On March 3, 2020, the Council of State granted the appeal filed by Società Cooperativa Taxi Torino (“Taxi Torino”) against the judgment issued by the Regional Administrative Tribunal for Latium (the “TAR Lazio”) on June 7, 2019.[1] The TAR Lazio had upheld the ICA decision of November 29, 2018, which imposed interim measures in an investigation concerning an alleged abuse in the market for the collection and sorting of orders for taxi services in Turin.[2]

Factual Background

By a decision adopted on November 29, 2018, the ICA imposed interim measures on Taxi Torino, a cooperative of taxi operators, found to hold a dominant position in the market – which is upstream for the taxi service market – for the collection and sorting of orders for taxi services in the City of Turin (the “Decision”). In particular, the ICA’s investigation focused on a clause of Taxi Torino’s by-laws, which imposed a non-compete obligation on taxi drivers participating in Taxi Torino’s network. According to the ICA, the said clause hindered entry by open platforms (such as the MyTaxi app) on the relevant market, and was neither indispensable for the smooth functioning of Taxi Torino’s network nor proportionate to this aim. Given that, in the ICA’s view, the conditions for the adoption of interim measures were met, it ordered Taxi Torino to cease the application of the non-compete clause pending a final decision on the alleged abuse.

On June 7, 2019, the TAR Lazio rejected the appeal filed by Taxi Torino and upheld the interim measures adopted by the ICA, holding that: (i) the service of collecting and sorting orders for taxi services provided through apps, by phone or radio constitutes a distinct relevant market; (ii) the non-compete clause at issue was binding on taxi drivers participating in Taxi Torino’s network, and thus aimed at limiting competition; and (iii) the interim measures issued by the ICA were reasonable and well grounded.

The Council of State’s ruling

As mentioned, the Council of State set aside the TAR Lazio Judgment and annulled the Decision.

The legal standard for the adoption of interim measures

First, the Council of State clarified the legal standard that must be met by the ICA when it adopts interim measures. According to the Council of State, Article 14-bis of Law No. 287/1990 – which governs the ICA’s power to adopt interim measures, and must be interpreted in compliance with Article 8 of Regulation 1/2003 – requires that the ICA adopt interim measures only where its theory of harm is clear. Indeed, according to the Council of State, one of the conditions for the ICA to adopt interim measures is that there be an actual risk of lessening of competition, not only the need to reach a decision as a matter of urgency. Moreover, the ICA interim order must take into account all the economic interests concerned, especially because the measures adopted may permanently shape competitive dynamics in the relevant market.

The Court added that the interim measures adopted by the ICA, differently from those adopted by courts, should be understood as prudential measures, aimed at making the markets more efficient, protecting consumers and making competitive markets more stable. Finally, according to the Council of State, the likelihood that the ICA adopt a final decision differing substantially from the interim measures should be low (the opposite outcome reflecting the fact that the final decision would be already affected by the effects of the interim measures that were previously adopted).

The ICA’s relevant market definition

Secondly, the Council of State considered whether the relevant market definition in the ICA decision complied with the said legal standard for the adoption of interim measures. It ruled that this was not the case on the ground that the ICA, instead of accurately defining the relevant market, postponed the complete market definition exercise to the final decision. According to the Court, especially in abuse of dominance cases, the ICA’s failure to define the relevant market entails uncertainty over which market it is protecting by the interim measures being adopted, and the very existence of competition concerns.

In particular, the Council of State took issue with the ICA’s failure to provide empirical data showing that the market for the collection and sorting of orders for taxi services offered through apps in the City of Turin were clearly substitutable, from the standpoint of consumers, with the similar services concerning orders by phone or radio. The Court agreed with Taxi Torino that such substitutability, albeit theoretically possible, was and still is unlikely at present, and that its demonstration would have required further investigative efforts on the part of the ICA. In particular, such demand- side substitutability could not be inferred from the fact that the means used to book taxi services has no relevance for taxi drivers, given that the only relevant aspect from their perspective is the provision of the transport service to the end user, regardless of how the taxi is booked and paid (supply-side substitutability).

Taxi Torino had argued that the apps that allow users to book taxis have features (such as geo-localization and the possibility to pay through the app) that make them irreplaceable by the more traditional means of booking taxis, such as phone and radio. In this respect, the Council of State disagreed with the TAR Lazio that these features merely improve consumer convenience, as they are actually capable of influencing the user experience.

Last, as to the relevant geographic market, the Council of State held that it is true that MyTaxi and Taxi Torino compete at the local level, but – in the context of the proceedings on the merits – the ICA should also consider that MyTaxi operates at a national level.

The necessity and proportionality of the interim measures

Thirdly, in assessing the ICA’s interim order to Taxi Torino to cease the application of the non-compete clause pending the final decision on its alleged abuse, the Council of State first noted that this measure was not consistent with a prima facie assessment of the case. According to the Court, far from constituting an abuse of dominance on the part of Taxi Torino, this clause was just an application of the duty of loyalty of the cooperative members towards their cooperative, as envisaged in Article 2527(2) of the Italian Civil Code. This provision does not allow cooperative members to exercise an economic activity that is in competition with that of the cooperative.

Further, according to the Court, the clause at stake was introduced by Taxi Torino with a view to limiting potentially unfair competition once it had entered the market for the collection and sorting of orders for taxi services in the City of Turin offered through apps and, indeed, following the signing of an exclusivity agreement for Taxi Torino’s acquisition of the Wetaxi app. The Council of State also emphasized – contrary to what the ICA had done in its interim decision – that the low number of taxi drivers that activated the MyTaxi platform was due to the commercial policy of that company, rather than to the non- compete clause introduced by Taxi Torino.

[1]              Council of State, Judgment No. 1547/2020 (setting aside TAR Lazio judgment No. 7463/2019).

[2]              ICA decision of November 29, 2018, No. 27434, A521, Attività di intermediazione della domanda di servizi taxi nel comune di Torino.