The Italian Competition Authority closes with a commitment decision an Article 102 TFEU investigation into the market for plastic recycling

By a recent commitment decision made on 3 September 2015 in the case A476 Apliplast v CONAI/COREPLA the Italian Competition Authority (ICA) has closed an Artice 102 TFEU investigation into the market for plastic recycling. The parties submitted a set of behavioural commitments which, following the results of the market test were seen by the ICA suitable to address the competition problems created by the contested conducts of the parties. Therefore, the ICA made the offered commitments binding and closed the proceedings.

The facts of the case

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.

In the ICA view CONAI/COREPLA enjoyed a dominant position in the relevant product market, which was identified in the market for the organization and funding of recycling of special plastic packages. 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. CONAI/COREPLA implemented their foreclosing strategy in many ways.

First, the consortia raised many issues both in the procedure before the MoE and in successive legal proceedings brought before administrative judges. All of these issues, however, were held to be unfounded and dismissed by the acting authorities.

Second, CONAI/COREPLA systematically refused to cooperate with Aliplast. To meet the concerns of CONAI/COREPLA that they might bear the costs for the management of wastes 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 requests to determine the fees, but 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. On the contrary, this 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 that many clients, not trusting the reliability of Aliplast to manage its recycling system, 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 in Legislative Decree n.152/06 for the authorization of alternative recycling systems. As a result, the conducts 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 competitors.

The commitments submitted by the parties

In order to address the competition problems that, in the ICA view, the above conducts were thought to cause, the parties offered a set of five behavioural commitments that were accepted by the ICA, following some amendments made by the parties on the basis on the results of the market test. The commitments made binding by the ICA are as follows:

- First, CONAI commits to refrain from taking part as consulting body in the procedures before the MoE for the authorization of competing recycling systems. CONAI may intervene in the procedures only through an independent monitoring trustee and only with relation to the specific questions made by the MoE. In addition, CONAI may submit an opinion as a response to generic questions put by the MoE only taking into consideration a limited number of factors set out in the guidelines draft by the parties. The ICA believes that this commitment may impede the parties from influencing the outcome of regulatory procedures before the MoE to the detriment of new competitors.

- Second, CONAI gives the undertaking to start negotiations with holders of authorized recycling systems to determine to fees that the latter has to pay to it. CONAI has to conclude the agreements for the determination of the fees by the deadline of 90 days. If the agreement is not reached within this deadline, the monitoring trustee appointed by CONAI should set the fees within the successive 90 days. The fees have to be determined in such a way to cover the costs for the collection of waste. According to the ICA, this commitment ensures that the fee agreements should be concluded quickly with the likely result to favour the entry of new competitors.

- Third, CONAI has to publish on its website detailed information about the identity of the monitoring trustee and the procedure for implementation of the first commitment, the authorized recycling systems and the systems for which the authorization procedures is still pending. In this way, according to the ICA, the parties should not strategically use the above information to denigrate competitors.

- Fourth, upon Aliplast request, CONAI shall apply the procedure under the second commitment to determine the fees due by Aliplast, whose application for the authorization of the PARI system is still pending. This commitment should prevent discriminations against Aliplast and other competitors.

Fifth, if requested by Aliplast, CONAI and COREPLA shall resolve à l'amicable all the disputes regarding the authorization of the PARI system, provided that such system is subjected to an assessment made by the monitoring trustee to establish the capability of the system to reach the objectives of recover and recycling laid down by the relevant legislation. Moreover, CONAI and COREPLA shall unconditionally abandon and/or refrain from starting legal actions to recover the sums of monies owned by Aliplast to CONAI. The ICA considers that this commitment should allow Aliplast to resolve all its pending disputes with the parties. The financial position of Aliplast and also its reputation with its clients may be then improved, thereby strengthening the capability of Aliplast to effectively compete with the parties.

Conclusion

Aliplast v CONAI/COREPLA illustrates that monitoring trustees can also play a role to implement the obligations in a commitment decision regarding anti-competitive conducts. As is known, in the context of merger control the ICA increasingly relies on monitoring trustees as a tool to ensure that the parties to a conditionally cleared merger correctly implement the remedies imposed to authorize the transaction (see, for example, Michele Giannino, The Italian Competition Authority conditionally clears a concentration between two regional energy firms (Energia Alto Adige), 15 juillet 2015, Bulletin e-Competitions September 2015, Art. N° 75470). Instead, in Aliplast v CONAI/COREPLA the ICA accepted the appointment of an independent monitoring trustee as part of the undertakings given by the parties to close with a commitment decision an Article 102 TFEU investigation. Apparently, the role of the monitoring trustee in this case is to strengthen the effectiveness of the commitments offered by the parties to meet the ICA competition concerns.