Navigating the New Merger Review Landscape: How the Italian Competition Authority's Enhanced Powers Impact Below-Threshold Mergers and Acquisitions

Requirements

For the ICA to investigate a below-threshold transaction, three cumulative conditions must be met: (i) no more than six months have elapsed since the completion of the transaction; (ii) one of the two turnover thresholds provided for in Article 16 of the Italian Competition Law (currently € 517 million for the parties’ combined turnover generated in Italy and € 31 million for the turnover generated in Italy by each of at least two parties) is exceeded or the total worldwide turnover generated by all parties exceeds € 5 billion, and (iii) the ICA finds prima facie risks to competition in the Italian market or in a specific part of it.  

Under its new powers, therefore, the ICA could investigate a transaction even if the target has no revenues in Italy, provided that the buyer achieves at least €517 million of Italian revenue or the total worldwide turnover of all the parties exceeds € 5 billion.  

Procedure

If the ICA becomes aware of a merger or acquisition that cumulatively meets the three conditions, it may request that all parties, not just the acquirer, notify the transaction within 30 days. The ICA may extend this deadline by up to 30 days upon receiving a motivated and timely request from the concerned undertakings. Failure to meet the deadline may result in a fine of up to 1% of the previous year's turnover. 

Parties to a below-threshold transaction may also inform the ICA of the transaction voluntarily (providing less information than required in a formal notification). In such cases, the ICA will inform the parties within 60 days of receiving a complete voluntary notification whether it intends to request formal notification of the transaction. 

Upon submission of a formal notification requested by the ICA, or the ICA’s confirmation that it intends to review a voluntary notification, the ICA’s usual merger review procedures and timetables will apply. 

Criteria for Requiring Notification

In determining whether a below-threshold transaction requires notification, the ICA assesses the market structure, operator characteristics, innovative activities, and other relevant factors. In a horizontal merger, a notification is unlikely to be required if the parties’ combined market shares is less than 25% and the HHI (an indicator of market concentration) is less than 1,000, the HHI is between 1,000 and 2,000 but the increment is less than 250 or the HHI is above 2,000 but the increment is less than 150. In a vertical merger, the ICA is unlikely to require notification if the combined entity’s market share is less than 30% in any upstream or downstream market and the HHI less than 2,000. However, the ICA can also consider other factors such as the target's competitive potential, R&D activities, and access to essential inputs.

Conclusion

Italy has joined a number of other jurisdictions that have amended their competition laws or policies in response to concerns that turnover-based merger filing thresholds may not capture all transactions that pose significant competition issues, particularly when the target is an innovative start up. Austria and Germany introduced transaction-value thresholds allowing the authorities to review high-value transactions with a local nexus even if the parties do not meet the turnover thresholds. Although uncertainties can arise about the local nexus required, the transaction-value-based approach provides a reasonable degree of legal certainty.

The EU Commission, instead, introduced a new policy of reviewing transactions that do not meet Member State thresholds under the EU Merger Regulation at the request of Member State authorities (so-called “Article 22 referrals”). Although the Commission has issued guidance on its approach to such cases, parties to transactions that don’t trigger a mandatory EUMR filing cannot be certain that the transaction won’t be referred to the Commission unless they proactively approach the Commission (and/or Member State authorities). When reviewing a transaction based on an Article 22 referral, moreover, the Commission is not a “one-stop shop”; the Commission can review the transaction’s effects only in the Member States that participate in the Article 22 referral.  

The ICA’s new powers complicate merging parties’ strategic choices. Except in the case of Italian-centric transactions, the same below-threshold transactions that could raise concerns for the ICA could also trigger an Article 22 referral. When considering whether to approach the Commission proactively to avoid a surprise referral, transaction parties will also need to consider approaching the ICA. The ICA may be tempted not to join an Article 22 referral but rather to review a transaction’s Italian impact itself. If one more Member States plan an Article 22 referral to trigger EU Commission review, however, the parties would no doubt prefer that Italy join the Article 22 referral to avoid parallel EU and ICA reviews.  

In this increasingly complex merger review landscape, our team of experienced EU and Italian competition law legal experts is equipped to guide businesses through this new terrain and help them stay ahead of the game.