The Italian Competition Authority conditionally clears a merger between two ferry operators
The Italian Competition Authority (ICA) has conditionally
cleared 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 (Case C12005, OnoratoPartcipazioni-Newco/Moby-Compagnia Italiana di Navigazione). Though the
merging parties operated many maritime links, the competition review conducted
by the ICA focused on two routes, Civitavecchia–Olbia and Genoa-Olbia, which
were the only routes where the activities of CIN and Moby overlapped. The above
links were then identified as the relevant product markets affected by the notified
merger.
Considering the pricing policies implemented by the parties,
the ICA pointed out that, in spite of the structural link connecting them, Moby
had a 40% stake in CIN, Moby and CIN did not coordinated their market conducts.
Instead, they fiercely competed with each other. CIN won many clients away from
Moby, while Moby reacted with an aggressive pricing policy. Then, the ICA noted
that, through the implementation of the merger, the entity resulting from the
entity would have a monopoly position. Unsurprisingly, the ICA rejected the
economic efficiency considerations submitted by the parties in the shape of a
rationalization of their activities. Due to the monopoly position that the
parties would have post-merger, the ICA took the view that the consummation of
the transaction would negatively affect the welfare of consumers resulting in price
increases and reduction of services. In addition, though there were not
relevant entry barriers, the ICA believed that the entry of new operators was unlikely
for manifold reasons. First, the relevant markets were declining with all the
ferry operators but for the merging parties having left the market. Second, CIN
was awarded a public service obligation contract under which it operated a
number of links, including the Genoa-Olbia route. Third, CIN had many high
capacity ferries and, therefore, it was capable to pose a credible threat to
potential entrants.
To deal with such competition problems, the parties offered
the following remedies:
- · The submission to the ICA review of the timetable plan of the links to be operated for the 2016 year on the Civitavecchia–Olbia and Genoa-Olbia routes and for the 2017 year only the Civitavecchia–Olbia.
· A price freezing obligation as for the fares to be charged by Moby on the Civitavecchia-Olbia for the 2016 season.
Despite the post-merger monopoly position of the
parties, rather surprisingly the ICA took the view that the above behavioural remedies
were suitable to address the competition problems resulting from this competitive
structure in the relevant markets and accepted them. The review of the 2016
timetable reveals that the parties substantially would keep the same number of
links as before the merger. The ICA also observed that the parties may amend the
2017 timetable if necessary to adapt to the new market conditions.
Optimistically,
the ICA believed that the undertaking to sell virtual capacity should encourage
the entry of new operators, which, in this way could avoid the typical start-up
costs in the shape of buying or renting suitable ships and hiring crews. It is
however, uncertain whether new operators could enter a market, that, as the ICA
said, has been declining over the past years and is dominated by the entity resulting
from the merger. In addition, ferry operators should face a strong inter-modal
competition from air carriers. That said, on the other hand, the recent
decision of third ferry operator, Grimaldi, to enter the Livorno-Olbia route
may indicate that other operators are ready to start operating the routes affected
by the merger and rely on the remedies imposed by the ICA.
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