The Italian Competition Authority opens a compliance procedure on the BancaIntesa/SanPaolo IMI concentration

On 14 May 2009, the Italian Competition Authority or ICA has opened an investigation into whether the merging parties to BancaIntesa/San Paolo IMI (case C8027, Banca Intesa/SanPaolo IMI, Boll.49/2006) complied with the some of the conditions imposed by the ICA decision to conditionally authorize the transaction cleared. Since the merger was found to be likely to create or strengthen a dominant position in many markets for banking and financial services, the ICA imposed a set of remedies to address the ensuing competition problems, among which transferring of 645 branches to an independent buyer the merging parties identified in Crédit Agricole.

Being Crédit Agricole linked to Banca Intesa by structural, financial and personal links, it did not meet the fundamental requirement of independence of the merging parties to purchase the assets to be divested. To overcome this problem, the AGCM prescribed a set of additional conditions the merging parties had to comply with in transferring the branches to Crédit Agricole. In this regard, Banca Intesa had to ensure that: Crédit Agricole would reduce its stake in Banca Intesa to below 5% by 31 December 2007; it would not join shareholder agreements; no persons being directly or indirectly connected with Crédit Agricole would sit in the corporate boards Banca.

The ICA has found that Crédit Agricole has still a stake in Banca Intesa higher than 5% and also entered into a shareholder agreement with Assicurazioni Generali with the purpose to regulate the exercise of the rights regarding the stakes they have in Banca Intesa. According to this agreement, Crédit Agricole and Assicurazioni Generali consult each other before any meeting of the corporate bodies of Banca Intesa. This arrangement enable the parties to exchange information and views on strategic matters, adopt common positions and decide on how to exercise their voting rights. The shareholder agreement also deals with the appointments of the members of the boards of management and surveillance of Banca Intesa. It sets that the parties shall propose and vote a common list of 8 candidates, 4 of whom shall be chosen by each party. In sum, the AGCM takes the view that with this shareholder agreement, contrary to the commitments undertaken by the parties, Crédit Agricole can participate in the governance of Banca Intesa. So, the ICA reproaches Banca Intesa for not having taken any steps to comply with the conditions regarding the divestiture of branches to Crédit Agricole and believes that such omissive conduct infringes the conditions imposed by the merger decision. Therefore, the ICA has opened a compliance procedure against Banca Intesa upon the basis of Article 19 of the Act 287/90. According to the case law of Italian courts and of the ICA, Article 19 also applies to the implementation of a merger in breach of the commitments imposed with the conditional authorization, and the merging parties shall be imposed a penalty ranging from 1 to 10% of their yearly turnover.

The ICA decision illustrates the difficulties in securing fulfilment of behavioural commitments, with national competition having to carefully monitor the post-merger conducts of parties to verify compliance. The second issue is whether the may relax its strict position in banking merger control and take into consideration the current economic climate while assessing the efforts made by the parties to find a buyer of the Crédit Agricole stake in Banca Intesa exceeding the 5% threshold.

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