Italy's Antitrust Probe: Snam-Edison Gas Storage Deal Under Scrutiny

Italy's antitrust authority has opened an investigation into the proposed gas storage deal between Snam and Edison, raising concerns about market concentration and competition in the Italian gas sector. The probe, announced on September 25, focuses on the acquisition of Edison's gas storage assets by Snam, which could lead to a dominant position in the Italian gas storage market.

The Snam-Edison gas storage deal, if approved, would create a vertically integrated entity with significant market power. Snam, the country's largest gas infrastructure operator, and Edison, a major gas and power supplier, aim to merge their gas storage businesses. This deal could control around 80% of Italy's gas storage capacity, potentially leading to higher prices and reduced competition.



The Italian antitrust authority's investigation will assess the potential barriers to entry and foreclosure effects resulting from the merger. Snam's extensive gas storage and transportation network, coupled with Edison's retail presence, may create a vertically integrated entity with significant market power. This could lead to higher barriers to entry for new competitors, as they would need to invest in similar infrastructure and customer bases. Additionally, the merged entity could potentially foreclose competitors by leveraging its control over key assets, such as storage facilities, to favor its own retail operations over those of rivals.



The deal could also impact pricing and service quality for consumers and businesses in the Italian gas market. Snam and Edison together control around 70% of Italy's gas storage capacity. This concentration could lead to higher prices for consumers and businesses, as the merged entity may have less incentive to compete on price. Moreover, reduced competition could lead to lower service quality, as the merged company may have less pressure to innovate and improve services.

The antitrust investigation may delay the regulatory approval timeline for the Snam-Edison gas storage deal. The new Italian antitrust law, effective since 27 August 2022, grants the ICA enhanced powers to scrutinize mergers and acquisitions, potentially leading to more thorough investigations. This could result in extended review periods, as seen in other European countries where antitrust probes have led to delays in merger approvals.

If found guilty of anti-competitive behavior, Snam and Edison may face fines up to 10% of their global turnover, as per the Italian antitrust law. Given Snam's 2023 turnover of €11.5 billion and Edison's €12.3 billion, potential fines could reach €2.3 billion for Snam and €1.2 billion for Edison. However, the actual fine will depend on the severity of the infringement and the duration of the illegal conduct.

The Italian antitrust agency's probe into Snam's acquisition of Edison's gas storage assets may impact investor sentiment and trading activity for both companies. The investigation, focusing on potential anti-competitive concerns, could raise uncertainty about the deal's completion, affecting Snam's share price. However, Edison's shares might benefit from potential divestment proceeds or strategic alternatives. Investors should monitor developments closely, as the outcome could influence their investment decisions.

In conclusion, the Snam-Edison gas storage deal faces scrutiny from Italy's antitrust authority, which aims to ensure that the deal does not harm consumers or stifle competition in the Italian gas market. The investigation will assess potential market concentration, barriers to entry, and impacts on pricing and service quality. Investors should closely monitor the developments, as the outcome could significantly impact the financial performance of both companies and the Italian gas sector as a whole.