On October 17, 2019, the Regional Administrative Tribunal for Latium (the “TAR Lazio”) ruled on appeals by companies belonging to the Enel and Acea groups, two major energy firms active, among others, in the distribution and sale of electricity in Italy, against Italian Competition Authority (“ICA”)’s decisions finding that the two incumbents had abused their dominant position in local markets for retail electricity supply.[1]
The TAR Lazio upheld Acea’s appeals and annulled the Acea Decision.[2] Conversely, Enel’s appeals against the Enel Decision were upheld only with respect to the fine calculation.[3] As a consequence, the TAR Lazio ordered the ICA to recalculate the fine imposed on Enel on the basis of the parameters indicated in the TAR Lazio’s Enel Judgment. In both judgments, the TAR Lazio rejected the grounds of appeal that were based on procedural reasons, such as the fact that both decisions were adopted by a board composed of only two members (which did not include the President of the ICA).
Background
On December 20, 2018, in parallel proceedings against Enel and Acea, the ICA found that the two incumbents had infringed Article 102 TFEU by carrying out an abusive strategy based on their position as companies active in both the enhanced protection service (“EPS”) and the retail supply of electricity at market prices.
The EPS is a regulated regime, reserved to domestic clients and small businesses that do not opt for offers at market prices. Under the EPS regime, electricity is supplied at a tariff set by the sector regulator. In Italy, the EPS was initially scheduled to end in July 2019, following full liberalization of the electricity market, but the deadline was recently postponed to 2020.
Enel and Acea are entrusted with providing the EPS in the local markets where they respectively manage the distribution of electricity. In addition, they are active in the retail supply of electricity at market prices. Enel provides the EPS through its subsidiary Servizio Elettrico Nazionale (“SEN”), and carries out the retail supply of electricity at market prices through its subsidiary Enel Energia (“EE”). In contrast, Acea entrusted its subsidiary Acea Energia S.p.A. (“AE”) with the provision of both services.
In the ICA’s view, Enel and Acea leveraged their position as vertically integrated operator, active in both the distribution and the retail supply of electricity in the respective local markets, to exclude competitors active in the provision of deregulated services at market prices. In particular, according to the ICA, Enel and Acea collected from their EPS customers, in a discriminatory manner, the privacy consent to be contacted for commercial purposes, and used these lists of customers to formulate targeted offers in the deregulated segment of the market. In addition, in its commercial strategies, AE made use of a series of privileged and detailed information on the evolution of market shares and the positioning of competitors in the areas in which the Acea group provides the distribution service, through its subsidiary Areti. According to the ICA, these practices aimed at inducing Enel and Acea’s respective EPS customers to switch to the incumbents’ offers in the deregulated segment of the market, so as to avoid losing those customers to competitors following the full liberalization of the market.
In the Enel Decision, the ICA held that the alleged abusive conduct had taken place between January 2012 and May 2017, and fined Enel over €93 million. In the Acea Decision, the ICA found that Acea’s alleged infringement had been carried out between March 2014 and 2017, and fined Acea approximately €16 million.[4]
The Acea Judgment
In the Acea Judgment, the TAR Lazio upheld the appeals lodged by Acea S.p.A., AE and Areti (i.e., the company belonging to the Acea group that is entrusted with the distribution of electricity in certain areas of Italy) against the Acea Decision.
First, the TAR Lazio recalled the principles established by the recent EU judgment in the Intel case, according to which – even when the incumbent’s conduct may fall, in principle, within the scope of Article 102 TFEU – antitrust authorities are required to carry out “an analysis of the intrinsic capacity of that practice to foreclose competitors which are at least as efficient as the dominant undertaking.”[5] As a consequence, the sole fact that a company holds a monopolistic position on a relevant market, and carries out initiatives aimed at retaining clients (even during the liberalization of a given market), does not per se amount to an abuse. On the contrary, antitrust authorities must prove the existence of a “discriminatory strategy, which may determine the foreclosure of competitors.”[6]
According to the TAR Lazio, the ICA’s reasoning in the Acea Decision did not meet the abovementioned standards.
On the one hand, the ICA did not take into account the arguments submitted by Acea in relation to the first alleged abusive conduct, i.e. the collection by AE of the contact details of EPS customers, allegedly carried out in a discriminatory manner, and the use of such contact details in AE’s commercial activities on the deregulated segment of the market. In the TAR Lazio’s view, such arguments proved the absence of any discriminatory practice. The TAR Lazio noted, inter alia, that EPS customers had been contacted with “standardized” offers, designed by AE for its whole customer base, instead of offers specifically targeted to EPS clients. Accordingly, in the TAR Lazio’s view, AE’s alleged infringement could not be considered capable of foreclosing competitors’ access to the “free” market.
The TAR Lazio also annulled the decision in the part concerning the alleged use by AE of sensitive information on the market positioning and performance of its main competitors – which was exclusively available to Areti in its capacity as electricity distributor in certain areas – with a view to better targeting its marketing strategy and monitoring its effectiveness. In this respect, the TAR Lazio held that the ICA had failed to clarify how aggregated data on competitors’ market positioning could be used by AE to guide (or monitor the effectiveness of) its business strategy of “retention” of EPS customers. The ICA’s reasoning was based on mere presumptions and did not adequately demonstrate the existence of anticompetitive conduct.
The Enel Judgment
In the Enel Judgment, the TAR Lazio upheld some of the grounds of appeal, while rejecting the others.
First, the TAR Lazio partially annulled the Enel Decision with regard to the duration of the alleged abuse. In this respect, on the one hand, the TAR Lazio noted that, in the ICA’s view, the “actual use” of customers’ contact details to “submit targeted offers dedicated to EPS customers” was an essential element of the alleged abuse. On the other hand, it found that the only offer specifically targeted to EPS customers was launched by EE in March 2017 and lasted only two months before being discontinued. Accordingly, the TAR Lazio held that the ICA had wrongly calculated the fine, by including in the duration of the infringement also years in which EE did not engage in targeted offers.
Interestingly, the TAR Lazio stated that, in the calculation of the new fine, the ICA should take into account a duration of 1 year and 9 months, i.e., since September 2015 (almost two years before the launch of the first and only targeted offer), when the first legislative proposals concerning the liberalization of the Italian electricity market were put forward. This is because, according to the TAR Lazio, these legislative proposals provided Enel with an incentive to try to retain its EPS customers by “transferring” them to EE, in order to avoid losing them following the liberalization. This point is difficult to reconcile with the overall reasoning of the TAR Lazio (as also laid down in the Acea Judgment), which seemed to attribute decisive relevance to the actual use of customers’ contact details to submit targeted offers.
In addition, the TAR Lazio upheld Enel’s claim that the ICA erred in calculating the fine by taking into account the turnover generated by Enel in 2017, notwithstanding that the last full year of the alleged infringement was 2016. In the TAR Lazio’s view, this amounted to a violation of the ICA’s Guidelines on the method of setting fines (§ 8).[7]
On the other hand, the TAR Lazio rejected the grounds of appeal concerning the alleged abuse.
In particular, the TAR Lazio upheld the ICA’s finding that the contact details collected by SEN, compared to other lists available on the market, provided additional (and strategic) information, i.e., that the customers included therein belonged to SEN’s EPS. In the TAR Lazio’s view, this made it impossible for EE’s competitors to duplicate SEN’s lists. The TAR Lazio acknowledged that the fact that, while collecting their contact details for commercial purposes, SEN allowed its customers to choose whether to grant consent to being contacted exclusively by the Enel group or also by third parties, did not amount in itself to a discriminatory practice. However, in the TAR Lazio’s view, the collection of contact details was characterized by an additional factor, namely SEN’s alleged plan to provide the lists to EE to enable it to launch targeted offers. Finally, with respect to the analysis of the effects of the alleged abuse, the reasoning of the Enel Judgment seems to depart from the position taken in the Acea Judgment. In the Enel Judgment, the TAR Lazio
limited itself to reiterating the traditional view that, once it is established that a given practice is, in theory, capable of excluding competitors, it is not necessary for an antitrust authority to assess the actual effects of such conduct. It did not make reference to the Intel judgment, which requires antitrust authorities to carry out an analysis of the intrinsic capacity of a practice to foreclose competitors, when an investigated company “submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects.”[8]
[1] ICA decisions of December 20, 2018, No. 27494, Case A511, Enel/Condotte anticoncorrenziali nel mercato della vendita di energia elettrica, and No. 27496, Case A513, Acea/Condotte anticoncorrenziali nel mercato della vendita di energia elettrica (respectively, the “Enel Decision” and the “Acea Decision”).
[2] TAR Lazio, Judgment Nos. 11960 and 11976/2019 (the “Acea Judgment”).
[3] TAR Lazio, Judgment Nos. 11954, 11957 and 11958/2019 (the “Enel Judgment”).
[4] On the same day, the ICA closed proceedings against A2A, opened to investigate a similar infringement of Article 102 TFEU, without finding any infringement (ICA decision of December 20, 2018, Case A512, A2A/Condotte anticoncorrenziali nel mercato della vendita di energia elettrica).
[5] Case C-413/14 P, Intel II, EU:C:2017:632, § 140.
[6] See Acea Judgment.
[7] Guidelines on the method of setting pecuniary administrative fines pursuant to Article 15, paragraph 1, of Law No. 287/90, ICA decision of October 22, 2014.
[8] Intel II (Case C-413/14 P), EU:C:2017:632, §§ 138 and 140.