Vivendi-Mediaset ruling. A chance to reform the Italian telecommunications regime  

Recently, the events involving the French telecommunication company Vivendi and its interests over the Italian competitor Mediaset came once again into the juridical spotlight. Indeed, on 3rd September, the European Court of Justice issued a judgement uphelding the Vivendi claims against an Italian law, the so called “Legge Gasparri”, which substantially prevented Vivendi from acquiring 28% of Mediaset share capital.

Contrarily to Mediaset arguments based on the mentioned legislative framework and in defense of pluralism of information, the Court ascertained that the application of the Italian provisions to Vivendi infringed EU law. Specifically, according to the Court’s reasoning, the Italian telecommunication regime represented a violation of Article 49 TFEU, which provides for the prohibition for each Member State to impose restrictions on their own territory to the freedom of establishment of nationals coming from another Member State. Despite the several outcomes of this ruling in the near future, it certainly opens a new cleavage in the Italian telecommunication system and a need to reform it.

Firstly, it is necessary to recall the Italian framework regulating the media-television sector, determined by the previously mentioned Legge Gasparri. Introduced as a reform of Legge Mammì (1990) and the following Legge Maccanico (1997), the regulation was approved by the Italian Parliament in 2004, taking its name from its proposer Maurizio Gasparri, Minister of Telecommunications under the second Berlusconi cabinet. The law identifies the general principles leading the functioning of the national radiotelevision system, such as the aim of guaranteeing freedom and pluralism of the telecommunications, in order to avoid any form of distortion of competition in this sector.

Following the latter specific purpose, the Testo Unico dei servizi di Media Audiovisivi e Radiofonici  (TUSMAR) was introduced in 2005, within Legge Gasparri reference framework, resuming the pillars of the radio-television broadcasting.  After the rise of digital technology, it responded to the need of adaptation to the convergence between the media and television field and all the other telecommunication sectors. Indeed, Article 2 TUSMAR identifies to the so-called integrated telecommunication system: it is a unification of television, radio, press, publishing, internet, cinema and advertising within the same system.

The legislation also responded to the possible consequences of this convergence on the market, outlining a specific antitrust regulation against forms of monopolies over the information transmission. According to Article 43, paragraph 7, the same content provider, even through companies that can be qualified as subsidiaries, cannot hold authorizations allowing it to broadcast more than 20 percent of total television programs or more than 20 percent of radio programs that can be broadcast on terrestrial frequencies at national level through the networks provided by the same plan.

In order to prevent the creation of dominant positions, as such likely to arise competitive concerns, Article 43, paragraph 11, provides also a limit for the revenue that companies can get, calculated on the entire system. It states that companies, even through subsidiary or associated entities, whose revenues in the electronic communications sector are more than 40% of the total revenues in that sector, cannot achieve revenues greater than 10% in the integrated communications system.

In 2016 the French company Vivendi SA, a parent company of a group that is active in the media sector and in the creation and distribution of audiovisual content and owner of 23% of shares in Telecom Italia Spa, started a hostile takeover campaign aimed at acquiring shares in Mediaset Italia Spa, the Italian competitor active in the same sector and controlled by Fininvest group. In this acquisition campaign, Vivendi obtained almost 28,8% of Mediaset’s share capital and 29,4 % of its voting rights, although it did not exercise any control over the society since it held a minority shareholding.

On the basis of the national legislative framework, on December 2016 Mediaset lodged a complaint against Vivendi with the Italian Communications Authority (AGCOM), accusing the French society of having infringed the provisions of Article 43, paragraph 11, of TUSMAR. Indeed, Vivendi’s shareholdings in Telecom Italia and Mediaset allegedly resulted in Vivendi’s revenues in the electronic communications sector, on the one hand, and in SIC, on the other, exceeding the thresholds established by that provision. The aim of these limits is to avoid, in the light of the phenomenon of the convergence between the telecommunication sector and the media, the disruptive effects on the pluralism of the informational means: they usually take place when an company owning a significant market power in this sector achieves a relevant economic dimension within the integrated telecommunication system.

AGCOM stated that the French company could be qualified as an affiliated society to both Mediaset and Telecom Italia Spa, since it had more than one-fifth of the voting rights within the shareholders’ meeting of each of these companies. It also pointed out that Vivendi had obtained 59% of the revenues realized in the electronic communications sector, which is composed of retail services from fixed network, wholesale services from fixed or mobile networks and broadcasting services for the transmission of content to end users, and that Mediaset had received 13.3% of the revenues realized in the SIC sector. According to the Italian Communications Authority, these results exceeded the thresholds established by the Italian law and, consequently, was in breach of the free competition principle and pluralism of media. Thus, by a decision of 18th April 2017, AGCOM stated that Vivendi had infringed that provision of Italian law by acquiring shares in Mediaset and ordered it to put an end to that infringement.

Notwithstanding its compliance with AGCOM’s decision by transferring to a third company 19.19% of the share capital in Mediaset, Vivendi brought an action seeking the annulment of that decision before the Regional Administrative Court for Lazio (hereinafter “TAR”). It argues that AGCOM neither took into consideration the correct definition of what the telecommunication sector includes, nor interpreted properly the notion of ‘affiliated society’. Hence, the French company claims a violation of Article 49 TFEU regarding the prohibition of restrictions on the freedom of establishment towards setting-up of agencies, branches or subsidiaries of another Member State, thus defining the Italian law discriminatory.

Against that background, the TAR asks the Court of Justice, through a preliminary ruling, whether the freedom of establishment enshrined in Article 49 TFEU precludes the Italian legislation to operate in order to protect the pluralism of information and of the media.

First of all, the Court recalls that, generally, Article 49 TFEU precludes any national measure which is liable to hinder or render less attractive the exercise by EU nationals of the freedom of establishment guaranteed by the TFEU. That is also the case of the Italian regime provided by Article 43 TUSMAR: in line with the disposition, AGCOM prevented Vivendi from retaining the shareholdings both in Mediaset and in Telecom Italia, thus requiring it to cease to hold those shares in one or other of those undertakings in so far as they exceeded the thresholds laid down in that provision. As a consequence, Vivendi was prevented from exercising its freedom of establishment in Italy.

On a consolidate case-law  basis, the Court admits that this restriction may be justified by imperative objective of general interest, such as the protection of pluralism of information. However, the Court pointed out that, in this case, the provided thresholds, fixed to guarantee the general interest, do not respect the principle of proportionality. Indeed, the Italian law prevents a single undertaking from acquiring, directly or through its subsidiaries, a significant share of the media sector in Italy if it already has significant market power in the electronic communications sector in that Member State. In this respect, the Court notes that EU law, as regards electronic communication services, makes a clear distinction between the production of content and the transmission of content. Accordingly, undertakings active in the electronic communications sector which control the transmission of content do not necessarily have control over the production of that content, thus they are reserved to two different disciplines. However, the provision at issue in this case does not refer to the links between the production of content and the transmission of content.

The Court notes, furthermore, some inconsistencies in the notions used by the Italian provision, regarding both the definition of electronic communication system and the establishment of the thresholds. As for the former, it states that the electronic communications sector is defined too restrictively, since its interpretation excludes markets which are of increasing importance for the transmission of information. Examples of this, such as mobile telephone retail services and other electronic communications services linked to the internet and satellite broadcasting services, have a direct connection to media business, thus their exclusion is not justified. For what concerns the latter, the Court observes that whether or not to achieve revenues equivalent to 10% of the total revenues of the SIC is not in itself indicative of a risk of influence on media pluralism.

Lastly, the Court evaluates that Article 43, when establishing the revenues thresholds applied to the undertaking, refers equally to controlled enterprises and affiliated companies, over which the undertaking concerned exercises “significant influence”. In this respect, it specifies that this is based on a broad presumption of the entity of “influence”: according to the dispositions, a “significant influence” over another company exists when it can exercise one fifth of the voting rights at the latter’s shareholders’ meeting, or one tenth if the former company holds shares listed on regulated markets. However, as the Court observes, these circumstances do not seem likely  to demonstrate that the first company can concretely exercise over the second one an influence such as to prejudice the pluralism of media and information.

Eventually, the Court upheld Vivendi’s appeal against AGCOM and Mediaset, abolishing one of the Legge Gasparri cornerstones for the protection of pluralism, i.e. the strict limit to the simultaneous control that companies can exercise over more telecommunications sectors. Juridically, this ruling  opens up multiple scenarios, since it may be easily subjected to new appeals by Mediaset, or, contrarily, it can trigger the direct intervention by lawmakers in order to revoke the law, insofar it is incompatible with EU provisions.

The implications of the sentence may redefine the interests of the two societies involved. In the view of a reform of the Italian legislation towards a more opened approach over acquisitions, Vivendi can keep its walks, acquiring new participations in Mediaset and increasing its voting rights in the undertaking. Even though the abolition of the previous principles enshrined in TUSMAR could bring a rearrangement within Mediaset’s structure, on its side the Italian company could however benefit from the effects of a new legislation, which would be more opened on the convergence between the media and the telecommunication sector. In the light of the recent development of the single national ultra-broadband network, Fininvest group seems to be again interested in making its entrance in this evolving business. However, both these opportunities for the two undertakings involved will depend from the next steps of the Italian Communications Authority and from the draft content of a new Italian telecommunication legal framework.