Italian biodegradable company Novamont fined more than 32 million euros
The Italian Competition Authority has fined Novamont (Novara, Italy) €30,359,000.00 and its parent company ENI S.p.A. (Electric Power) €1,701,052.08, totaling more than €32 million (about RMB 270 million), for abusing their dominant market position from at least January 1, 2018 to December 31, 2023.
Novamont is active in the national market for bioplastic raw materials (so-called biocomposites) for the production of shopping bags and ultra-light bags (such as fruit and vegetable bags). Given that such bags are often treated as waste, this sector plays a key role in reducing environmental impact. For this reason, when Italy transposed EU Directive 2015/720, it stipulated through Legislative Decree No. 152/2006 that all shopping bags and ultralight bags must be biodegradable and compostable; ultralight bags must also contain no less than 60% renewable raw materials.
The Authority found that Novamont had developed a product (called Mater-Bi) that met the applicable standards and had achieved a dominant position in the national market for bioplastics used in the production of shopping bags (with a market share of over 50%) and the national market for bioplastics used in the production of ultralight bags (with a market share of over 70%).
In these markets, Novamont has established a two-tier supply agreement system that works at both ends of the supply chain by imposing exclusivity clauses, as follows:
processors (i.e., manufacturers that purchase biocomposites to produce shopping and ultralight bags) are prohibited from purchasing materials other than Mater-Bi, which blocks Novamont's competitors from the market (these processors account for approximately 52% of the national demand for biocomposites for shopping bags and 70% of the demand for biocomposites for ultralight bags);
large retailers (the processors' customers and the main purchasers of the above-mentioned bags) are forced to purchase Mater-Bi bags only from processors that work with Novamont. During the period under investigation, large retailers that signed contracts with Novamont accounted for as much as 44% of the total demand for shopping and ultralight bags in the retail sector, and also accounted for a significant proportion of the revenue of Novamont's partner processors (up to 51%).
This system creates an exclusionary approach against Novamont's competitors through a circular mechanism, with the following impact:
As long as the leading large retailers agree to purchase Mater-Bi bags only from converters that cooperate with Novamont, these converters have a strong incentive to accept the exclusivity terms imposed by Novamont.
As long as the majority of converters supplying large retailers are bound by Novamont's exclusivity terms, large retailers are willing to enter into contracts with Novamont that contain bonus exclusivity terms and/or incentives.
Novamont's exclusionary approach prevents the development of fair competition in the national markets for the production and sale of biocomposites for shopping and ultralight bags, effectively preventing competitors from finding viable sales channels for their products and operating successfully in these markets.
Restricting the development of Mater-Bi alternatives not only harms competition, but also has significant environmental impacts. Full competition in the bioplastics sector is key to achieving the environmental goals set by European and national policymakers. Effective competition will promote the emergence of more efficient alternative bioplastics and help more sustainable products to come to market - either of higher quality or at a lower cost.
