The Italian Competition Authority opens an investigation into an alleged refusal to deal

Industria Chimica Italiana (ICE) is the dominant player in the market for the production and sale of cholic acid that is an input for the preparation of an active principle, ursodeoxycholic acid or udca, used in the pharmaceutical industry. The udca is marketed by an ICE subsidiary, Prodotti Chimici e Alimentari  (PCA),  and by RGR. RGR filed a complaint with the Italian Competition Authority (ICA) reporting that ICE would have abused its dominant position in many ways. The ICA then opened an Article 102 TFEU investigation against PCA (Case A473 RGR v PCA).
ICE has been supplying RGR with cholic acid since long. However, starting from 2009 when it bought PCA, ICR has progressively increased the prices applied on RGR for the supplies of cholic acid. The ICE price increases had no justification, and in any event they did not depend on a rise in the production costs incurred by ICE. Moreover, RGR may not shift its requirements to other suppliers. There exist only two other producers of cholic acid, NZP and Casco Argentina. The latter did not reply to the RGR proposal to start negotiating a supply agreement, while the former replied that it was not ready to sign a supply agreement with RGR due to the risk of retaliation from ICE. According to the ICA, the above conduct would amount to a constructive refusal to deal, with a dominant under, ICE, non supplying anymore a long-standing customer with essential inputs for the activity of the latter in downstream markets.
Furthermore, ICE refused to sell to RGR a given quantity of unprocessed cholic acid in 2012. RGR intended to buy from ICE unprocessed cholic acid and then process it by itself with the view to reducing the growing cost in the procurement of this item due to aggressive pricing policy of ICE.
Finally, via its subsidiary PCA, ICE targeted the customers of RGR, proposing selected price discounts for the purchase of ucda. Due to the increases in the price for cholic acid, RGR was unable to meet the ICE competition by proposing competitive offers to its customers. Is it an application of the as efficient competitor test in the Commission Guidelines on the enforcement of Article 102 TFEU?
In sum, what the ICA feared is that ICE tried driving RGR off the market by refusing to deal with it and with aggressive discounts selectively targeted at the RGR customers. Apparently ICE intend to complete a vertical integration plan. Being already dominant in the upstream market for cholic acid, it intends to expand its economic power into the downstream market for ucda. In this market it bought an udca manufacturer, PCA, and it aims at reserving this market for itself and its subsidiary by foreclosing competitors such as RGR. The foreclosing strategy of ICE seems to be successful, as RGR reported a substantial shrink in the quantity of produced and sold udca. That should provide evidence of the capability of the ICE conducts to negatively affect competition.

In sum, the ICE conducts may infringe competition. The ICA has already penalized undertakings for refusing to deal with competitors when the refusal was part of a strategy to monopolize the market. 

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