On February 28, 2022, the Regional Administrative Court for Latium (the “TAR Lazio”) rejected the appeal filed by TIM against the ICA’s decision that had imposed a fine of over €116 million imposed by the ICA in 2020 for an alleged abuse of dominant position in the wholesale and retail markets for broadband and ultra-broadband telecommunications services in Italy (the “Judgment”).[1]

The ICA’s Findings

In a decision of February 25, 2020 (the “Decision”),[2] the ICA held that TIM had engaged in a single and complex exclusionary strategy, comprising different practices allegedly aimed at restricting competition in a market considered strategic for the development of the country. First, the ICA contested that there had been a change in TIM’s investment plans with regard to areas characterized by market failure,[3] allegedly aimed at making it more difficult for the new operator Open Fiber S.p.A. (“Open Fiber”) to enter the market. Second, the ICA held that TIM had implemented a regulatory gaming and sham litigation strategy against Open Fiber and Infratel Italia S.p.A. (a public company tasked with the implementation of the Italian Strategy for High- Speed Broadband), by initiating groundless and abusive legal proceedings ultimately aimed at hindering the tendering processes for the areas of market failure. Third, the ICA argued that TIM had implemented anticompetitive pricing policies for its wholesale and retail services, in order to secure a large share of ultra-broadband fixed lines, before the FTTH coverage announced by Open Fiber was available.

In the ICA’s view, TIM’s conduct would have allegedly hindered the investments in ultra- broadband networks in areas of market failure.

The Judgment

TIM filed an appeal against the Decision. Inter alia, TIM claimed that the ICA had: (i) incorrectly defined the relevant markets for wholesale fixed broadband and ultra-broadband access services and fixed broadband and ultra-broadband retail telecommunications, which were considered national in scope, while there are distinct smaller geographic markets, characterized by differing competitive and regulatory conditions; (ii) erroneously found an unitary anticompetitive strategy; (iii) failed to prove that TIM’s conduct was capable of having foreclosure effects; (iv) erroneously considered that TIM’s investments in new infrastructure were not profitable; (v) committed a number of errors in the assessment of the alleged sham litigation; (vi) failed to prove that TIM’s wholesale and retail pricing policies had anticompetitive effects; (vii) erroneously considered the alleged infringement was serious and, thus, it was appropriate to impose a fine on TIM; (viii) set the amount of the fine on the basis of erroneous assumptions, as the ICA had incorrectly determined the value of the sales made, as well as the gravity and duration of TIM’s alleged infringement.

The TAR Lazio rejected TIM’s appeal, by making extensive reference to the reasoning of the Decision.

In particular, with regard to the definition of the relevant markets and the finding of dominance, the TAR Lazio held that the ICA had carried out a thorough analysis and its conclusions were consistent with the available evidence.

As to the change in TIM’s investment plans, the TAR Lazio confirmed the ICA’s view that TIM had abused its dominant position, because it had decided to invest in areas of market failure, notwithstanding that its internal profitability analyses suggested that the investment was not economically viable. In this respect, the TAR Lazio agreed with the ICA’s view that the change in TIM’s investment plans was allegedly aimed at preserving its position and preventing the entry of other operators willing to build their own FTTH network.

With regard to the alleged exclusionary prices, the TAR Lazio reiterated the ICA’s view that TIM had offered below-cost prices for its VULA FTTH service and a wholesale offer capable of tying customers, in order to secure a significant portion of the contestable demand at the wholesale level. In this respect, the fact that the contested offers were under assessment by AGCOM, and were discontinued by TIM after the regulatory authority’s decision not to approve them, was not considered relevant by the TAR Lazio. The TAR Lazio also confirmed the ICA’s view that TIM had offered, in the retail market, promotional conditions allegedly capable of creating switching costs for customers, thus limiting access to the contestable demand also at the downstream level.

As to the effects of the conduct, the TAR Lazio stated that the ICA is not required to prove the actual effects of the contested practice, insofar as it provides evidence that the conduct could alter competition. In any event, in the TAR’s view, the ICA had allegedly ascertained the existence of negative effects, as: (i) TIM’s market share in the ultra-broadband segment had grown from 42.4% in December 2016 to 48% in December 2017; and the share of customers who had subscribed to TIM’s ultra-broadband offers in 2017 had significantly increased.

[1]      TAR Lazio, Judgment No. 2334 of February 28, 2022.

[2]      ICA Decision No. 28162 of February 25, 2020, case A514, Condotte fibra Telecom Italia (discussed in the March 2020 issue of this Newsletter: https://www. clearygottlieb.com/-/media/files/italian-comp-reports/italiancompetitionlawnewslettermarch2020pd-pdf.pdf).

[3]      Market failure areas (so-called “white areas”) are those where, in the absence of public subsidies, private investment in innovative infrastructure would not take place.