The Italian Competition Authority grants an interim order in the antitrust investigation concerning the audiovisual sector

Introduction

Applying Article 14-bis of the Law no. 247/1990[1], the Italian Competition Authority (ICA) has recently issued an interim order against some trade associations in the Free Outdoor Cinemas case. The ICA believed that these associations would have breached Article 2 of the Law no. 287/90, which correspond to Article 101 TFEU, refusing to supply some customers[2].

The facts of the case

Several entities running free outdoor cinemas in Rome and Milan reported to the ICA increasing difficulty in being licensed the rights to show movies at their premises due to the practices of distributors and other intermediaries. Following the receipt of these complaints, the ICA opened an antitrust investigation against some trade associations (ANICA, ANEC and ANEC Lazio) that were alleged to have coordinated their market conduct in violation of Article 2 of Law no. 287/1990 and Article 101 TFEU.

ANICA was a trade association active in the audiovisual sector and regrouping all the more important national movie distributors as well as the Italian branches of the Hollywood majors. The membership base of ANICA also comprised ANEC, a national association of owners of movie theaters, and its local branch of the region of Latium, ANEC Latium. ANICA and ANEC, together with other entities, agreed to implement the Moviement Village, the purpose of which was to promote outdoor screenings across Italy.

Moreover, one of the entities that reported the alleged collusion to the ICA also filed an application for interim measures pursuant to Article 14-bis of Law no. 287/1990.  

The decision of the Italian Competition Authority

The theory of competition harm envisaged by the ICA was collective boycott. Coordinating their conducts, the parties frustrated the granting of showing rights to movie to for free outdoor cinemas in the upstream market for movie distribution for the 2018, 2019 and 2020 seasons. These practices might also restrain competition in the downstream market for the showing of movies, limiting the activities of the free outdoor cinemas and the choices of consumers. The markets for the distribution of movies and for the showing of movies were identified by the ICA as the relevant product markets concerned by the conducts under investigation.

According to the functional definition of the notion of undertaking that comes into play when applying competition law, any entity running an economic activity, regardless of its legal status and source of funding is subject to competition rules. For this reason, the ICA rejected the argument of the parties that the free outdoor cinemas did not constitute an undertaking for the purpose of competition law because their showings were free of charge. On the contrary, the activities of the outdoor cinemas qualified as undertakings because they aimed at meeting a typical need of the summer season and generated revenues from ancillary activities.

For interim measures to be issued by the ICA, two requirements must be met: i) a prima facie case for competition breach (fumus boni iuris); and ii) the risk of a serious and irreparable competition harm (periculum in mora).

I) The requirement of fumus boni iuris

The theory of competition harm of collective boycott relied on by the ICA was corroborated by several evidentiary pieces. For the 2018 season, the ICA pointed to a meeting held at the premises of ANEC Lazio, the minutes of which reported the intention of the participants to prevent the complainants from offering free showings of movies.

The parties further strengthened and formalized their cooperation for the 2019 and 2020 seasons. In particular, the ICA pointed to the guidelines issued by ANICA, which shaped the commercial strategy pursued by the distributors setting out, in particular, the conditions under which to license showing rights to free outdoor cinemas. In particular, the guidelines provided that showing rights could be only awarded to outdoor cinemas located at more than 5 km from the next movie theatres and for movies premiered at least 4 years before, with an exception for newer Italian movies to be showed in presence of the film-makers that made these works. In addition, also ANEC and ANEC Lazio sent circulars and letters by which they recommended their members to not deal with free outdoor cinemas.

The result of these strict commercial policies was that free outdoor cinemas were consistently denied the showing rights in almost all the cases in which they applied for them.

II)The requirement of periculum in mora

The ICA noted that the above guidelines and recommendations issued by the parties applied nationwide. As a result, the complaining outdoor cinemas were obliged to review their originally planned screenings, substantially reducing the number of showings. In other words, the parties’ refusal to deal with the complainants would put in jeopardy all their activities as well as similar initiatives planned by the other for free outdoor cinemas. The relevance and width of the boycott was well illustrated by the fact that a complainant had to face high obstacles even to organize a retrospective about the works of Alfred Hitchcock.

A further relevant aspect is the seasonal nature of the offer of outdoor cinemas, which is typically limited to summer. With the summer season having already commenced, a regulatory intervention to address these competition problems before the end of the ongoing summer season was thus unavoidable.

For these reasons, the ICA considered that both the requirements of fumus boni iuris and periculum in mora were met and accordingly issued an interim order against ANICA, ANEC and ANEC Lazio. They were ordered to refrain from implementing the challenged anti-competitive agreements. ANICA, ANEC and ANEC Lazio had then to restore the full freedom of distributors as to their commercial strategies to license showing rights to free outdoor cinemas by revoking all guidelines and recommendations that might restrain the said commercial policies of their members.

Conclusion

In Free Outdoor Cinemas the ICA granted an interim order with an anti-competitive agreement, in the shape of a collective refusal to deal concerning the supply of intangible goods or showing rights of movies. This the first time that the ICA has made an interim order in the audiovisual sector. Free Outdoor Cinemas seems to be in line with the decisional practice of the ICA that extensively applies its powers in Article 14-bis of Law no. 287/1990.

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[1] Article 14.bis, as introduced by Decree Law 223/2006 empowers the ICA to adopt interim measures when: ‘In urgent cases where there is a risk of serious, irreparable damage to competition, the Authority may, where a cursory examination reveals the existence of a contravention, decide ex officio that interim measures must be adopted’.

[2]Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority), decision no. 28286 of 8 July 2020, Case I840 Ostacoli alle arene a titolo gratuito (Free Outdoor Cinemas), in Bullettin no. 28/2020 of 13 July 2020