Italy: Italian Council of State partially dismisses bid-rigging fines, setting relevant legal principles in cartel investigations

In 2014, a public tender for the provision of management facility services across public offices in the country was launched. Over 250 contract-cleaning companies took part in the public tender. However, according to investigations carried out by the ICA, several of them were involved in a concerted practice which had the object to restrict competition. The investigations started after CNS, one of the Companies involved in this cartel, decided to withdraw from the tender and presented its leniency application to the ICA. CNS admitted the existence of a concerted practice in violation of Article 101(1) TFEU and provided the ICA with documents and oral statements to support its application.

In 2019, the ICA confirmed the existence of a cartel between the Companies who participated in the public tender. Said violation was proven by a number of anomalies: (a) each Company only took part in a limited number of offers provided by the tender; (b) the Companies allegedly involved in the cartel did not compete against each other; (c) the final result consisted in an anomalous equal distribution of the offers allocated under the tender between the Companies.

In addition, the ICA, in order to prove the existence of a cartel, lawfully based its decision on email exchanges between the Companies (where reference was made to meetings between the competitors setting out a strategy for a possible participation in the public tender), as well as wiretapping acquired in the framework of a parallel criminal proceeding by the Rome Criminal Court.

After being fined by the ICA, several Companies decided to appeal the decision in front of the Lazio Regional Administrative Court (“TAR Lazio”). The latter welcomed the appeals, but only with regards to the amount of the sanctions imposed by the ICA.

The Tar Lazio judgment has been appealed in front of the Council of State both for procedural and substantive grounds.

Procedural grounds

With its judgment, the Council of State has rejected the complaints related to the infringement of the Companies’ rights of defence. Furthermore, it has established that the evidence gathered in a criminal proceeding may be used for the purpose to ascertain antitrust violations if: (i) evidence is obtained lawfully; (ii) the right of defence is upheld; (iii) the evidentiary material is scrutinised by the competent authority.

In particular, the way wiretapping was carried out and used both in the criminal and antitrust proceedings was lawful. The Companies had access to the evidence gathered by the ICA and had also a chance to provide for a counterproof, which they did not do. Finally, the evidentiary materials were all scrutinised and interpreted by the ICA. The result of the investigations has then confirmed the allegations of the existence of a cartel. The Companies therefore did not demonstrate that the interpretation given by the ICA was erroneous.

In addition, the Council of State has upheld the ICA decision with regards to a different procedural ground, by confirming its former administrative case law establishing that the composition of the ICA College at the moment of the adoption of the decision shall only meet the requirements of continuity and good administration protected by both EU and national law (Article 97 of the Italian Constitution and Article 41 EU Charter of Fundamental Rights).

Substantive grounds

With regards to the merits of the decision, the Companies contested the existence of their anti-competitive behaviour and the way it was proven by the ICA. More specifically, they questioned the reliability of the information and documentation provided to the ICA by the leniency applicant and the fact that all the alternative explanations given by the Companies to justify their strategy in the public tender were omitted.

The Council of State assessed the Companies’ complaints based on settled EU and national case law, with particular regards to the standard of proof required to ascertain an antitrust infringement under Article 101 TFEU.

Accordingly, it confirmed that when the competent authority is able to prove the unequivocal existence of a horizontal agreement between two or more undertakings, the companies involved will have to prove that they are no longer part of such agreement. However, when the competent authority is only able to prove an unusual economic behaviour of two or more undertakings in the market, but it cannot unconditionally demonstrate the existence of an illegal agreement, this must be presumed. It will then be the undertakings’ task to provide the authority with a plausible alternative explanation to justify their behaviour in the market.

In the proceedings under analysis, the ICA was unable to provide for an unequivocal proof of a concerted practice with respect to all the involved Companies. Nonetheless, the evidence gathered by the ICA was deemed to be enough to presume the existence of a violation of antitrust legislation. Therefore, where the alternative explanations provided by the Companies involved were not considered to be satisfactory, this presumption would become certainty.

In fact, the Council of State welcomed the justifications provided by some of the involved Companies for their apparently anomalous behaviours in the market. Conversely, other two fined Companies’ appeals were both rejected as their explanations were vague and insufficient.

This conclusion has been reached also due to the fact that the Council of State has not classified the concerted practice as “a single and continuous infringement”. It has indeed stated it is necessary to prove the unlawfulness of each individual conduct engaged in by the Companies, also considering the criminal nature of the pecuniary sanction imposed by the ICA, which excludes any form of “objective responsibility”.

In conclusion, the Council of State judgment represents an interesting overview of relevant antitrust issues often approached by the Italian Courts with reference to the application of Article 101 TFEU. In particular, it confirms that the “parental liability presumption” shall be demonstrated in concrete terms.

The Council of State also provided relevant clarifications related to different aspects of the method of calculation of the fines to be applied by the ICA in the event of antitrust infringements.

• Firstly, in line with the ICA Guidelines on the quantification of the antitrust fines, it confirmed the ICA conclusion that the value of the sales, in the event of public tender procedures, shall correspond to the amount of the tender offers and not to the turnover actually achieved as a result of the tender;
• In accordance with the Commission Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, the Council of State, while confirming that the distortion of a public tender is, by its very nature, among the most harmful restrictions of competition, also stressed that the amount of the fine must in any case take into account the actual effect that the cartel has on the market (e.g. considering the geographical extension of the relevant market, the nature of the infringement and the aggregated market share of the involved undertakings). In the case at hand, the seriousness factor considered by the ICA in imposing the fine was thus deemed to be disproportionate compared to the repercussions that the concerted practice had on the market. Upholding the conclusions reached by the TAR Lazio, the Council of State confirmed the reduction of the seriousness factor at 15%;
• The application of the “entry fee” falls within the ICA discretionary powers and the overall assessment of the fine and therefore does not need to be separately motivated by the ICA;
• Lastly, confirming the EU case law on the calculation of the maximum fine, the Council of State stated that the fine threshold, which amounts to 10%  of the total turnover, only constitutes a “capping ceiling” in order to avoid the application of excessively high fines, regardless of the seriousness of the infringement. Therefore, the ICA remains free to fix a different threshold based on the gravity of the infringement, its only limit being the 30% referred to the value of the sales.

For more information, please contact Federico Marini Balestra, Lucia Antonazzi or Chiara Horgan.

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