LEGISLATIVE DECREE ON OIL DISTRIBUTION
PRESS RELEASE
The Italian Government approved a Legislative Decree regulating the main aspects of motor vehicles fuel distribution (concession, logistics, non oil, opening times).
The Italian Competition Authority had expressed the hope for a full liberalization of the market in its fact-finding survey concluded the last year and, therefore, considered such a Decree as an important step toward this process started with the liberalization of selling price, which was insufficient by itself to promote effective competition.
The Authority appreciated the intention to liberalize the opening and management of gasoline filling stations, by removing the regime of granting administrative license currently in force. In fact the Municipal authorization will permit new operators to access the market and, additionally, will reduce constraints on the existing operators. As such, it seems to be better than license to ensure that reorganization and requalification of the current distribution network be conducted in line with efficiency criteria required by competition rather than according to a negotiation under public control.
The Authority attributed particular importance to the rules on administrative simplification set forth by Section 1 and Section 2 of the Decree above, to meet needs of rapid administrative actions and assurance of law being necessary pre-requirements for performing business in competitive regime.
Furthermore, Section 10 on the usage of tanks for the storage of liquefied petroleum gas derived from oil plays a relevant role to develop competition in the market concerned. This Section prohibits the free loan of tanks for the storage of liquefied petroleum gas for civil, industrial and agricultural use; it permits current commodatories to become owners of tanks, and enables them to choose freely companies to sign contracts with for the maintenance of tanks.
In spite of such appreciable provisions, the Authority found that the Legislative Decree contains certain unsatisfactory aspects.
First, Section 3 puts off the start of the liberalization process, established by Section 1, until December 31st, 1999. Such a two phase system - the former concerning the restructuring of the distribution network, the latter related to the complete liberalization of the market - would be likely to prevent companies from closing plants according to efficiency criteria. Impact on efficiency and reduction of consumer price referred to in Section 3 would be more significant if the distribution network was reorganized along with and in virtue of the complete liberalization of market access.
Additionally, the removal of the concessionary scheme is not justified by the regulation of the contractual relationships between licensees and likely service station managers, whose definition would be left to the autonomy of the parties.
In particular, establishing common schemes would be likely to strengthen uniform vertical relationships between operators and their managers so as to facilitate the horizontal co-ordination between the operators themselves.
Furthermore, the provisions of the Decree which vest the Ministry of Industry with the power to review and broaden the classified listings and set service station managers free to decide their opening times, constitute important conditions to overcome the current uniformity of contracts. However, such rules are in contrast with the provision of a maximum limit of opening times.
Last, the rules on the conditions of access to storage would be unsatisfactory. To this end, the Authority felt that it would be necessary to promote independent supply policies by operators which are not vertically integrated. By contrast, the adopted measure heavily affects licensees of store plants, by reducing possibilities to cut prices to consumers’ advantage.