The Italian Competition Authority opens a II-Phase investigation into the banking merger between Intesa SanPaolo and UBI Bank

By a decision made on 11 May 2020 the Italian Competition Authority has opened a II-Phase investigation into the proposed acquisition of UBI Banca (UBI) by Intesa SanPaolo (ISP) affecting several banking and financial markets (Case C-12287, Intesa SanPaolo/UBI Banca). 

Alongside with Unicredit, ISP is one of the major banking players in Italy while the target UBI is a mid-size banking group. In February 2020 ISP launched a conditional public bid on the shares of UBI. On the same time ISP entered into a legally binding contract with another banking group, BPER, for the sale of about 400/500 branches of UBI. Because this contract shall be implemented within a reasonably short deadline, ISP does gains control of these assets. Notwithstanding that, while vetting the merger the ICA will also consider such branches because the precise scope of the divestment contract is uncertain.

The ICA has concerns that the consummation of the merger might restrain competition in several banking and financial markets. As hinted above, ISP and Unicredit are by far the two greater banking operators in Italy, their next competitors having much smaller market shares and dimensions. The merger may substantially modify the competition structure of the relevant markets in two ways: first, a mid-size operator that in future might create a third great banking player capable of effectively competing with ISP and Unicredit will exit the market; second, the current situation of equilibrium between ISP and Unicredit will be altered by the growth of the former following the acquisition of UBI.

That said, the ICA has defined the following relevant markets in which the notified merger is expected to have economic effects:

Relevant product markets	Relevant geographic markets	The preliminary assessment of the ICA
Markets for collection of savings	Province	The combined market shares of the merging parties are higher than 35-40% in several provinces where the merger might lead to the creation or strengthening of the dominance position of ISP
Markets for lending to families and small-sized family businesses	Provinces	The combined market shares of the merging parties are higher than 35-40% in several provinces where the merger might lead to the creation or strengthening of the dominance position of ISP
Markets for lending to mid-sized and large businesses	Regions	The combined market shares of the merging parties are higher than 35-40% in some regions. ISP argued that the economic conditions for loans are determined nationwide by centralized entities and the geographic market may be national in scope. The ICA will examine the competition impact of the merger more in deep in the II-Phase.
Market for lending to public entities	Nationwide	The stronger competitor of the merging parties is a  public entity, CDP, providing middle and long-term loans to public administration. The ICA will examine the competition impact of the merger more in deep in the II-Phase.
Market for management of collective investment funds (CIV)	Nationwide-production of CIV; Provinces-distribution of CIV	The market shares of the merging parties in the segments for the production of CIV are negligible. However, considering the vertical integration between the production and distribution of CIV as well as the close link between the management of CIV and the collection of savings, the combined shares of the merging parties will be about 35-40% in several provinces where the merger might restrain competition.
Markets for individual asset managements	Nationwide-production of products Provinces-distribution of products	The market shares of the merging parties in the segments for the production of CIV are negligible. However, considering the vertical integration between the production and distribution of these financial products as well as the close link between the asset management activities and the collection of savings, the combined shares of the merging parties will be about 35-40% in several provinces where the merger might restrain competition.
Markets for supplementary pension schemes	Nationwide-production of products Provinces-distribution of products	The market shares of the merging parties in the upstream production segment are negligible. Yet, the merging parties will have a 35-40% share in the distribution markets in the provinces of Ascoli Piceno and Rieti where the merger might restrain competition
Markets for credit consumer services	Regions	The merging parties overlaps only in the segment for direct consumer credit services. Because of the presence of several reliable competitors, the merger is unlikely to restrain competition.
Market for factoring services	Nationwide	Because of the negligible market shares of the merging parties and the presence of several reliable competitors, the merger is unlikely to restrain competition.
Market for leasing services	Nationwide	The merging parties overlaps only in the segment for financial lease arrangements. Because of the presence of several reliable competitors whose market shares are close to those of the merging parties, the merger is unlikely to restrain competition.
Market for payment services	Nationwide	Because of the presence of several reliable competitors and the small market shares of the merging parties, the merger is unlikely to restrain competition.
Markets for investment banking services	Nationwide	Because of the presence of several reliable competitors, the merger is unlikely to restrain competition.
Markets for insurance services	Nationwide-production of products Provinces-distribution of products	The market shares of the merging parties in the segments for the production of insurance products are negligible. However, considering the vertical integration between the production and distribution of insurance products, the merger might have restrictive effects on competition in some provinces where the merging parties have a strong presence.

In essence, the ICA fears that the implementation of the ISP-UBI merger would lead to the market exit of a banking operator that in future might challenge the leading market position of the two major Italian banking groups, ISP and Unicredit. While the merger appears to have a defensive nature against the technological developments affecting the banking industry, the merged entity may benefit from the integration of the activities of the merging parties. Consistently with its decisional practice. The ICA’s competition concerns focused in the markets where the post-merger market shares of the parties will exceed the 35-40% threshold.