The Italian Competition Authority fines two ferry operators for breaching the commitments imposed with the conditional approval of a merger

By a decision made on 20 December 2013 the Italian Competition Authority (ICA) has closed the monitoring proceeding opened in the CIN/Tirrenia case (Case C11613B, Compagnia Italian di Navigazione/Ramo Aziendadi Tirrenia di Navigazione) into whether two ferry operators, Moby and CIN, complied with the commitments imposed by the ICA for the approval of the transaction by which Moby and CIN acquired the control of their competitor, Tirrenia. In order to resolve the competition problems that the merger was found to be likely to result in the ICA imposed on the parties a number of behavioural remedies. Such remedies included, among other things, i) the commitment to terminate all code sharing agreements by the deadline of 28 June 2012 and ii) the commitment to sell tickets for the problematic routes for the Summer 2012 season at such prices to keep unchanged the average revenue per single ticket obtained by Moby in 2009, save for the increases necessary to compensate the effects coming from the variations in the average cost of fuel. Having reasons to believe that the parties infringed the above commitments, the ICA opened a monitoring proceedings.
As for the first commitment, the ICA found that the code sharing agreement concluded between Moby and its competitor GNV was still in force after the deadline of 28 June 2012. This finding was based on the Moby declaration that it shared with GNV the revenues generating from a given special offer. Considering that Moby launched such special offer after the month of June, the ICA inferred that the revenues Moby had shared with GNV were generated by tickets booked and sold under the code share agreement well beyond the deadline. The ICA also rejected the Moby defense that GNV first agreed to terminate the agreement by the deadline and then it asked to postpone the termination to the end of the season. In that regard, the ICA only observed that the documents submitted by Moby were not relevant as contradictory.
With regard to the second commitment, the ICA found the parties to have misinterpreted it and thus breached it. Moby contended that it was possible to calculate the increases in the fuel costs in such a way to keep the proportionality between fuel costs and total revenues unchanged. The ICA dismisses this contention as being in contrast with the wording of the decision and its underlying rationale. The aim pursued by the ICA with imposing this remedy was to prevent the merging entity from exploiting its dominant position on the Sardinia-Continental Italy links. To this end, the ICA sought to force the parties to charge the same fares of the 2009 season when the competition in the market was healthier. On the contrary, the interpretation of the remedy submitted by Moby would allow the parties to translate on revenues the whole fuel costs with a wider profit margin for them.

Therefore, the ICA found that Moby and CIN infringed the commitments imposed on them. Pursuant to Article 19 of the Italian Competition Act, the ICA is obliged to impose a penalty, comprised between 1% and 10% of the yearly turnaround on the merging parties that breached the commitments imposed with the authorization of the merger. In this case the amount of the fines levied by the ICA was closed to 1%. Arguably, in setting the fines the ICA might have considered the difficult financial situation of Moby and also the difficulties for the parties to correctly interpreting the commitments, especially the second one. In sum, this case is a witness to the shortcomings in behavioral remedies for anticompetitive mergers, ranging from the need for competition authorities to monitor the parties’ compliance to the need for the parties to rightly understand the steps to take to implement such remedies.

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