On December 22, 2020, the TAR Lazio quashed an infringement decision issued by the ICA (“ICA Decision”) against the public utility company Hera Holding Energia Risorse Ambiente S.p.A. (“Hera”) and its subsidiary Herambiente S.p.A. (“Herambiente”).[1] The ICA Decision found an alleged abuse of dominant position in the markets for the collection of waste paper in a number of municipalities in the region of Emilia- Romagna, for having favored Akron S.p.A. (“Akron”) – Herambiente’s subsidiary active in downstream markets – to the detriment of competitors.[2]
Background
ICA Decision
Hera holds a monopoly in the collection of waste paper from public surfaces in several provinces in Emilia Romagna. Herambiente’s subsidiary Akron is active in the production and sale of waste paper intended for paper mills. According to the ICA, Hera abused its dominant position by preventing access to cellulosic waste (a product resulting from urban recycling) for competitors of Akron.
The ICA alleged that the dominant position of Hera in the upstream market for the collection of waste enabled Herambiente to have a dominant position in the downstream market for the sale of separated municipal waste in various municipalities in Emilia Romagna.
The ICA asserted that the waste paper collected by Hera was transferred directly to Akron at a price lower than the market price, without any fair, transparent and non-discriminatory comparison with competitors’ offers. In the ICA’s view, such conduct resulted, respectively, in:
an exclusionary abuse, in the form of input foreclosure, carried out by Herambiente in favor of its own downstream subsidiary Akron. According to the ICA, this conduct prevented Akron’s competitors from competing in the downstream markets for the sale of pulp to the paper mills;
an exploitative abuse, arising from the transfer of waste paper to Akron at a price lower than the market price. The lower revenues earned by Hera resulted in an increase in the tariffs paid by residents for the urban hygiene services in the municipalities in which Hera managed waste collection. In addition, Akron, which had exclusive access to inexpensive supplies, was able to exercise significant market power in the sale of waste paper, which resulted in higher prices for paper mills.
The TAR Lazio judgments
According to the TAR Lazio, the ICA overlooked the fact that Hera was entrusted with the provision of a public service and the definition of the relevant markets did not take that into account.
In particular, the court upheld Hera’s argument that, at the time, the market for the recovery of cellulosic waste from urban separate collection was not fully liberalized. As a matter of law, the public service to be entrusted following a tender procedure did not have to include the recovery phase. Hera was entrusted with the provision of the public service and, thus, had to ensure – for reasons of urban hygiene, health and environmental protection – continuity, safety and efficiency of the entire waste cycle, including the final recovery phase.
The TAR Lazio referred to the European Court of Justice judgment in the Intel case, according to which, “in the case where the undertaking [which is in a dominant position] 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 … the Commission is not only required to analyze, first, the extent of the undertaking’s dominant position on the relevant market and, secondly, the share of the market covered by the challenged practice … it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market”.[3]
However, the ICA asserted an infringement of competition law only due to the fact that Hera had not adopted competitive procedures for the selection of the entity responsible for the recovery phase. The ICA did not take into account the arguments put forward by Hera, according to which, among other things:
the decision to entrust the waste recovery service to a company belonging to the same group represented the most efficient way of fulfilling Hera’s legal duty. In particular, it was the only way to maintain the quality of the management service under Hera’s direction, planning and control, to the advantage of the public interest in terms of greater environmental sustainability;
a number of technologically-advanced waste treatment facilities were available to Akron, but not to any other operator active in the same area;
Akron had high-level economic and financial standing in the long term, unlike its potential competitors.
Against this background, the TAR Lazio held that the ICA should have established whether or not Hera’s decision to entrust the service within the group only aimed at excluding Akron’s as efficient competitors from the market. However, the ICA did not carry out this analysis. Nor had the ICA proved that competitors submitted offers comparable, in terms of quality, to the service Akron could provide.
Other developments
On December 10, 2020, the Council of State rejected an appeal lodged by Tubosider S.p.A. (“Tubosider”) against a TAR Lazio judgment that upheld an ICA decision to reject an application to revise a fine imposed in 2012 on, among others, Tubosider.[4] The fine concerned an alleged infringement of Article 101 TFEU in the national road crash barrier sector. The Council of State also rejected Tubosider’s argument that the ICA’s Fining Guidelines (ICA decision of October 22, 2014, No. 25152) do not provide, unlawfully, for an obligation on the ICA to revise a fine in the case of exceptional and extraordinary circumstances concerning the relevant market or the financial situation of the undertaking concerned.
Firstly, the Council of State held that the ICA is not required to take a decision on such a request, a power that it may instead exercise at its own discretion. Secondly, the Council of State held that the worsening of the financial situation of a firm cannot affect the lawfulness, enforceability and finality of a fine previously imposed and upheld.
As a matter of law, in setting the amount of a fine, the ICA has to take into account only the relevant factors at the time the fine is imposed. The law and the ICA’s Fining Guidelines do not provide for the possibility to consider the worsening of a financial situation to adjust the amount of a fine. Nor can such a possibility be inferred from EU or national case law.
Finally, in the Council of State’s view, allowing the continuous revision of a final fine would undermine the effectiveness and the deterrent effect of competition rules, and would carry the risk of introducing a further inadmissible level of appeal, to the detriment of legal certainty.
[1] TAR Lazio judgments of December 22, 2020, No. 13886 and 13888.
[2] ICA decision of February 27, 2014, No. 24819, case A444, Akron. The ICA distinguished three relevant markets: (i) the market for waste paper collection; (ii) the market for used paper from mixed collection; and (3) the market for recovered paper of grade 1.02.
[3] European Court of Justice, judgment of September 6, 2017, C-413/14, Intel, §§ 138-139.
[4] Council of State, judgment of December 10, 2020, No. 7874; TAR Lazio, judgment of May 16, 2020, No. 6087.