SEAT PRIVATIZATION (Conclusion of the investigation)
PRESS RELEASE
The Italian Competition Authority decided that the contracts signed between Telecom Italia and Seat for Yellow Pages and telephone directories joint distribution and shrinkwrapping, as well as the contract for the telephone business customers data classification, violated Section 2 of Law no. 287/90 (restrictive agreements) in that they had as their effect appreciable distortion of competition.
Telecom Italia and Seat (a Stet Group company dealing with directory publishing and marketing) were required to file within 60 days a report regarding the measures adopted to remove the infringements and restore effective conditions for competition on the market.
The relevant product market concerned the marketing of big-circulation directory advertising. In 1996 total sales from this market amounted to 1,644 billion lira divided as follows: White Pages (Telecom Italia) 0.7%; Yellow Pages (Seat) 44.3%; Helpful Pages (Fininvest) 15%.
Seat was a Telecom's operating division. When the company was privatized (but Telecom Italia still holds a share of 20 per cent), the Authority examined this operation and decided to investigate into certain contracts between the two parties.
The Authority ruled that Seat was given economic and product reliability advantages in virtue of the contracts for Yellow Pages and telephone directories joint distribution and shrinkwrapping. The economic advantage was proportional to the difference between the total cost incurred by Seat for distribution and the cost incurred by the Helpful Pages publisher for the same activity. With respect to product reliability, Seat could take advantage of the joint distribution and benefit of the association of its commercial product (White Pages) with a product like the telephone directories, which can be considered as official in that they are edited and published in compliance with law provisions.
Telecom Italia affirmed that the disjointed distribution of 24.3 million of telephone directories as well as the same number of Yellow Pages would rise appreciably the contribution paid by customers for home delivery of telephone directories. However, the cost analysis submitted by Telecom Italia during the investigation showed that so far the company has earned profit from such distribution seeing that the contribution paid by customers is higher than the unitary cost incurred by Telecom Italia to provide the service. In addition, in 1996 the company sales from the marketing of directory advertising amounted to about 670 billion lira.
As far as the telephone business customers (nearly 3.7 million) data classification is concerned, under this contract the information about professional activities given by customers to Telecom Italia when subscribing to the telephone service is sold to Seat after having classified it by a specific index created by Seat itself.
The privileged position enjoyed by Seat was confirmed by the circumstance that another company, Italy Page, which needed information about customers professional activities alike to prepare their directory, was given by Telecom further information about customers business, in addition to their personal data, only during the investigation. These data, however, according to a statement of Telecom Italia, were not fully reliable in that they were non-specific and did not always deal with economic activity.
On the basis of the grounds above, the Authority ruled that the contracts examined constituted restrictive agreements.