The Italian Competition Authority fined Parmalat for failure to fulfil a divestiture obligation

The Italian Competition Authority (ICA) has imposed a Euro 2,2 million fine on Parmalat for not having fulfilled a divestiture obligation resulting from a conditional merger clearance (Autorità Garante della Concorrenza e del Mercato, 21 May 2008, Provvedimento n. 18325, case n. C3460F- Parmalat/Eurolat, www.agcm.it). Article 19 of the Act n. 287/1990 expressly empowers the ICA to impose a penalty only when firms have implemented an anticompetitive concentration or have not complied with the measures adopted by the ICA in order to resolve the competition problem created by an already implemented concentration. However, it is trite law that the ICA has also the power to fine the merging parties in case they fail to comply with the commitments the ICA imposed on them in order to have the concentration approved. Non-compliance with commitments may have the same negative effect on the competitive structure of markets as the implementation of an anticompetitive concentration.

In 2005 the ICA has conditionally cleared a concentration between Parmalat and Eurolat. In order to resolve the competition concerns the transaction gave rise in the milk market in the regions of Lazio and Campania, Parmalat committed to divest a set of assets belonging to Newlat. Due to the difficulty to find a suitable purchaser of the assets, in December 2006, upon Parmalat request, the ICA modified the original commitments. Parmalat thus committed to divest Newlat by October 2007. Nonetheless, it is only in April 2008 that Parmalat succeeded in selling Newlat .

Parmalat argued that it was unable to find a purchaser compliant with the conditions set out by the ICA by the set deadline due to the negative financial conditions of Newlat and to turbulences in the markets for raw materials. These justifications have been dismissed by the ICA as not relevant. Parmalat did not prove that it was impossible to sale Newlat by October 2007 because of circumstances on which it had no control. Instead, it was only difficult to find a suitable purchaser, as indicated by the fact that it effectively sold Newlat, though at less rewarding financial conditions and after the expiry of the set deadline.

Parmalat is so liable for breaching the prohibition to implement an anticompetitive concentration laid down by Article 18 of the Act n. 287/1990. The ICA has to impose a penalty within the range of 1% and 10% of the annual turnover of the business forming the object of the concentration. As for the determination of the penalty, the ICA ruled that Parmalat has infringed the prohibition only because of negligence. The ICA also found a mitigating factor in the activities carried out by Parmalat during the procedure in order to find a suitable purchaser. The divestiture of Newlat is also considered as a mitigating factor as, by doing so, Parmalat removed the competition concerns created by the concentration. For the these reasons, the ICA has imposed on Parmalat the minimum amount of penalty allowed by the law, which has been calculated in Euro 2,226,900.

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