LEGISLATIVE DECREE ON MOTOR VEHICLES FUEL DISTRIBUTION NETWORK (Advisory opinion)
PRESS RELEASE
The Italian Competition Authority submitted an opinion to the Speakers of the Senate and the Chamber of Deputies, the Prime Minister, the Ministers respectively for Industry and the Department for the Public Function and Regional Affairs, on legislative decree on motor vehicles fuel distribution, approved by the Council of Ministers on October 1st, 1997. the Authority highlighted some aspects which could slow up unjustifiably the achievement of the decree goals.
Such a decree is an important step toward the full liberalization of the market concerned, advocated by the Authority in its fact-finding survey concluded last year. In order to achieve this, the decree is designed to regulate all the main aspects of motor vehicles fuel distribution (licensing system, logistics, non-oil activities, opening times), and liberalize the opening and management of gasoline filling stations, through the removal of the current franchise system. However, some provisions of the decree in question are likely to unjustifiably hamper or slow up the opening of market access.
In particular, Section 3, subsection 1, of the decree delays until December 31st, 1999, the complete application of the licensing regime with regard to the installing of new pumps, in such a way as to implement a two-phase regulation aimed at placing the voluntary and concerted restructuring of fuel network before the full liberalization of the market.
By contrast, the Authority considered it opportune to proceed immediately to the liberalization of the market, in order to start restructuring the sector. Only in this case, the closing down of retail stations will depend strictly on free market access of non-vertically integrated operators, so as to ensure that the closing down meets efficiency criteria, rather than a coordinated plan for local market sharing and maintenance of historic market shares.
The provisions of the legislative decree in question show a dual risk. First, firms could be unlikely to proceed to an effective restructuring of the distribution network: indeed, a system impeding the entry of new competitors does not encourage firms to close down their pumps in line with efficiency criteria. Second, existing oligopoly could be strengthened so that new entrants would be prevented from market access for other two years and the present firms could proceed to a concerted restructuring of the network.
The Authority therefore felt unlikely that the objectives of efficiency promotion and consumer price control, set out by Section 3, subsection 1, of legislative decree, could be better achieved by delaying liberalization and the restructuring of the distribution network.
On the basis of the grounds above, the Authority expressed the hope that the restructuring of the network would be the immediate and direct consequence of the full liberalization of market access, and, as such, any delay would not be a barrier to entry of new competitors.