, the Transaction was capable of lessening competition in the market for retail pay-TV services, in which SKY and MP were the main players, by providing an incentive for MP to exit the market, and had the same effects as an acquisition of the whole of MP by SKY. The market for retail pay-TV services includes, in the ICA’s view, broadcasting through satellite (direct-to-home, DTH), DTT and the Internet. The ICA considered that the Transaction could potentially hinder competition also in the markets for: (i) wholesale access services to DTT technical platforms, (ii) the wholesale licensing of broadcasting rights, and (iii) the wholesale supply of pay-TV channels.
The withdrawal of the notification and the ICA’s assessment
Since the parties were not subject to a standstill obligation as a matter of law, they completed the Transaction after notification, and SKY acquired sole control over R2 before the ICA completed its assessment. However, the Transaction included a condition subsequent to allow SKY to return R2 to MP if the ICA adopted a prohibition or a conditional decision on the merger. Following notification of the statement of objections, SKY withdrew the notification and R2 was demerged back into MP. As a result of the return of R2 to MP, R2’s platform was opened to third-party access.
Despite the notification’s withdrawal and the return of R2 to MP, the ICA took the view that the demerger only partially restored the situation to the status quo ante (i.e., the situation before the Transaction) and did not remove the anti- competitive effects that the notified Transaction had generated in the meantime.
The ICA found that, even after the return of R2 to MP, SKY maintained control of some of R2’s assets (some employees, contracts and fixed assets). Moreover, the return of R2 did not include other assets that allegedly had been transferred to SKY, such as the exclusive rights to broadcast MP channels on DTT. The Decision also found that SKY had modified certain R2 assets (i.e., conditional-access modules).
Regarding the irreversible anti-competitive effects, the Decision found that, although the Transaction did not formally concern the acquisition of the whole of MP, it had similar effects, namely the migration of some MP subscribers to SKY and the elimination of the competitive constraints previously exercised by MP. According to the ICA, this, in turn, strengthened SKY’s position in the pay-TV market as well as in the markets for the licensing of broadcasting rights and the supply of pay-TV channels, where SKY would become the only purchaser of content and channels on both the DTH and DTT platforms.
In the ICA’s view, the whole structure of the Transaction and the ancillary agreements between the parties appeared to be directed at fragmenting the effects of the concentration and reducing the effectiveness of the ICA’s merger review powers. The ICA asserted that the only means it had to protect competition was to properly restore the status quo ante through the imposition of remedies, to protect over-the-top Internet operators and potential new DTT entrants, which would have been the only players left to exercise competitive constraints on SKY.
Therefore, in authorizing the Transaction, the ICA imposed the following measures on SKY, for a period of three years as of notification of the Decision (the “Remedies”):
An obligation not to conclude new contracts for the acquisition of broadcasting rights and linear pay-TV channels edited by third parties on an exclusive basis for the Internet platform in Italy;
An obligation to grant third parties access on a fair, reasonable, non-discriminatory and
cost-oriented basis to any new proprietary DTT platform that SKY may set up, to the extent that the platform in question is “compatible with the R2 assets” that SKY modified during the time in which it exercised control over the R2 platform;
An obligation on SKY not to use information and assets belonging to R2 and already acquired for SKY’s pay-TV offers;
An obligation to designate, within two months of the Decision, a trustee to verify SKY’s compliance with the Remedies;
An obligation to draw up and submit to the ICA, within three months of the Decision and each year thereafter, reports setting out the actions taken by SKY to comply with the Remedies.
 SKY ITALIA/R2 (Case No. C/12207), ICA Decision of May 20, 2019.
 ICA Decision No. 25579 of March 7, 2019.
 Pursuant to Article 16 of Law 287/90.
 Pursuant to Article 18(3) of Law 287/90.