29 April 2020

With the judgement no. 520/2020, the Council of State rejected the appeal brought by the Italian Antitrust Authority (“IAA”) against the judgments by which the Lazio Regional Administrative Court (the so-called Tar Lazio) had annulled the decision adopted by the Authority itself at the end of proceedings I742.

In particular, it should be recalled that, on July 2017, the Italian Antitrust Authority imposed fines of more than 140 million Euros on the main steel companies operating in the markets for reinforcing steel rod and electro welded wire mesh, because of the existence of an anticompetitive agreement in breach of Article 101 TFEU.

The conduct, ascertained by the Authority, consisted of the regular and systematic exchange of sensitive commercial information concerning the purchase costs of ferrous metal scrap and their future steel production plans, during the monthly Trade Association meetings. Furthermore, the infringement concerned also the fixing of sales prices for the final products, put in place during the meetings of Price Commission of steel products of the Chamber of Commerce of Brescia.

Before the judgement of the Supreme Administrative Court, the IAA’s decision was challenged before the Lazio Regional Administrative Court, that upheld the appeal filed by the fined companies, considering the Authority’s decision incorrect both from a substantial and a procedural point of view.

The Italian Competition Authority decision

On 19 July 2017, the Italian Antitrust Authority held that Ferriera Valsabbia S.p.A., Feralpi Siderurgica S.p.A., Ferriere Nord Spa, Riva Acciaio S.p.A., Alfa Acciai S.p.A., Federalpi Siderurgica S.p.A., Industrie Riunite Odolesi I.R.O. S.p.A. (the main Italian players in the markets for reinforcing steel rods) had implemented – between 2010 and 2016 – a single, complex and continuous anticompetitive agreement in breach of Article 101 TFEU.

The investigation revealed that the parties exchanged sensitive commercial information on the raw material (i.e. ferrous metal scrap) and fixed the wholesale price of reinforcing bars and electrowelded mesh, in order to limit the competitive confrontation in the relevant market.

In particular, the Authority established the uniqueness of the restrictive purposes between the parties by verifying i) the common use of the reinforcing bars and electrowelded mesh; ii) the identity of the demand, considering that customers purchasing reinforcing bars purchase also electrowelded mesh; iii) the common production process and consequently the existence of a high degree of substitutability between the products in question; iv) the coincident geographic scope of the respective markets; and finally v) the same market structure and prices.

According to the IAA, the anticompetitive agreement was implemented through the exchange of sensitive information put in place within the Nuovo Campsider Association – a trade association representing all the national steel companies – and through the monitoring of prices carried out by the Price Committee of the Chamber of Commerce of Brescia.

It should be noted that the information exchanged within the Association concerned: i) the respective forecast of ferrous metal scrap requirements; ii) the ferrous metal scrap stock levels; iii) the foreseeable change in its purchase price; iv) the pace and energy costs of production.

The Authority considered that this information exchanged on a monthly basis allowed the companies, from one hand, to reduce the uncertainty about the costs incurred by competitors to purchase the ferrous metal scrap, as well as the expected level of production; and, from the other hand, “to define their commercial behaviour due to the information acquired and provided there, in a context of mutual control of commercial and industrial policies”.

Furthermore, in the Authority’s view, the monitoring prices, which had taken place within the Price Commission of the Chamber of Commerce of Brescia, represented a joint price-fixing agreement.

Considering the severity of these conducts, as anticipated, the Authority imposed a significant fine amounting to a total of € 140 million.

The first instance judgment

The Lazio Regional Administrative Court upheld the appeal filed by the fined companies considering the Authority decision incorrect from both the substantial and procedural points of view (judgement of June 12th, 2018, n. 6518).

First of all, with specific reference to the procedural issues, the first-instance judge recalled the following principles: i) the fact that Article 14 of Law no. 689/1981 is not directly applicable in antitrust proceedings cannot justify an excessively long preliminary investigation; ii) for the purposes of assessing the adequacy of the time for ascertaining the infringement, what is relevant, as an initial term, is not the mere knowledge of the punishable fact, but the acquisition of full knowledge of the unlawful conduct.

Applying the above principles to the present case, the Tar Lazio established that the Authority unreasonably prolonged the preliminary investigation without objective reasons to justify the delay in the initiation of the investigation procedure, thus violating the principle of sound administration.

Indeed, the Authority already had at its disposal the full information picture one year before the formal opening of the investigation procedure.

Furthermore, with regard to the substantial issues, the Tar Lazio found numerous investigation deficiencies regarding the correlation between the information exchanged within the Association and the subsequent meetings held within the Price Commission of the Chamber of Commerce of Brescia. The IAA grounded its conclusions on the assumption that the link between ferrous metal scrap and the finished product would be sufficient to demonstrate the correlation between the information exchange and the joint fixing prices within the Chamber of Commerce; nevertheless, the Authority did not take into account the impact of other inputs for the purposes of fixing the final sales price. Therefore, the administrative court stated that the translation effect on the price of the finished product is not enough to show that the cost of ferrous metal scrap is a unique parameter for the determination of the final price.

According to the Tar Lazio, even the activity within the Price Commission of the Chamber of Commerce of Brescia had to be considered lawful and in compliance with antitrust law, since not only this activity was expressly provided by the institutional framework of the Italian Chambers of Commerce, but it also concerned the monitoring of minimum/maximum price ranges (not of a predetermined price).

The final decision of the Council of State

With judgment no. 512/2020, the Council of State rejected the appeal filed by the Italian Antitrust Authority, confirming the first-instance judgment.

Indeed, the Italian Supreme Administrative Court confirmed the assessments made by the Tar Lazio, judging that the grounds of appeal raised by the IAA, in the second-instance proceedings, were unsuitable to call into question the arguments and conclusions reached by the Tar Lazio.

From a procedural viewpoint, the Council of State confirmed the unlawfulness of the IAA’s decision for breach of Article 14 of Law 689/81, since the Authority had unreasonably prolonged the preliminary investigation phase – of more than 4 years – before formally opening the investigation proceeding.

Indeed, the Supreme Administrative Court reiterated the principles already mentioned by the first-instance judge, specifying that the deadline for contesting administrative violations, such as antitrust infringements, is peremptory. This deadline aims at ensuring the timely exercise of the rights of defence, in order to avoid a kind of permanent investigation conducted pending the acquisition of absent or insufficient evidence.

With reference to the evidence on the existence of the anticompetitive agreement, the Council of State ruled that the Authority had failed to pass the standard of proof necessary in order to demonstrate the existence of an anticompetitive infringement by object.

In fact, the IAA had not provided adequate evidence of the ability of the exchange of information, put in place within the meetings at the trade association and at the Chamber of Commerce of Brescia, to eliminate the uncertainty about the parties’ behaviour in the market.

In particular, the Authority did not demonstrate the subjective correspondence among the companies attending the meetings within the Trade Association and the meetings within the Price Commission of the Chamber of Commerce of Brescia. In this respect, the Council of State underlined the lawfulness of both meetings as part of the ordinary activities of the Trade Association and the Price Committee. Furthermore, the Authority did not take into account certain supporting circumstances, such as the different impact of the ferrous metal scrap on the final price of the products for companies involved, the application of individual discounts by all companies or the identification of wide ranges of prices. Finally, the Authority was not even able to prove the existence of negative effects on the steel market or possible consumers harm.

This judgement of the Council of State has finally ended the dispute at stake.

Elisa Teti and Alessandro Raffaelli