The Italian Competition Authority opens an Article 102 TFEU investigation into the market for plastic recycling

In the case A476Aliplast v CONAI/COREPLA the Italian Competition Authority (ICA) has recently opened an Artice 102 TFEU investigation into the market for plastic recycling. CONAI is a consortium set up by Legislative Decree n. 152/06 which is responsible for the recycling of packages. CONAI also coordinates the activities of COREPLA the consortium which is charge for the recycling of plastic packages. Under Legislative Decree n. 152/06 all undertakings making use of plastic packages have to join the CONAI/COREPLA system and pay a fees (CAC) when giving the packages to the consortium. Membership to the CONAI/COREPLA system is, however, a default regime and users can also set an alternative recycling system, which has to be authorized by the Ministry of Environment (MoE). The procedure for the authorization before the MoE can be divided into two phases. In the first phase the MoE considers the suitability of the proposed system and in the second phase it examines how the system effectively works.

The ICA started the enquiry against CONAI/COREPLA on the basis of a report filed by Aliplast that applied to the MoE for the authorization of an alternative system for recycling plastic packages, PARI. The authorization decision of the MoE was challenged by CONAI/COREPLA before the administrative judges. Eventually the Council of State annulled the second phase authorization and referred the matter back to the MoE before which the procedure is still pending. With its report Aliplast complained that the two consortia influenced the procedure before the MoE in order to impede the granting of the sought authorization for the PARI alternative recycling system.

The ICA defined the relevant market affected by the contested conducts as the market for the organization and funding of recycling of special plastic packages. CONAI/COREPLA enjoyed a dominant position in this market as the compulsory registration with the consortia was the main form of funding of recycling. The ICA alleged that CONAI/COREPLA abused their dominant position with a complex foreclosing strategy to the detriment of Aliplast. The aim of strategy was to impede Aliplast from entering the market with its alternative recycling system. To this end, CONAI/COREPLA sought to influence the administrative procedure before the MoE with the view that the Moe rejected the authorization application filed by Aliplast. In the view of the ICA CONAI/COREPLA implemented their foreclosing strategy in many ways.

First, the consortia submitted many issues both in the procedure before the MoE and the in legal actions brought before the administrative judges. All of the issues, however, were held to be unfounded and then dismissed by the competent authority.

Second, CONAI/COREPLA systematically refused to cooperate with Aliplast. To meet the concerns of CONAI/COREPLA that they bore the costs for the management of the waste exceeding the quota that by statute the PARI system had to recycle, the MoE imposed on the parties to conclude a cooperation agreement. However, CONAI/COREPLA refused to colloborate with Aliplast outrighlty. They did not quantify the amount of fees due by Aliplast in spite of the MoE requests and they never replied to the Aliplast request to determine such fees. CONAI/COREPLA only asked Aliplast to pay the CAC fees. In the ICA view the refusal of CONAI/COREPLA to conclude the cooperation agreement had no economic justification. Indeed, the conclusion of the agreement would relieve the consortia from their above reported financial concerns. In addition, the cooperation agreement appeared to be an important step for the positive outcome for Aliplast of the administrative procedure before the MoE. The CONAI/COREPLA refusal might at least delay the granting of the authorizzation to Aliplast.

Third, the foreclosing strategy of CONAI/COREPLA also included the denigration of its competitor Aliplast and its alternative system PARI. The publication on the CONAI web site of a press release that the PARI system was not recognized by the MoE and the request for the payment of the CAC fees may create a situation of uncertainty as to the capability of Aliplast to effectively manage its PARI system. The ICA pointed out many clients, not trusting the reliability of Aliplast have terminated the contracts with it. With many clients of Aliplast shifting to competitors, the PARI system would not meet any more the requirements set out Legislative Decree n. 152/06 for the authorization of alternative recycling systems. As a result, the conduct of the consortia would have the effect to frustrate the market entry of Aliplast, by frustrating its application for the authorization of its system. According to the ICA, the conducts of CONAI/COREPLA might also negatively affect the welfare consumers as they would prevent the market entry of more efficient competitor.

Incidentally, the ICA rejected the Aliplast application for interin relief as it did not meet the statutory requirements to grant them.

In conclusion, the key question in Aliplast v CONAI/COREPLA is whether the dominant consortia strategically misused the regulatory proceedings for the granting of authorization to the PARI alternative system and whether such conducts amount to a competition infringement. The ICA seems to believe that this is the case. CONAI/COREPLA submitted many groundless issues and refused to take steps that were in their interest with the apparent intent to impede the granting of the authorization and frustrate the market entry of Aliplast.

Alike interestingly, the ICA will have to ascertain whether the denigration conducts constitutes an abuse of dominant position. Incidentally, the French Competition Authority had already ruled in Sanofi and Yaourts aux Antilles that an undertaking when denigrating its competitors abused its dominant position.