The return of the Jedi: The Italian Competition Authority opens an investigation on the merger between Alitalia and Air One
Pursuant to the special powers conferred on it by the Law Decree 347/2003 as amended by the Law Decree 134/2008, the Italian Government authorized the Alitalia/CAI merger on the basis of prevailing national interests. The Italian Competition Authority(ICA) was thus deprived of its regulatory jurisdiction on the transaction. As the merging parties were the national flag carrier, Alitalia, and one of its next competitor, Air One, the merger was likely to lead to monopoly or quasi monopoly position on many routes, and in particular on the very profitable Milan Linate (LIN) -Rome Fiumicino (FCO). Nevertheless, the Government granted a three-year antitrust immunity to the Alitalia/CAI merger. Therefore, the ICA could only impose behavioral remedies in order to mitigate the expected serious anticompetitive effects of the merger.
Since the three year period of immunity expired on 3 December 2011, at the beginning of December 2011the ICA started an investigation into the Alitalia/CAI merger in order to examine whether the transaction still give rise to anticompetitive effects on the aviation transport market (C9812B-Monitoraggio post-concentrazione-Compagnia Aerea Italiana/Alitalia Linee Aeree Italiane-Airone).
Consistently with its previous practice and the EU competition case law, the ICA has identified in the routes on which the merging parties enjoy together more than 60% of the available slots the markets which are more likely to be negatively affected by the merger. Among the 22 domestic routes on which Alitalia and Air One exceed the 60% thresholds, the ICA is particularly worried about the routes to/from LIN. Given to its status of congested airport, take offs and landings are strictly regulated and limited at LIN. As a result, there exist high administrative barriers that frustrate the entry of new carriers and the expansion of airliners already flying from/to it.
It should be noted that since the implementation of the merger the national high speed rail network has been inaugurated. The national rail incumbent is now operating high speed trains travelling on the Milan-Naples lines and a new operator will enter the market very soon. Therefore, it can be said that as for the LIN-FCO and probably the LIN-Naples routes high speed rail exert a strong competition on the merging parties. Thus, the merger should have no more anticompetitive effects on this routes. As far as the other domestic routes are concerned, the ICA will assess whether the rise of low cost carriers have lowered the dominant position held by the merging parties in 2008. This is unlikely to be case with the routes connecting LIN with Southern Italy, due to the high administrative barriers at LIN.
Whether the ICA finds that the merger still cause competition problems, to remedy these problems it will impose on the parties to divest a certain number of slots. In that regard it may be interesting to see whether the ICA will follow the new European Commission practice, started with the AF/KLM concentration, to design slot remedies in order to make them more attractive for potential entrants. Considering that at LIN the merging parties have 70% of the available slots, that would be a welcome development.
Since the three year period of immunity expired on 3 December 2011, at the beginning of December 2011the ICA started an investigation into the Alitalia/CAI merger in order to examine whether the transaction still give rise to anticompetitive effects on the aviation transport market (C9812B-Monitoraggio post-concentrazione-Compagnia Aerea Italiana/Alitalia Linee Aeree Italiane-Airone).
Consistently with its previous practice and the EU competition case law, the ICA has identified in the routes on which the merging parties enjoy together more than 60% of the available slots the markets which are more likely to be negatively affected by the merger. Among the 22 domestic routes on which Alitalia and Air One exceed the 60% thresholds, the ICA is particularly worried about the routes to/from LIN. Given to its status of congested airport, take offs and landings are strictly regulated and limited at LIN. As a result, there exist high administrative barriers that frustrate the entry of new carriers and the expansion of airliners already flying from/to it.
It should be noted that since the implementation of the merger the national high speed rail network has been inaugurated. The national rail incumbent is now operating high speed trains travelling on the Milan-Naples lines and a new operator will enter the market very soon. Therefore, it can be said that as for the LIN-FCO and probably the LIN-Naples routes high speed rail exert a strong competition on the merging parties. Thus, the merger should have no more anticompetitive effects on this routes. As far as the other domestic routes are concerned, the ICA will assess whether the rise of low cost carriers have lowered the dominant position held by the merging parties in 2008. This is unlikely to be case with the routes connecting LIN with Southern Italy, due to the high administrative barriers at LIN.
Whether the ICA finds that the merger still cause competition problems, to remedy these problems it will impose on the parties to divest a certain number of slots. In that regard it may be interesting to see whether the ICA will follow the new European Commission practice, started with the AF/KLM concentration, to design slot remedies in order to make them more attractive for potential entrants. Considering that at LIN the merging parties have 70% of the available slots, that would be a welcome development.
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