REGULATION AND AUTONOMY OF LOCAL AUTHORITIES (Advisory opinion)
PRESS RELEASE
The Italian Competition Authority submitted to the Speakers of the Senate and the Chamber of Deputies, the Prime Minister, the Ministry of Home Affairs and the Department for the Public Function and Regional Affairs, a new advisory opinion, respecting the draft bill on the regulation and autonomy of local authorities.
The remarks made by the Authority in its previous opinion of February 24th, 1997, have been largely taken up by the Italian Government, which amended substantially the draft law. However, the text currently discussed by Parliament might be further amended to avoid interpretations and implementations potentially restricting competition.
Section 5 of the so-called Napolitano-Bassanini (which are the two Ministers respectively in charge of Home Affairs and the Public Function) draft law is still under discussion. Such a Section set forth that local authorities provide local residents with public utilities so as to ensure regularity, continuity and economicity, in addition to equal conditions of access to services.
To this end, local authorities are required to pursue the economicity of the management as well to monitor and check their course of activities.
On the basis of the grounds above, the Authority suggested to point out that services should be contracted directly to special agencies or stock companies with mixed capital (state and private) only when the reasons why the local authority is needed to deviate from the tendering and award procedures are clearly defined.
The present formulation of the draft bill provides for service to be contracted directly to state-owned companies. Indeed, it states that a pluralism of local authorities can acquire shareholdings in a mixed capital company, which can take advantage of a direct assignment of the services whose supply is the reason why the company has been established. The provision of a mere shareholding and not the control of a company could allow a local authority to be directly contracted, even through a minimum shareholding in a mixed capital company. This possibility could be avoided by providing that the mixed capital companies would bid to award the supply contracts and not to identify the private partner. Furthermore, it should be set out that the direct assignment would occur only for specific periods of time and within the limits provided by the law.
The draft bill states that special agencies can operate outside of their territory only if and when they create or enter capital companies. This provision seems to be likely to avoid cross subsidies restricting competition. In the Authority's opinion, such a solution could be adopted also to legitimate the conduct of activities on behalf of mixed capital companies outside of their territory instead of the simple accounting separation between the activities carried out by the mixed capital company for the parent institution on the one side, and the services supplied outside the territory on the other side. In addition, it is to be noted that mixed capital companies are not required to pay certain taxes for three years after their creation. In order to avoid that these fiscal agevolations (which are equivalent to public subsidies under the community law on State aids) could restrict competition, it is necessary to prevent that profits gained by companies supplying services outside of their territory would be taxed in a different way as profits gained by competitors.