The Council of State Confirms the Annulment of an ICA Decision on an Abuse of Dominance in the Market for Ticketing Services for Live Pop Music Concerts

By Cleary Gottlieb on October 24, 2022

On October 24, 2022, the Council of State[1] confirmed on appeal the annulment of a 2020 decision, by which the ICA had imposed a fine on CTS Eventim-TicketOne Group (“TicketOne”) for allegedly abusing its dominant position in the Italian market for the provision of ticketing services for pop music concerts.[2]

Background

The Panischi Agreements

In 2001, TicketOne notified the ICA of two agreements it had entered into with some of the leading organizers of live music events (the “Panischi Agreements”), requesting confirmation that they fulfilled the requirements for exemption from the ban on anticompetitive practices. The Panischi Agreements, whose term was 15 years, comprised: (i) a concession agreement, under which TicketOne had the exclusive right to distribute online an increasing percentage of tickets for events organized by promoters, for a fixed fee of 15% of the ticket price; and (ii) a non-compete agreement between the parties. In 2002, the ICA took the view that the Panischi Agreements did not significantly restrict competition in the relevant markets.

In October 2017, following the expiry of the Panischi Agreements, the ICA sent a request for information to TicketOne, concerning (i) its current relationships with promoters that had been parties to the Panischi Agreements, and (ii) its relationships with its biggest 20 customers (i.e., concert organizers and promoters). In particular, the ICA asked TicketOne to set out whether it had entered into any exclusivity agreements with them. In September 2018, the ICA opened an investigation into TicketOne’s potential abuse of dominance.

The ICA Decision

On December 22, 2020, the ICA adopted a decision finding that TicketOne had engaged since 2013 in a complex exclusionary abusive strategy aimed at significantly restricting sales of tickets for live pop music events by competing ticketing operators. The ICA imposed a fine of approximately €10.8 million on TicketOne.

In the ICA’s view, TicketOne’s unlawful strategy comprised the following conduct: (i) entering into exclusivity agreements with producers and organizers of live music events; (ii) acquiring, between September 2017 and April 2018, four of the major national promoters (the “Acquisitions”); (iii) imposing exclusivity clauses on local promoters; (iv) entering into commercial agreements with smaller ticketing operators, so as to prevent its competitors from dealing with them; as well as (v) retaliation and boycott measures against certain concert organizers to punish them for entering into agreements with Live Nation/TicketMaster (“TicketMaster”), a competitor that TicketOne allegedly sought to exclude from the market.

In its defense in the course of the investigation, TicketOne argued that the Acquisitions and the exclusivity agreements with producers and organizers of live music events, far from being abusive, were necessary in order for it to compete against the entry on the market of the strong competitor Ticketmaster, but the ICA was not persuaded by this argument.

The TAR Lazio Judgment

In March 2022, the TAR Lazio quashed the ICA’s decision, finding that the ICA had failed to prove to the requisite legal standard the existence of a single exclusionary strategy against competing ticketing operators.

In particular, the TAR Lazio disagreed with the ICA’s finding that the Acquisitions represented a key element of the abusive conduct.

The TAR Lazio held, in this respect, that concentrations should only be assessed under the framework provided for by Regulation (EC) No. 139/2004 on control of concentrations between undertakings (“Regulation 139/2004”) or under the corresponding domestic legal framework, depending on the applicable rules. The TAR Lazio reasoned that, if competition authorities were allowed to apply Article 102 TFEU, or the corresponding domestic law provisions, to operations of concentration already completed, the risk would arise that the effects of such transactions may be challenged years after their clearance, in violation of the principles of legal certainty and the interested companies’ freedom of economic initiative.

Interestingly, in the case at stake, the Acquisitions had not been notified to the European Commission (the “Commission”) or to the ICA (as they did not meet the turnover thresholds for notification), and the ICA became aware of their existence only on the basis of TicketOne’s reply to a request for information.

The Council of State Judgment

On appeal, the Council of State upheld the TAR Lazio’s conclusions. It concurred with the lower court that the ICA found that the Acquisitions were abusive without sufficiently investigating first the alternative explanations provided by TicketOne.[3]

However, the Council of State disagreed with the TAR Lazio’s statement concerning the ICA’s lack of a legal basis and competence to assess mergers falling below the domestic notification thresholds pursuant to antitrust rules. The TAR Lazio had based its finding, among other things, on Article 21(1) of the EU Merger Regulation (No. 139/2004), which in its view expressly rules out the applicability to concentrations of Articles 101 and 102 TFEU. In this regard, the Council of State referred to the case law of the EU Court of Justice,[4] which in its view establishes that, where a merger is below the turnover thresholds set out in Regulation No. 139/2004, it may still be appraised pursuant to traditional tools. Nevertheless, the Council of State added that, due to the nature and effects of concentrations, it is still preferable to carry out an ex ante review, as made possible by Article 22 of Regulation 139/2004, which provides for a tool to refer mergers below thresholds to the Commission. It is noteworthy that the Austria Asphalt judgment, which the Council of State referred to, did not concern a merger below thresholds (unlike the Acquisitions), but conduct falling outside of the scope of Article 3 EUMR, thus not constituting a concentration within the meaning of Regulation No 139/2004.[5] It is, therefore, questionable whether the Austria Asphalt judgment was relevant to the case at hand, which fell outside the scope of merger control rules only because the relevant transactions did not meet the turnover thresholds at the Italian level.

[1] See Council of State Judgment No. 9035 of October 24, 2022.

[2] See TAR Lazio Judgment No. 3334 of March 24, 2022 and ICA Decision No. 28495 of December 22, 2020, Case A523 – TicketOne/Condotte escludenti nella vendita di biglietti (discussed respectively in the March 2022 and January 2021 issue of this Newsletter: https://www.clearygottlieb.com/-/media/files/italian-comp- reports/italian-competition-law-newsletter—feb-march-2022.pdf; https://www.clearygottlieb.com/-/media/files/alert-memos-2021/italian-competition-law- newsletter-january–2021.pdf).

[3] In the course of the investigation, TicketOne explained that the Acquisitions had been carried out to implement a (legitimate) business strategy aimed at creating a vertically integrated entity, capable of directly managing the whole organization of live music events (including not only the sale of tickets, but also the promotion of concerts). This strategy was aimed at allowing TicketOne to compete more effectively with TicketMaster, which was already vertically integrated in the markets for promotion and ticketing, and whose global turnover in 2019 exceeded by approximately seven times TicketOne’s turnover. For this reason, in the previous years, TicketOne had also carried out similar acquisitions in several other countries.

[4] See C- 248/16, Austria Asphalt, EU:C:2017:643.

[5] Id., paras. 32-33.