EU legal challenge over Parmalat protectionism unlikely, says lawyer

By Guy Montague-Jones

- Last updated on GMT

Related tags Italy

Threatening noises from the EU have little chance, as things stand, of turning into a successful legal challenge to frustrate Italian protectionism over the future of Parmalat, according to an EU competition lawyer.

The Italian government has been busy taking legal steps to encourage a domestic bid for Parmalat and prevent Lactalis from gaining control of the Italian dairy. This comes after France-based Lactalis built up a 29 per cent shareholding in Parmalat.

EU antitrust chief Joaquín Almunia warned last week that he is “closely following” ​developments and is determined to use EU powers to preserve the openness of the internal market.

The basis for a potential legal challenge to Italian protectionism could come from Article 21 of the Merger Regulation that gives the Commission the power to ensure that member states do not put up unjustified obstacles to cross-border mergers with EU implications.

So how likely is an EU legal challenge and could resorting to the law book be a successful strategy?

Edoardo Courir, a partner at Bird & Bird, told “The EU Commissioner did not state that there was an infringement, only that he is closely following developments. I would assume the discussions will continue on a political level rather than a legal one.

“Where things are the chances of a successful legal challenge are a bit thin”

Legal incentive for an Italian ‘white knight’

The EU competition specialist explained that the Italian government has taken two legal steps to keep Parmalat in Italian hands.

He said: “The Italian government wants to create a ‘white knight’ to confront Lactalis and keep Parmalat in Italian hands.”

To achieve this goal the government has passed a decree to enable Parmalat to postpone its AGM – the move is designed to prevent Lactalis from gaining control of the board and buy time for Italian companies to put together a rival bid.

This, in itself, may not be significant enough to justify a legal challenge. Courir said: “The postponement of an AGM is not something that is important enough to jeopardise fair competition.”

The other legal step that the government has taken is to change the rules of the Cassa Depositi e Prestit - a state investment fund under the Ministry of the Economy. Currently used just to finance public investment, its rules have been changed so that it can now acquire stakes in strategic national companies.

This could be used to support an Italian bid for Parmalat but as it has not yet been acted on, there is little basis for a legal challenge at the moment, according to Courier.

In addition, the lawyer said it may be difficult to mount a legal action against Italy even if the country uses the financial resources of the Cassa Depositi e Prestit. This is because the recent moves in Italy are very similar to those taken by France in 2005 when PepsiCo took an interest in acquiring Danone. As the EU did not act then, the Italians can defend themselves by pointing to the commonality between their position and the French one.

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1 comment

Lactalis already present in Italy....

Posted by Mauro Bianchessi,

Just wanted to let you know that Lactalis is already the owner of italian historical cheese brand like Galbani and Invernizzi trough their control company lactalis Italia and Italatte who is buying already more than 20% of the milk produced in Italy. If they merger with parmalat, they will control an important share of italian milk production. Isn't this the case to ask the european anti-trust commission to let us know what they think?

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