On October 24, 2020, the Regional Administrative Court of Lazio (the “TAR Lazio”) upheld the applications lodged by nine leading captive banks,[1] two further financial institutions holding equity stakes in two of the applicant captive banks, seven automotive groups as well as trade associations Assilea and Assofin, for annulment of the 2018 decision by which the Italian Competition Authority (the “ICA”) imposed on the applicants[2] total fines of approximately €670 million for their participation in a cartel concerning the sale of car vehicles through the provision of financial products.[3]

The ICA decision

According to the ICA, the infringement consisted of parallel exchanges of information, which included (i) direct bilateral and multilateral information exchanges among captive banks, and (ii) indirect multilateral information exchanges among captive banks through trade associations.

The ICA identified the relevant market affected by the infringement as the market for the “sale of cars through loans granted by captive banks (both financing activities in the strict sense and leasing).”

The ICA maintained that captive banks compete with each other in this market, because the cost of financing is a relevant part of a car’s price and influences consumer choice. Therefore, captive banks actively participated in the competition among car manufacturers as a fundamental marketing arm to support car sales.

The TAR Lazio judgment

The TAR Lazio accepted two of the pleas raised by the applicants and held that the ICA decision was unlawful, finding it unnecessary to analyze also their remaining pleas.

  • Late opening of the investigation

As the TAR Lazio highlights, the first leniency application by a car vehicle producer reporting the unlawful conduct was received in March 2014, but the ICA only opened the formal investigation in April 2017. From the procedural standpoint, the TAR Lazio found that the ICA carried out a preliminary investigation lasting about 3 years, without any reasonable justification explaining such delay in the opening of the formal investigation.

In the course of the procedure, the ICA claimed that such delay was due to the fact that the leniency applicant submitted a full-fledged application to the European Commission (“EC”), but mere summary applications (in 2014 and 2016) to the ICA. Therefore, according to the ICA, the opening of the

investigation at national level was prevented by the EC’s indecision whether to directly pursue the case or to allocate it to the ICA. The ICA also submitted that it contacted the EC a number of times in this regard and that, as soon as it was clear that the EC was not going to deal with the case, the ICA promptly opened its investigation.

The TAR Lazio rejected the ICA’s claims and held that there was no evidence in the case file to support them. Moreover, the TAR Lazio highlighted that the ICA, in the course of the preliminary investigation, stated twice its willingness to grant the leniency applicant immunity from fines. The TAR Lazio noted that such behavior did not fit with the treatment that the ICA normally reserves for summary leniency applications, which are indeed only aimed at obtaining a marker from the ICA, but rather suggested that the ICA treated the applications as full leniency applications.

The TAR Lazio then referred to Article 14 of Law No. 689/1981.[4] Although the said provision is not directly applicable to antitrust proceedings (i.e., to either the preliminary investigation phase or the formal investigation procedure), the ICA is bound to initiate the investigation within a reasonable period of time, pursuant to the general principles of efficient and good administration of justice that are enshrined in Law No. 241/1990[5] as well as in Article 6 of the ECHR and Article 41 of the EU Charter of Fundamental Rights. The Court clarified that this time period runs from the moment when the ICA has full knowledge of the possible infringement. Having regard to the case under review, the TAR Lazio considered that a preliminary investigation lasting over 3 years from the first leniency application was unreasonably long and incompatible with these general principles. However, the maximum duration that the ICA’s preliminary investigation could possibly reach for it to be considered reasonable remains unclear. As a result, for future cases, the analysis will still need to be carried out on a case-by-case basis, taking into account in particular the complexity of the case and the initial evidence collected by the ICA.

  • Definition of the relevant market

As to the substance of the case, the TAR Lazio held that the ICA’s statement of reasons contained several errors concerning the definition of the relevant market and the analysis of conduct with anticompetitive effects on the market.

The TAR Lazio observed that, although the ICA defined the market affected by the infringement as the “sale of cars through loans granted by captive banks”, it failed to investigate the dynamics of such market, instead focusing exclusively on the financial services related to the purchases of vehicles.

According to the Court, the ICA failed to explain how the exchange of information between the captive banks could affect the commercial decisions of car manufacturers and amount to a restriction of competition with respect to car pricing strategies. Furthermore, the ICA did not analyze whether the exchange of information concerning the financial services could influence car prices. In this respect, the TAR Lazio found that the applicant captive banks provided evidence that car prices were not linked to the competitive dynamics of financing services.

Finally, the Court noted that the ICA’s insufficient analysis of the relevant market was further highlighted by the fact that it left out of the scope of the investigation one important car manufacturer, even though its captive bank was eventually found to have participated in the infringement.

[1]              A captive finance company is a wholly-owned subsidiary of a car vehicle manufacturer that provides loans and other financial services to the customers of its parent company.

[2]              TAR Lazio, Judgment Nos. 12529-12545 of October 24, 2020.

[3]              ICA, decision of December 20, 2018, No. 27497, Case I811 – Finanziamenti Auto (see description in the January-February 2019 Newsletter, available at https:// www.clearygottlieb.com/-/media/files/italian-comp-reports/italiancompetitionlawnewsletterjanuaryfebruary2019pd-pdf.pdf).

[4]              Article 14 of Law No. 689 of November 24, 1981 (modifying the criminal law system, which regulates inter alia administrative sanctions applicable in case of antitrust violations): “the details of the infringement must be notified to the persons concerned residing in the Italian territory within a period of ninety days …”. Pursuant to Section 31 of the Italian Competition Statute, the general principles governing administrative sanctions set forth under the first two sections of Law No. 689/1981 apply, as far as compatible, to fines levied by the ICA.

[5]              Law No. 241/1990 (providing rules on administrative procedure and right of access to administrative documents)