The Italian Competition Authority finds the manager of Milan airports to foreclose the general aviation market
Introduction
By a decision made on 25 March the Italian Competition Authority (ICA) fined the manager of the Milan airports, SEA, for infringing Article 102 TFEU (Case A474, Cedicor/SEA). SEA foreclosed the market for the management of airport facilities for the provision of handling services for the general aviation by preventing an efficient competitor, Cedicor, from entering the relevant markets.
The facts of the case
By an agreement first signed in 1961 and recently renewed until 2041 the manager of the airports of Milan, SEA, awarded to ATA an exclusive concession for the management of the centralized infrastructures at the airport of Linate, including the facilities required by the general aviation. The last renewal of the concession agreement in 2008 was made conditional upon the ATA commitment to renovate a number of facilities. SEA reproached ATA for failing to comply with that commitment, though it did not challenge the validity of the agreement. In 2012 SAPAM, the company controlling ATA went into receivership and then in February 2013 the receiver called for a competitive procedure to select to whom sell the 98% share capital of ATA. SEA bid for ATA, yet the winning bid was made by Cedicor. One day before the formal announcement of the exit of the procedure in July 2013 SEA sent a letter to Cedicor to communicate its intention to start proceedings to obtain the termination of the concession agreement with ATA. One month later, SEA communicated to ATA that the agreement was terminated inviting it to leave the facilities it was previously allowed to use. Cedicor reported the above facts to the ICA, which started an Article 102 TFEU investigation against SEA.
The findings of the Italian Competition Authority
As holder of an exclusive concession to manage the airports of Milan, SEA enjoyed a monopoly in the markets for the management of airport facilities at the airports of Linate and Malpensa as well as in the markets to grant access to such facilities. Moreover, SEA had a dominant position in the market for the market of the provision of handling services to commercial aviation, having through its subsidiary SEA Handling a 76% share of the market. On the contrary, SEA was not active in the in the market of the provision of handling services to general aviation, in which ATA was the leading player with a 70% market share.
The ICA took the view that SEA infringed Article 102 TFEU by preventing the entry of a new and efficient competitor, Cedicor, in the market for the management of airport facilities. Exploiting its economic power in this market, SEA strategically invoked the termination of the concession agreement then in force with ATA to frustrate the bid of Cedicor to buy it by interfering with the competitive procedure to select the buyer of ATA. The ICA based this finding of a number of apparent irrationalities in the SEA conducts. First, SEA made an unconditional bid for ATA, raising the issue of the invalidity of the concession agreement only after Cedicor also bid for ATA. Second, the SEA commitment to make a bid higher than the Cedicor offer was unjustified as in any event it would retake the possession of the facilities used by ATA with the termination of the agreement. Third the decision to make such bid was approved by the board of SEA absent any detailed business plan which, instead, was drafted by Cedicor. Fourth, pursuant to the provisions for the liberalization of handling services, with the termination of the agreement SEA would gain only the possession of the centralized facilities but it would not retain the provision of handling services previously supplied by ATA.
Therefore the ICA viewed the SEA conducts aimed at preventing Cedicor from buying ATA as part of a foreclosing strategy in the market for the management of airport facilities for the general aviation. Such anticompetitive practice also negatively affected the downward market for the provision of handling services to general. Indeed, by preventing the Cedicor acquisition of ATA, SEA gained a dominant position at the airport of Milan of Linate.
Cedicor was an efficient player in the market for handling services and was a market leader in South America. The foreclosing conducts of SEA weaken the competitive structure of the relevant markets by depriving consumers the possibilities of being supplied by a competitor as efficient as Cedicor. As a consequence, the ICA perceived the SEA conducts as a serious competitive infringement. By applying its new Guidelines on fining, the ICA levied on SEA a € 3.365.000,00 fine.
Conclusion
Cedicor/SEA reminds that a dominant firm may take legal actions to protect its interests within the boundaries set by competition law or it may commit abusive conducts prohibited by Article 102 TFEU. In AstraZeneca the Court of Justice found that a misuse of regulatory procedures would amount to abusive conducts. In ITT Promedia, in relation to an action brought by a dominant firm to seek performance of contract, the General Court said that such conducts were abusive if the claim asserted by the dominant firm could not reasonably considered to be its rights. In Cedicor/SEA, in establishing that the SEA conduct was abusive for ICA the key factor was the time at which SEA decided to take action against ATA. It notified its intention to terminate the contract only after that Cedicor successfully bid for ATA, though the problems with the ATA correct performance of the contract were known well before that event. In the ICA view this was decisive to qualify the SEA legal actions as part of an exclusionary strategy to the detriment of Cedicor.
By a decision made on 25 March the Italian Competition Authority (ICA) fined the manager of the Milan airports, SEA, for infringing Article 102 TFEU (Case A474, Cedicor/SEA). SEA foreclosed the market for the management of airport facilities for the provision of handling services for the general aviation by preventing an efficient competitor, Cedicor, from entering the relevant markets.
The facts of the case
By an agreement first signed in 1961 and recently renewed until 2041 the manager of the airports of Milan, SEA, awarded to ATA an exclusive concession for the management of the centralized infrastructures at the airport of Linate, including the facilities required by the general aviation. The last renewal of the concession agreement in 2008 was made conditional upon the ATA commitment to renovate a number of facilities. SEA reproached ATA for failing to comply with that commitment, though it did not challenge the validity of the agreement. In 2012 SAPAM, the company controlling ATA went into receivership and then in February 2013 the receiver called for a competitive procedure to select to whom sell the 98% share capital of ATA. SEA bid for ATA, yet the winning bid was made by Cedicor. One day before the formal announcement of the exit of the procedure in July 2013 SEA sent a letter to Cedicor to communicate its intention to start proceedings to obtain the termination of the concession agreement with ATA. One month later, SEA communicated to ATA that the agreement was terminated inviting it to leave the facilities it was previously allowed to use. Cedicor reported the above facts to the ICA, which started an Article 102 TFEU investigation against SEA.
The findings of the Italian Competition Authority
As holder of an exclusive concession to manage the airports of Milan, SEA enjoyed a monopoly in the markets for the management of airport facilities at the airports of Linate and Malpensa as well as in the markets to grant access to such facilities. Moreover, SEA had a dominant position in the market for the market of the provision of handling services to commercial aviation, having through its subsidiary SEA Handling a 76% share of the market. On the contrary, SEA was not active in the in the market of the provision of handling services to general aviation, in which ATA was the leading player with a 70% market share.
The ICA took the view that SEA infringed Article 102 TFEU by preventing the entry of a new and efficient competitor, Cedicor, in the market for the management of airport facilities. Exploiting its economic power in this market, SEA strategically invoked the termination of the concession agreement then in force with ATA to frustrate the bid of Cedicor to buy it by interfering with the competitive procedure to select the buyer of ATA. The ICA based this finding of a number of apparent irrationalities in the SEA conducts. First, SEA made an unconditional bid for ATA, raising the issue of the invalidity of the concession agreement only after Cedicor also bid for ATA. Second, the SEA commitment to make a bid higher than the Cedicor offer was unjustified as in any event it would retake the possession of the facilities used by ATA with the termination of the agreement. Third the decision to make such bid was approved by the board of SEA absent any detailed business plan which, instead, was drafted by Cedicor. Fourth, pursuant to the provisions for the liberalization of handling services, with the termination of the agreement SEA would gain only the possession of the centralized facilities but it would not retain the provision of handling services previously supplied by ATA.
Therefore the ICA viewed the SEA conducts aimed at preventing Cedicor from buying ATA as part of a foreclosing strategy in the market for the management of airport facilities for the general aviation. Such anticompetitive practice also negatively affected the downward market for the provision of handling services to general. Indeed, by preventing the Cedicor acquisition of ATA, SEA gained a dominant position at the airport of Milan of Linate.
Cedicor was an efficient player in the market for handling services and was a market leader in South America. The foreclosing conducts of SEA weaken the competitive structure of the relevant markets by depriving consumers the possibilities of being supplied by a competitor as efficient as Cedicor. As a consequence, the ICA perceived the SEA conducts as a serious competitive infringement. By applying its new Guidelines on fining, the ICA levied on SEA a € 3.365.000,00 fine.
Conclusion
Cedicor/SEA reminds that a dominant firm may take legal actions to protect its interests within the boundaries set by competition law or it may commit abusive conducts prohibited by Article 102 TFEU. In AstraZeneca the Court of Justice found that a misuse of regulatory procedures would amount to abusive conducts. In ITT Promedia, in relation to an action brought by a dominant firm to seek performance of contract, the General Court said that such conducts were abusive if the claim asserted by the dominant firm could not reasonably considered to be its rights. In Cedicor/SEA, in establishing that the SEA conduct was abusive for ICA the key factor was the time at which SEA decided to take action against ATA. It notified its intention to terminate the contract only after that Cedicor successfully bid for ATA, though the problems with the ATA correct performance of the contract were known well before that event. In the ICA view this was decisive to qualify the SEA legal actions as part of an exclusionary strategy to the detriment of Cedicor.
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