Wednesday, June 3, 2009
Posted by D. Daniel Sokol
Philippe Noguès (O'Melveny & Myers) & Giovanni Cifelli (O'Melveny & Myers) asks Alitalia—Government Interventionism, The Road to Recovery?
ABSTRACT: On December 3, 2008, the Italian competition authority (the “ICA”) authorized the merger between Compagnia Aerea Italiana (“CAI”), a new Italian company incorporated in order to acquire most of the passenger-related assets of Alitalia, and AirOne, the second largest Italian carrier. According to the decision, the transaction led to overlaps on 22 domestic and seven international routes where the combined entity would have a market share ranging from 50 to 100 percent. More importantly, the decision also outlined that the merged entity would be the only carrier to offer passenger air transport on numerous routes, including some of the most relevant routes in terms of traffic and revenue, whereas elsewhere the presence of competing operators, with a few exceptions, would be strongly reduced.
Confronted with that analysis—which concluded that a transaction would impede effective competition by creating dominant positions on several markets—many, if not all, competition regulators in the world would have either prohibited the transaction or approved it further to significant structural remedies in order to ensure that the consumer would not be harmed. In fact, quite the contrary happened in this case!