The Italian Antitrust Authority’s approach to competition in the digital economy era

Competition in the digital economy has become a topical subject in Italy, with the Italian Antitrust Authority (IAA) having shown an interest in a number of areas in recent months.

Big Data

The IAA has  opened a sector inquiry into “Big Data”, in cooperation with the Communications regulator and the Privacy authority.

The main purpose of the inquiry is to identify potential competition concerns and define a regulatory framework capable of fostering competition in the markets of the digital economy, protecting privacy and consumers, and promoting pluralism within the digital ecosystem.

Big data have been discussed at length by the IAA’s President Giovanni Pitruzzella, during a recent conference which took place at the end of May.

Pitruzzella firstly highlighted that platforms and other operators are increasingly using complex algorithms to define their commercial policies and, in particular, their prices.

According to Pitruzzella, such algorithms are an important challenge for competition authorities as they change the ways collusion among undertakings works. The algorithms not only assist operators (i.e. humans), but can also operate autonomously. Crucially, machines can autonomously align the behaviour of an undertaking to that of its competitors, without the need for human collusion and achieving the same results.

The concern of the IAA is that such practices already exist on the market but cannot be tackled by competition authorities using the ordinary means and principles.

For this reason, the IAA has announced that it will employ a number of new IT experts, with specific expertise in algorithms and big data, so as to be able to understand what is going on in the market and to make sure that the IAA is well prepared to tackle any practices raising concerns.

As well as being a challenge though, Pitruzzella interestingly pointed out that algorithms can also be used by the authorities, to identify behaviours of undertakings which might create competition concerns and anomalous price trends.

The IAA is also looking to establish whether big data can give rise in itself to market power, and what kind of value should be attributed to this kind of information.

Privacy

The intricate relationship between privacy protection and antitrust is another of the matters that the IAA is seeking to investigate. According to Pitruzzella, the question is whether behaviours that are deemed illegitimate from a privacy law point of view can also be construed as competition law infringements (e.g. under the abuse of dominance rules). It will be interesting to see whether the IAA take any action in this area, and whether other national Competition Authorities will follow suit.

E- Commerce and vertical agreements

The online sector is currently being targeted by the IAA also from an enforcement point of view.

On 17 May 2017, the IAA opened an investigation under Article 101 of the TFEU against Cadel Ltd (Cadel), a company belonging to a major European group that produces biomass heaters. The investigation concerns various commercial policies that Cadel has adopted (since at least 2006) for its online distribution channels, with the apparent aim of preventing online dealers from selling Cadel products at excessively low prices.

According to the IAA, Cadel requires online dealers to charge minimum sale prices and to apply the maximum discounts indicated by Cadel.

Further restrictions of online sales imposed by Cadel, according to the IAA, include:

• the obligation to market Cadel products only through Italian sites registered with the domain ‘.it’;
• the prohibition to use languages other than Italian for online offers of Cadel products; and
• the obligation to deliver Cadel products only to customers in the Italian territory.

In light of this, the IAA’s concern is that such terms and rules might give rise to anti-competitive territorial restrictions to the online sales of Cadel products: these arrangements might put off dealers from expanding their distribution business abroad. They might also prevent foreign customers from purchasing Cadel products from the dealers admitted to the company’s Italian network.

This case is particularly important because it shows a renewed attention on vertical agreements from the IAA; it follows two other recent cases concerning resale price maintenance and other vertical restrictions imposed also on online resellers.

The first case (I718-Dietary supplements) concerned the compatibility with Article 101 TFEU of provisions contained in distribution agreements with retailers and wholesalers; the second  (I766-Solar and wind energies inverters) concerned provisions imposing minimum prices to retailers.

In both cases, the IAA accepted the commitments proposed by the suppliers and closed the investigations without ascertaining any infringement.

This, however, should not be viewed as an indication of leniency from the IAA towards vertical restrictions. Rather, those cases may be seen as  the IAA sending a message to the market that vertical relationships would not be ignored, and where there is cause for concern they will be investigated.

Moreover, in the Dietary supplements case, the Authority specified that the resale price maintenance concerned only one online retailer and, therefore, was not sufficient to have an effect on competition.

It will be interesting to see whether the IAA will take a stricter approach in the Cadel case, given the wider scope of its restrictions. If so, this will confirm that the IAA are not taking a soft line on vertical restrictions in e-commerce.