On March 5, 2020, the TAR Lazio annulled the ICA decision of May 20, 2019, concerning the acquisition of sole control of R2 S.r.l. (“R2”) by Sky Italia S.r.l. (“Sky”), including the measures imposed on Sky.[1]

Factual background

Sky is a provider of pay-TV services, offered both via satellite and via digital terrestrial television (“DTT”). Mediaset Premium (“MP”) produces content, which is generally transmitted by pay-TV operators. MP wholly owns R2, a company providing technical and administrative platform services for broadcasting by DTT.

In November 2018, Sky notified the ICA of its acquisition of sole control over R2. Since Italian law does not provide for the automatic suspension of a concentration pending antitrust review, the parties completed the transaction before the ICA’s clearance. In February 2019, the ICA opened an in-depth investigation and one month later issued a statement of objections, raising serious doubts that the transaction was capable of lessening competition in the market for retail pay-TV services. As a result, the parties withdrew the notification and tried to restore the previous competitive conditions: R2 was partially demerged from Sky and returned under MP’s control, apart from some ‘ancillary activities’ (i.e., two going concerns of R2 that Mediaset transferred back to Sky following the restitution of R2) and other residual assets.

Nonetheless, the ICA took the view that the demerger did not fully restore the situation existing before the transaction. In its decision, therefore, the ICA – while authorizing the concentration under review – imposed on Sky a set of behavioral remedies for the duration of three years, aimed at effectively restoring competition in the market. These remedies included the obligations: to grant third parties access on a fair, reasonable, non-discriminatory and cost-oriented basis, to any new proprietary DTT platform that Sky might set up; and to abstain from using the information and the assets acquired from R2 in connection with Sky’s pay-TV offers.

In its decision, the ICA adopted a broad definition of ‘concentration’: its assessment was not limited to Sky’s acquisition of R2, but also covered a set of agreements signed in 2018 between Sky and MP, by which MP assigned to Sky some DTT transmission capacity for its pay-TV services (the “DTT sub-license”), and granted a license allowing Sky to include MP’s channels and TV shows in its pay-TV offers via satellite, DTT and online. According to the ICA, these contractual arrangements would continue to be effective even after the abandonment of the notified transaction, and had already had the effect of causing MP’s exit from the market and a significant increase in Sky’s customer base.

The TAR Lazio’s ruling

The TAR Lazio annulled the decision on both procedural and substantive grounds.

Procedural grounds

Sky pleaded the violation of its rights of defense on the ground that the ICA decision was based on facts and documents gathered after the closing of the investigation phase, and with regard to which Sky could not exercise its rights of defense. The TAR Lazio concurred with Sky’s argument, finding that there was a substantial difference between the transaction on which the statement of objections was based and the transaction which was the object of the decision. According to the Court, the statement of objections’ brief assessment of the potential, residual effects in case the acquisition of R2 was undone did not change this conclusion. First, at the time of the statement of objections, the abandonment of the transaction was a mere possibility. Secondly, the statement of objections’ allegations on the concentrative nature of the transaction and the remedies to be imposed were based on the assessment of the transaction before it was abandoned. In contrast, a very substantial (and decisive) part of the arguments underlying the decision was dedicated to the analysis of the effects of the transaction following the restitution of R2. As a result, Sky was unable to exercise its rights of defense as far as those arguments were concerned. Moreover, the ICA was not under time constraints, and should have opened of its own motion a new procedure to notify Sky of the new objections on which the decision was based.

Substantive grounds

The TAR Lazio also accepted Sky’s plea according to which – after R2 was given back to Mediaset – there was no longer a concentration between Sky and Mediaset that could be subject to the ICA’s authorization. According to the Court, the DTT sub-license did not grant Sky any exclusivity, considering that Mediaset continued its Infinity offer.[2] Moreover, the DTT sub-license’s term was too short to result in a lasting change in control of the undertakings concerned and in the structure of the market.

Moreover, the ICA did not show that the ‘ancillary activities’ were an undertaking to which a turnover could be attributed and failed to verify the turnover that could be attributed to the other residual assets mentioned in the ICA’s decision.

Finally, the TAR Lazio held that the ICA did not demonstrate that the individual agreements allegedly forming part of the overall transaction were conditionally linked to each other, and that each of them had concentrative nature.

[1]              TAR Lazio, judgment No. 2932/2020; ICA decision of May 20, 2019, No. 27784, C12207, Sky Italia/R2.

[2]              The Infinity offer is provided by MP on its over-the-top platform and is a natural continuation of MP’s offer, given that it includes the same contents. It was found to compete with Sky’s offer on the market for retail pay-TV services.