On June 25, 2019, the Italian Council of State (“Council of State”) partially upheld the appeal lodged by Società Metalmeccanica Fracasso in Liquidazione S.p.A. (“Metalmeccanica Fracasso”) against the judgment issued by the Regional Administrative Tribunal of Latium (“TAR Lazio”) on February 1, 2017 (“Judgment”),[1] which had confirmed the decision of the Italian Competition Authority (“ICA”) to re-determine the fine imposed on Metalmeccanica Fracasso for an alleged restrictive agreement.[2]
Factual Background
On September 28, 2012, the ICA found that some companies active in the market for road safety barriers had violated Article 101 TFEU (“Infringement Decision”). In particular, the ICA imposed a fine of €11,013,165.40 on Metalmeccanica Fracasso, for having entered into an anticompetitive agreement consisting of a single, complex and continuous concerted practice affecting competition in the national market for safety barriers between January 2003 and May 2007.[3]
Metalmeccanica Fracasso challenged the Infringement Decision before the TAR Lazio, which partially upheld the appeal and re-determined the fine accordingly.[4] The ICA challenged the TAR Lazio’s ruling before the Council of State, which partially annulled the judgment and required the ICA to re-determine the fine taking into account the revenues achieved by Metalmeccanica Fracasso through the anticompetitive conduct and its contribution to the agreement.[5]
On December 22, 2015, the ICA set a new amount of the fine to be imposed on Metalmeccanica Fracasso, equal to €7,714,083.04. Against this decision, Metalmeccanica Fracasso filed a motion for compliance with the Council of State, arguing that the ICA had not complied with the criteria set forth in the decision of the Council of State. The Council of State, however, rejected Metalmeccanica Fracasso’s motion.[6]
Metalmeccanica Fracasso also filed an appeal against the decision re-determining the fine before the TAR Lazio. However, in the Judgment, the TAR Lazio rejected the appeal in its entirety. Metalmeccanica Fracasso challenged the Judgment before the Council of State.
The judgment of the Council of State
The relevant turnover
In the first three grounds of appeal, Metalmeccanica Fracasso argued that: (i) the TAR Lazio had erroneously considered that, to determine the basic amount of the fine, it was necessary to take into account the 2011 turnover, used in the Infringement Decision, as this issue was already covered by a final judgment (i.e., the 2015 judgment of the Council of State); (ii) the TAR Lazio had failed to acknowledge that the fine was disproportionately high, as it did not take into account the turnover realized by Metalmeccanica Fracasso when the decision re-determining the fine was adopted; (iii) the Judgment violated Article 15 of Law 287/1990 or, in any event, EU law, given that the ICA should have taken into account the turnover realized during the year before the adoption of the decision re-determining the fine and not during the year before the adoption of the Infringement Decision.
The Council of State agreed with the TAR Lazio that the issue of the turnover to be taken into account for the purposes of setting the fine was already covered by a final judgment, i.e. the 2015 judgment of the Council of State, according to which the ICA had correctly taken into account the turnover realized by Metalmeccanica Fracasso in 2011. The Council of State made reference to the binding value of a final judgment, and added that, apart from limited exceptions (which, in any event, should be provided for by national law), the fact that a judgment violates EU law is not enough to set aside national procedural rules on the binding value of a final judgment.
In any case, the Council of State stated that the ICA had complied with the relevant provisions of national and EU law on the relevant criteria for calculating antitrust fines. Indeed, in line with these provisions, the ICA had rightly taken into account the turnover realized by Metalmeccanica Fracasso in the year before the Infringement Decision (i.e., 2011) and not in the year before the decision re-determining the fine (i.e., 2014).
The principle of proportionality in the assessment of inability to pay
Metalmeccanica Fracasso also argued that the TAR Lazio had erroneously upheld the ICA’s evaluation of Metalmeccanica Fracasso’s ability to pay, which was not compatible with the principle of proportionality.
The Council of State first recalled the principles established by both national and European case law, according to which (i) a reduction of the fine for inability to pay is possible only in exceptional circumstances, and (ii) the parties seeking the reduction should provide adequate evidence of the inability to pay and of the link between the inability to pay and the payment of the fine. In the case at hand, the Council of State held that, in light of the evidence provided by Metalmeccanica Fracasso, the Judgment had to be annulled, because the TAR Lazio had not adequately taken into account the company’s inability to pay, thus violating the principle of proportionality.
In particular, the Council of State stated that the fine should be proportionate not only to the gravity of the infringement, but also to the infringer’s economic and financial situation and, more generally, to the objectives pursued through the imposition of antitrust fines.
After having underlined that the ICA had correctly taken into consideration the turnover realized by the company in 2011, the Council of State added that, in light of the circumstances of the case and the considerable amount of time that had passed since the Infringement Decision, the ICA should have also taken into account the decrease in the turnover realized by the company, which fell from more than €110 million in 2011 to €2.6 million in 2014.
Therefore, the Council of State ruled that the imposition, in 2014, of a fine of more than €7 million on Metalmeccanica Fracasso exceeded the company’s ability to pay and was not proportionate, as the turnover realized by the company in 2014 amounted to only €2.6 million. As a result, the Council of State ordered the ICA to re-determine the fine, taking into account Metalmeccanica Fracasso’s reduced ability to pay.
[1] Council of State, judgment No. 4335/2019; TAR Lazio, judgment No. 1618/2017.
[2] ICA decision of December 22, 2015, No. 25796, Case I723B, Intesa nel mercato delle barriere stradali-rideterminazione della sanzione Metalmeccanica Fracasso.
[3] ICA decision of September 28, 2012, No. 23931, Case I723, Intesa nel mercato delle barriere stradali.
[4] TAR Lazio, judgment No. 8674/2013.
[5] Council of State, judgment No. 3291/2015.
[6] Council of State, judgment No. 4563/2016.