Getting The Deal Through logo
Getting The Deal Through

Gian Luca Zampa has been an antitrust partner with Freshfields since 2005. He joined the firm in 2001 after having been an official of the Italian Antitrust Authority and having worked in New York with Wachtell Lipton Rosen and Katz.

Gian Luca graduated magna cum laude from the University of Bologna in 1992, obtained an LLM from the University of London (QMW) in 1995 and a second LLM from Columbia Law School in 2000. He is admitted to the Bar in Italy (1995, Supreme Court 2012) and New York (2003).

Gian Luca works in the Rome, Milan and Brussels offices advising on all aspects of EU and Italian antitrust, from merger control to behavioural investigations and state aid. He regularly appears before administrative and civil courts in Italy as well as before the General Court and European Court of Justice in Luxembourg.

Since 2009, Gian Luca has been a non-governmental adviser of the Italian Antitrust Authority in relation to the International Competition Network. His clients include Borsa Italiana, LafargeHolcim, Deutsche Bahn, Emirates, Mediapro, Volkswagen and Volvo. Within Freshfields, Gian Luca is antitrust, competition and trade country partner for Turkey; co-leader of junior associate training; and recruiting partner for the Rome office.

GTDT: What have been the key developments in the past year or so in merger control in your jurisdiction?

Gian Luca Zampa: There were two key developments in Italy in the past year.

First, in terms of merger control review, there was a continuation of the trend leading to less intensity in merger control. In fact, in the period of 2017 to the beginning of 2018, the Italian Antitrust Authority (IAA) only opened four Phase II reviews, three of which were decided in the last few months of 2017 and the beginning of 2018, and only one in the first 10 months of 2017. 

Second, and probably as a consequence of the fact that the IAA eventually acknowledged that it was slowly giving up its role as guardian of the competitive structures of regional and local markets, Italy passed legislation that tried to re-expand the jurisdiction of the IAA, which was severely reduced with the 2013 reform. Following this change, the number of reportable transactions has been limited, typically to around 45–50 filings per year, a significant reduction from the 500–600 filings per year that characterised the previous 10–15 years of application of Italian merger control.

The four Phase II cases that were completed concerned different economic activities, all sharing as a common element that the affected relevant markets had a local geographical dimension: from the newspaper publishing sector, to the supply of cement, to gas distribution to cosmetics and perfumes distribution. All cases where approved subject to conditions and, overall, they reveal the inevitable preference for structural or quasi-structural approach of the IAA.

In particular, the first of the three cases related to the acquisition by the publishing house Gruppo Editoriale L’Espresso, owner of one of the most popular Italian newspapers, la Repubblica, of Italiana Editore, publisher of La Stampa (the newspaper previously part of the FCA Chrysler group). The main concern in this case was the envisaged softening of competition in the local advertising markets relating to daily newspapers in the city of Turin (where La Stampa is produced) and Genova. After a complex investigation, which saw also the intervention of the telecoms regulator (which under Italian law must provide its non-binding opinion to the IAA in all cases concerning media and electronic communication services), the IAA authorised the transaction subject to quasi-structural remedies, requiring the combined entity to transfer to an independent third party the right to sell advertisement space in the local edition of la Repubblica.

The most recent Phase II investigations were instead characterised by the use of straightforward structural remedies represented by asset divestitures. Italcementi’s acquisition of Cementir was approved in November 2017 on the condition that the combined entity would divest enough assets to eliminate the restrictive effects that would have stemmed from their merger in certain local markets. This case was noteworthy as the review was carried out in parallel with a cartel case that included two merging parties, in which, tellingly, the IAA had concluded for the existence of a national cement market, which is in striking contrast not only with the economics of the sector as reflected in the consolidated case law of the EU Commission and of the IAA, but also in contrast with its approach in the merger review. The 2iRete Gas/Nedgia merger was authorised in January 2018 after the parties not only committed to divesting significant assets in two of the relevant local markets where the transaction would have essentially led to a three-to-two effect the market structure, but also undertook widespread behavioural commitments. These additional commitments concerned another six local markets and are essentially aimed at balancing the incentives of third-party potential bidders for the relevant gas distribution concessions, with the disincentives, brought about by the deal, for competing with the former incumbents.

Finally, the Profumerie Douglas/La Gardenia Beauty/Limoni case was a decision that the IAA took after a referral back from the European Commission, which concerned the consolidation of three major cosmetics distribution chains in Italy under the umbrella of the private equity fund CVC. The IAA consiered the transaction in the context of micromarkets to see what impact the merger would have on consumer choices, and concluded that it was necessary to divest a number of stores to avoid overlaps in excess of 45 per cent in any of the 14 micromarkets.

Another important development was that, eventually, after a consultation process a few years back that went nowhere, last August new legislation was passed that modified the merger control turnover thresholds. From 29 August 2017, in order for a transaction without an EU dimension to be reportable in Italy, in addition to the total combined Italian turnover of all undertakings concerned to be above €495 million, it is also required that at least two undertakings concerned each generated at least €30 million in Italy in the past financial year. In other words, this modification to the law introduced two changes: it reduced the value of the turnover that the target must generate in Italy from €50 million to €30 million; and requested that the acquirer group generates at least €30 million in Italy. Although this change is welcomed by the Italian antitrust community as it brings the Italian merger control thresholds more in line with International Competition Network recommendations, in my opinion it does not do much to strike a balance between re-expanding the IAA jurisdiction to allow it to be an effective guardian of market structures in Italy and avoiding to excessive red tape for the business community. In a recent workshop for a sector-specific association, a group of antitrust lawyers were vocal in their belief the real change that should be made is a reduction of the first threshold relating to the Italian turnover of all undertakings concerned in the transaction, which is disproportionately high (currently €495 million) when compared with other jurisdictions such as France and Germany.

“Italy, along with the UK, is one of the few countries without a standstill obligation.”

GTDT: What lessons can be learned from recent cases to help merger parties manage the review process and allay authority concerns at an early stage?

GLZ: As Phase II merger review in Italy is likely to be one of the shortest in the EU, it allows parties to factor in much shorter interim periods (ie, between signing and closing) in the deal timeline, which gives the deal more certainty and allows integration planning exercises to be more linear and effective. At the same time, this obviously puts a lot of pressure on the case team and the degree (and quality) of the in-depth analysis cannot always be guaranteed. In addition, Italy, along with the UK, is one of the few countries without a standstill obligation, and thus companies may decide to close the transaction prior to the relevant clearance, which, if there are no real antitrust issues, can further speed up the process and improve deal certainty.

The best piece of advice I can give to parties involved in a merger proceeding in Italy is this: the golden rule when dealing with a transaction that may give rise to merger control issues is ‘prepare, prepare and prepare!’. This is the advice that I continue to give to clients and younger colleagues. This also applies to the relationship with the IAA but, as we continue to see, clients often forget it and tend to consider problems only when the IAA notes them, which is likely to be very late in the process and where a change in defensive strategy is difficult to implement, let alone justify.

The overall interaction with the IAA is very efficient and smooth, and quite informal. Pre-notification is not expected by the IAA for every deal, however it is clear that, to the extent that antitrust lawyers have been brought in sufficiently in advance to have at least the possibility of conducting a preliminary analysis of the antitrust aspects of a deal, if they have come across issues that could become serious concerns, they should generally recommend starting the pre-notification process as soon as possible. In fact, it is only when the interaction with the IAA is done outside a formal notification review period that all parties have sufficient procedural flexibility to adjust it to the needs of the case. Clearly, this requires an equally flexible deal timetable, something that admittedly we rarely have. My recommendation would therefore be to make more frequent and systematic use of pre-notification contacts whenever there is a chance that an aspect of the deal may have antitrust concerns that, if not dealt with, could derail the whole transaction.

The rest of the interaction with the IAA should be straightforward. The authority seems to be fully aware that dealmaking is the result of a number of compromises between very different individuals and companies, and, as such, the case team and senior management are generally prepared to accept at face value any request for having more clarity on the process and react swiftly to it, they require information informally and adopt formal decisions (including stop-the-clock letters interrupting the review period) only in the most extreme cases, and they establish an open channel with the parties.

GTDT: What do recent cases tell us about the enforcement priorities of the authorities in your jurisdiction?

GLZ: Control of the structure of the markets remains a key aspect of the IAA’s policy, although it is probably not its top priority. It appeared in the past few years that merger control was regaining momentum but in fact what we have seen in the past year is a renewed focus on behavioural investigation and much less on merger control. At the same time we believe that the IAA is keen to use all tools at its disposal to review concentrations that have a material effect on Italian markets and, as such, we expect that it will be more active in trying to obtain referral of cases having an EU dimension.

Historically, the IAA has shown particular interest in the energy sector, focusing on any merger-related activity concerning public tenders for the granting of concessions in the gas distribution market, something that has also come up in the past year.

More generally, it is clear that, from a merger control angle, the IAA increasingly sees itself as the watchdog of market structures at the local level, even going as far as identifying micromarkets through isochrones analysis.

GTDT: Have there been any developments in the kinds of evidence that the authorities in your jurisdiction review in assessing mergers?

GLZ: The situation in this respect has not changed much in the past few years. While it took a while for the IAA to introduce the role of chief economist and utilise it as a further means of control in the activity carried out by the case teams, the situation has been improving. Despite its economists-driven origin, it is thus only in the relatively recent past, after the creation of the chief economist’s office, that we have seen more formalised economics being used as evidence in merger cases. However, this has not resulted in an extension of the tight timeline the merger review must follow, something that affects the ability of all stakeholders to develop, support and contest economic arguments. Accordingly, economic analysis and evidence in merger reviews is now essential and its absence would significantly weaken a party’s case; at the same time, by itself, economic analysis would not give a notifying party the upper hand, considering that, among other things, the limited time available does not typically permit a fully adversarial engagement between the economists of the parties and the IAA’s economists.

In my opinion, while the short Phase II timetable existing under Italian merger law is normally appreciated by merging clients (given the strict deadline they are typically up against), it would be in their interest to have a framework of analysis that also allows for full appreciation of the economic effects of a concentration,, with particular reference to synergies and cost efficiencies.

GTDT: Talk us through any notable deals that have been prohibited, cleared subject to conditions or referred for in-depth review in the past year.

GLZ: Please refer to my answer to the first question.

GTDT: Do you expect enforcement policy or the merger control rules to change in the near future? If so, what do you predict will be the impact on business?

GLZ: I believe that the IAA will continue to adapt internally to the changing M&A world and allow more and more interaction between economists in the context of a fully regulated process. This may require amending secondary legislation and IAA notices, which, on its face, seems unlikely to happen.

The Inside Track

What are the most important skills and qualities needed by an adviser in this area?

To be an effective antitrust lawyer, and even more so, an M&A antitrust lawyer, it is essential that the basics of accounting, corporate finance and, naturally, industrial and microeconomics are all present in her or his toolbox. Knowing the law (hard and soft) and the case law is important, but without the above-mentioned technical skills it would be difficult to succeed.

What are the key things for the parties and their advisers to get right for the review process to go smoothly?

‘Start early and prepare well’ are the words that any antitrust lawyer would want to hear from her or his clients. This is key and whoever says otherwise is not being fully honest: there has to be a process that factors in antitrust as a key element to consider when assessing the overall feasibility of a deal. Investment bankers and business consultants should by now have understood that, as with any important input, ‘repetitita iuvant’: a Latin saying that essentially means that when you have an important message to get across, repeating things is always beneficial. This is particularly true in this context as rushing to get a deal closed as soon as possible can actually delay the transaction or even derail it.

What were the most interesting or challenging cases you have dealt with in the past year?

The most interesting case I have been involved in was a joint venture that originally had an EU dimension but that, after a long pre-notification, was eventually referred to the IAA, which subsequently cleared it in Phase I. It had two features worth noting. The first is that, despite being moved to Italy with a voluntary request for a pre-filing referral  (after an express request of the IAA to this effect), and in agreement with the European Commission, the case was in any event cleared in Phase I without any objection being put on the table, something that was not expected. The second is that it occurred at the same time the IAA was investigating the same sector in the context of an article 101 TFEU proceeding. Despite these two elements, which apparently increased the level of risk attached to this transaction, the IAA ultimately cleared it unconditionally.

Another interesting case that I was involved in is the Deutsche Bourse/London Stock Exchange failed merger, which was ultimately blocked by the European Commission on what, to all lawyers working on the case, appeared to be peculiar terms, given the focus on a small Italian platform for government bonds that, according to the European Commission, despite its modest size, was capable of altering competition in a material way if not divested. The implications connected with Brexit, and the general hostile environment in the EU with respect to the deal, once again confirms that the longer the review period, the more likely it is that unpredictable events will derail the deal despite it on agreed terms and not hostile. Given the lengthy review periods in Phase II cases, this is a good example of why, under certain conditions, it is more efficient and effective to close the case in Phase I even if it is at the cost of broader commitments (typical of this preliminary phase), rather than initiating a long Phase II review that may delay the closing date for a significant amount of time, during which other uncontrollable variables can come into place and negatively impact the deal.  

Gian Luca Zampa
Freshfields Bruckhaus Deringer

Follow Getting the Deal Through for the latest updates on law and regulation worldwide

Follow us on LinkedIn