Antitrust Bites – Newsletter
July 2024Consumer protection: Council of State rules on the duty of the hearing before the ICA
With its judgement No. 5716 published on 28 June 2024, the Council of State annulled a fine of EUR2 million imposed by the ICA for an aggressive commercial practice, because of the Authority's refusal to grant a hearing to the company, which was considered unlawful.
The Council of State upheld the ground of appeal against the judgment of the Lazio Regional Administrative Court, which was aimed at denouncing the unlawfulness of the Regulation on investigative procedures in matters of consumer protection of the ICA set out in Resolution 25411 of 1 April 2015 insofar as it doesn't provide for the mandatory nature of the hearing before the deciding board of the ICA in proceedings concerning penalties of an afflictive nature at least where the person concerned makes an express request.
The Regulation provides that the hearing of the parties to the proceedings is left to the discretion of the person in charge of the proceedings, who has the power (and not the obligation) to arrange for it where necessary to gather or assess the elements of inquiry requested by one of the parties. However, once the preliminary investigation phase is concluded, the person in charge of the proceedings refers the documents to the deciding board to adopt the final measure. During this phase, the Regulation doesn't provide for any participation of the parties.
As already noted with reference to the Italian Companies and Exchange Commission (Commissione Nazionale per le Società e la Borsa – CONSOB) sanction proceedings, the Council of State emphasises that respect for the principle of cross-examination implies “something more” than merely the prior arraignment of the charges (which, in any case, in consumer protection proceedings, unlike antitrust sanctions proceedings, is not even envisaged) and the possibility for the party to assert its defence.
According to the Council of State, the parties must have the opportunity to know the preliminary findings and to reply before the deciding board of the Authority makes its final decision. This is different from consumer protection proceedings. Failure to recognise this right – according to the Council of State – means that parties don't get the immediate right of defence in proceedings aimed at imposing “afflictive” sanctions.
So, the Council of State, partially reforming the appealed judgment, recognised the unlawfulness of the Regulation where it doesn't provide for the “substantial” duty of the hearing before the deciding board. Consequently, it annulled the sanctioning measure, vitiated by a procedural defect. The Administrative Judge didn't deem it necessary to annul the Regulation. But the Judge pointed out that the conforming effect of the decision in question means the ICA has to renew the preliminary investigation by assessing whether to introduce measures into the Regulation such as to eliminate the ascertained cause of illegitimacy.
Italian Regulatory Authority for Energy, Networks and Environment appeals ICA's Communication regulating its new powers in fact-finding investigations
By Resolution No. 276/2024/C of 8 July 2024, the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) decided to appeal the ICA's Communication (adopted with Decision No. 31190/2024) which regulates the exercise of its new powers in fact-finding investigations provided for by Article 1, paragraph 5, of Decree-Law No. 104/2023 (Decreto Asset).
The Decree-Law provides that if, following a fact-finding investigation conducted pursuant to Article 12, paragraph 2, of Law 287/1990, the ICA identifies competition problems that hinder or distort the proper functioning of the market, resulting in consumer harm, it can impose necessary and proportionate structural or behavioural measures on the undertakings to eliminate the distortions of competition. The Council of State clarified in its Opinion No. 61/2024 that the new powers' scope of application is not restricted to certain sectors or products.
As stated in Resolution No. 276/2024/C, ARERA appeals the Communication as it believes that “it is based on an erroneous interpretation of the relevant factual and legal elements.”
Notification of judicial documents in actions for damages for anticompetitive agreements
In its judgement of 11 July 2024 in Case C-632/22, the Court of Justice of the EU excluded that the notion of “economic unit” between a parent company and its subsidiary justifies judicial documents addressed to the former being served on the latter in the context of an action for damages resulting from an agreement restricting competition.
The decision under review stems from the question referred for a preliminary ruling by the Spanish Supreme Court. The latter was asked to review the judgment in which the Commercial Court No 1 of Valencia had held that an action for damages for infringement of Article 101 TFEU was admissible even though it had been served at the Spanish seat of the formally defendant company's subsidiary (based in Sweden). The referring court asked the Court of Justice to clarify whether it is compatible with the right to an effective judicial protection laid down in Article 47 of the Charter of Fundamental Rights of the European Union to serve documents intended for the parent company at the address of the subsidiary, established in another Member State, when they form a single economic unit. Article 47 expresses the need to reduce the costs of translation and service of judicial documents drawn up by the applicant and to avoid an increase in the length of proceedings.
The Court pointed out that the undertakings making up an “economic unit,” although jointly and severally liable for the obligations incumbent on them, retain their autonomy and independence from each other, since the “economic unit” cannot be regarded as a separate legal entity.
According to the Court, it cannot be presumed that a subsidiary has been designated by the parent company as the person authorised to receive on its behalf the judicial documents intended for it. That would risk prejudicing the parent company's rights of defence. On the contrary, the right to a fair trial, laid down in Article 47 of the Charter of Fundamental Rights of the European Union, requires that judicial documents intended for a person be “actually” and “effectively” delivered to that person.
In the light of these considerations, the Court concluded that “a parent company against which proceedings have been brought for compensation for damage caused by an infringement of competition law is not validly served with a summons where service of the document instituting the proceedings was effected at the address of its subsidiary domiciled in the Member State in which the proceedings were brought, even if the parent company forms an economic unit with that subsidiary.”
Recent ICA and European Commission proceedings on consent related to personal data
Two recent initiatives, undertaken respectively by the Italian Competition Authority (ICA) and the European Commission, highlight the growing importance of personal data protection and transparency in data collection by major online platforms.
The ICA has launched an investigation into Google and Alphabet (Google's parent company) concerning a potential misleading and aggressive commercial practice. According to the Authority, the companies may have engaged in the practice regarding the management of user consent related to the “linking” of various services offered by Google. The ICA asserts that the information provided to users by these operators is incomplete or unclear, particularly regarding the actual impact of the consent given by the users.
The Authority has also expressed concerns about the compatibility of the techniques used by Google to obtain user consent with consumer protection laws. In the ICA's view, these techniques might pressure users into consenting to the combined and cross-usage of their data across the different services offered by Google, leading them to make decisions they might not otherwise have made.
The Commission has communicated its preliminary findings, indicating that Meta, with its online advertising service “pay or consent,” which requires users to choose between (i) subscribing to a monthly plan for an ad-free version of the offered social networks or (ii) the free version of the social network with personalized ads, violates EU Regulation No. 1925/2022 – Digital Markets Act.
Specifically, under Article 5(2) of the DMA, gatekeepers must get user consent to combine their personal data (typically, to provide personalized offers). If the user refuses, they should be offered a less personalized but equivalent alternative of the requested service. According to the Commission, by presenting users with the binary choice offered by the “pay or consent” model, Meta forces them to consent to the combination of their personal data without providing (as required by the DMA) a less personalized but equivalent alternative of the social networks.
