Funding programmes for consumers through the proceeds of fines imposed on competition infringers

During 2007 the Italian Competition Authority (ICA) found and punished six anticompetitive agreements. It also found one abuse of dominant position for which it imposed a € 2 million fine. One may wonder what happens to the fines paid by competition infringers. Under Italian law the fines imposed by the ICA shall be used to fund initiatives and programmes in favour of consumers. A recent judgment of the regional administrative court of Lazio gives an insight into how public authorities should organize and carry out these programmes. (TAR Lazio, chamber III ter,, 17 September 2008, case n. 8356, Codacons v Ministero Sviluppo Economico et al.).

The region of Lazio funded a programme for consumers, the execution of which was entrusted to a private body, through a share of the proceeds of the competition fines imposed by the ICA that the state allocates to regional authorities. A consumer association, Codacons, contested this arrangements before the Tar Lazio, which however, found for the defendant.

To start, the Tar Lazio makes it clear that public authorities have no obligation to entrust the programmes for consumers to consumers’ associations. The text of Article 148 of the Act 388/2000 sets that the pecuniary penalties imposed by the ICA for competition infringements shall be used to finance initiatives to the benefit of consumers. According to the administrative court this provision imposes an obligation to use the proceeds of the fines paid by competition infringers to fund initiatives in favour of consumer. But, it does not require that these programmes have to be carried out by consumers’ associations or in collaboration with them.

The Tar Lazio also notes that Title V of the Italian Constitution confers on regions general lawmaking powers, with the only exception of those subjects specifically reserved to the exclusive competence of state. As a result, such wide lawmaking powers imply that regional authorities are also empowered to put in place programmes aimed at the protection of consumers’ interests.

The complainant also questioned the decision of the regional authorities to entrust the programmes for consumers, without any tendering procedures, to a non-public entity, LA.it. LA.it is a company in which the region of Lazio holds 99% of shares, the other 1% being in the hands of a third company fully owned by the region of Lazio itself. More precisely, the complainant lamented that this arrangement did not met one of the conditions set out by the ECJ for the in-house model for the provision of a public service: that the public authority must have a control of the entrusted body similar to that of its own departments.

Also this complaint was rejected by the administrative court. Consistently with the EC post-Tekal case law, the courts sets out that in order to comply with the requirement of the similar control the key factor is not the public authority’s fully ownership of the entrusted body. Rather, it is the fact that the public authority has more pervasive powers in the entrusted body than those that company law normally confers on the majority shareholder. As a result, the public authority enjoys a determining influence over the strategic objectives and the important decisions of the controlled company.

In this case the courts has found that the region of Lazio has the power to appoint the members of the administrative and supervisory boards of LA.it; it has also the power to draft the strategic plan of the subsidiary. That suffices to conclude that the region of Lazio has a control of LA.it similar to that of its own services and that the contested arrangement falls within the in-house model permitted by the ECJ.

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