Competition Law in Italy The first 20 years of law and practice

B. Role of Economic Doctrines and Analysis
1. Generally
The use of economic analysis plays a very important role in the enforcement of the
Competition Law. The Competition Authority set up a specialized department, the Market
Analysis Department (Ufficio Analisi dei Mercati), which provides enhanced economic
support to the investigative departments.
2. Use of Specific Economic Analysis
In general, the Competition Authority relies on economic doctrines and applies
quantitative tests in determining product market definition, such as estimates of elasticities
and cross-elasticities. Economic analysis is particularly important in (i) the evaluation of
concerted practices, to determine whether the parties’ conduct has an objective justification;
(ii) essential facility cases; and (iii) merger control review.
For mergers, the Competition Authority has taken into account the Herfindahl-
Hirshman Index (HHI) test to measure the degree of concentration of the relevant markets.
To authorize transactions under its merger control rules, it has also applied the doctrines on
strategic barriers to entry and potential competition. In this respect, it also takes into
account the benefits deriving from a more efficient resource allocation (efficiency
defense). 33
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In Sai/La Fondiaria, the Competition Authority used, for the first time, a PCAIDS
(Proportionality Calibrated Almost Ideal Demand System) simulation model to assess the
existence of a dominant position. The PCAIDS measures how the growth in market
concentration created by a merger increases the parties’ ability to fix prices independently
from competitors. In Sai/La Fondiaria, such simulation showed that the parties would have
been able to charge a substantial premium, averaging more than 10 percent above pretransaction
market levels.
35
In Compagnie Aeree-Fuel Charge, the Competition Authority used, for the first time,
the Multimarket Competition theory. According to this theory, when certain conditions are
satisfied (e.g., price transparency and relatively high product homogeneity), undertakings
simultaneously active in various geographic markets (e.g., the routes operated by air
carriers) define their respective business strategies for each market by taking into account
the whole of the markets in which they operate. Applying this theory, the Competition
Authority considered all domestic routes in condemning the air carriers’ imposition of
identical surcharges for domestic flights as an anticompetitive concerted practice.
33
Competition AUTHORITY, ANNUAL REPORT 1992, at 30-31 (1993).
34
Sai-Società Assicuratrice Industriale/La Fondiaria Assicurazioni, 17 Dec. 2002, n. C5422B, Bulletin
51-52/2002.
35
Compagnie Aeree-Fuel Charge, 1 Aug. 2002, n. I446, Bulletin 31/2002. In both Compagnie Aeree-
Fuel Charge and Sai/La Fondiaria, the Competition Authority explicitly referred to recent economic
literature.
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