The Italian Competition Authority opens a II phase investigation into a merger between two ferry operators

The Italian Competition Authority (ICA) has recently started a II-phase investigation into the proposed acquisition of Compagnia Italiana di Navigazione (CIN), a ferry operator, by Moby, another ferry operator and Onorato Partecipazioni (OP), a holding company that jointly controls Moby together with L19, a private equity fund (decision of 28 October 2015, Case C12005 OnoratoPartecipazioni/Moby- Compagnia Italiana di Navigazione).

According to the merging parties, the notified transaction notified would result in the change from sole to joint control over CIN and Moby, two major ferry operators mainly operating ferry links between Sardinia and Continental Italy. OP, together with L19, gained the joint control over Moby and CIN by the merger operation conditionally cleared by the ICA in 2012. By the notified transaction, OP would acquire the sole control over the ferry operators. The qualification of the notified merger submitted by the merging parties was, however, rejected by the ICA. In fact, the minutes of the resolutions adopted by the boards of directors of CIN and Moby produced by OP indicated divergences between OP and L19 as for the running of the businesses of CIN and Moby. On the basis of this finding, the ICA ruled out that OP and L19 jointly controlled CIN and Moby. As a result, the implementation would not lead to a change in the control over the ferry operators, but rather to the acquisition of OP of the sole control over CIN and Moby.

Then, the ICA went on examining the competition impact of the proposed merger. Though the merging parties provided many maritime links, the only routes in which the links operated by CIN and Moby overlap is the Civitavecchia–Olbia and the Genoa-Olbia and only in the summer season when Moby operate such links. Therefore, the Civitavecchia–Olbia and the Genoa-Olbia were identified by the ICA as the relevant markets affected by the merger.

As far as the Civitavecchia –Olbia route is concerned, due to the exit of the other competitors, CIN and Moby enjoy an almost monopoly position in the market for this link, though the market was declining. CIN was imposed a public service obligation to operate this link. The ICA observed that over the 2010-2014 period CIN doubled its market share for the transportation of passengers, whereas Moby considerably decreased its share of the market as well as its average revenue per passengers. That might indicate that the Moby’s pricing policy was more aggressive than that of CIN. Instead, the Moby’s average revenue for the transportation of cars increased faster than that of CIN. Finally, the average revenue per freight item was stable for the parties.

Also in the market for the Genoa-Olbia route the merging parties had a quasi monopoly position. also this declining market. The average revenue per passenger moved in similar way to that concerning the Civitavecchia-Olbia route. The average revenue per freight items and per cars of CIN increased slightly faster than those generated by Moby.

In light of the above, the ICA reached the conclusion that the merger might result in creating a dominant position in the markets for the Civitavecchia-Olbia and Genoa-Olbia, by eliminating the competition that the parties appeared to have mutually exerted beforehand. During the 2012 and 2013 summer seasons, when the parties operated the above links, CIN considerably increased its share of the market for passenger transportation where Moby was historically stronger. The increase in the average revenue per passenger and cars obtained by Moby may indicate that, to meet the CIN’s competition, Moby would have implemented an aggressive commercial policy to win more clients.

The data related to the average revenue per passengers and cars and freight transported appeared to have player a relevant role in the ICA’s decision to open a II-Phase investigation. In that regard, the Italian higher administrative court or Council of State in an appeal judgment against the ICA decision to fine CIN and Moby for price-fixing rejected the validity of such approach. Indeed, the judges held that the concept of average revenues per passenger employed by the ICA could not be considered a reliable proxy for the amount of the ticket fares effectively charged by the ferry operators.