AS226 - REFORM OF REGULATION AND THE PROMOTION OF COMPETITION
PRESS RELEASE
PRESS RELEASE
The Competition Authority has submitted a report on competition and regulation
At its meeting on 20 December 2001 the Competition Authority adopted a report on regulation and competition. This document, which has been submitted to the Speakers of both Houses of Parliament and to the Prime Minister, contains a detailed overview of the status of market regulation in Italy and further measures that might be introduced.
The report identifies four sectors: measures regarding the purposes of and the procedures for regulation; measures relating to company ownership and corporate structure; lowering market entry barriers; corporate governance.
During the past decade, several countries have given a prominent role to the regulation of economic activities. Italy is fully in line with this trend and has recorded significant successes in terms of both reducing the number of regulatory constraints and improving the quality of regulation. It is essential to continue consistently in this direction, building further on the results already achieved.
In short, the Authority considers the following ten sets of measures necessary to boost competition.
A) REGULATION AND FEDERALISM
In order to strengthen "procedural democracy" the Authority believes that Italy should also introduce a "notice and comment" system which will make it possible for all the parties involved to participate more broadly in the drafting of regulations relating to economic activities. This mechanism would operate as follows: the regulation process is notified, the draft regulations are then published, a deadline is set for the submission of comments, and the regulations are then finally adopted. This model would apply to procedures for the adoption of technical rules by Ministries and government departments, agencies, and independent authorities with regulatory functions.
In the wake of the recent amendments to the Constitution introducing greater federalism, regional and local regulations governing major areas of the economy will play an increasingly more prominent role. Steps must be taken to ensure that these regional and local regulations are neither more permissive nor more restrictive than the supranational or domestic legislative framework.
B) LIBERALISATION AND PUBLIC SERVICES
While acknowledging the intensity and the quality of the privatisation process, the Authority deems it necessary to ensure that before any privatisations are carried out, the economic features of the industries involved are carefully examined in order to promote the necessary liberalisation and industrial restructuring measures beforehand, so that a genuinely competitive environment is created. These measures are particularly appropriate for the delivery of local public services, which have been less affected by Community liberalisation. Furthermore, the Authority considers that no provisions should be introduced that are likely to restrict competition for the control of public udertakings, unless there are essential requirements for the protection of the general interest. With regard to monopoly-holders that provide public services and utilities, the problem is to prevent these monopolists from abusively extending their dominant position to other markets that have already been liberalised. Significant examples of this are the postal services, telecommunications, railways, electricity and gas, where the companies that have traditionally held a statutory monopoly retain a major presence on the markets that have been liberalised and are vertically linked to their former markets.
In more general terms, the Authority believes that when a monopolist on a particular market also operates on potentially competitive markets vertically linked to the former, the possibility of separating the ownership of the different phases of operation should be carefully appraised.
C) MARKET SHARES AND INTERNATIONAL BENCHMARKING
The Authority believes that no limits should be set on the expansion possibilities available to companies by laying down specific market shares, and that competition-promotion initiatives are more effective when they do not require constant monitoring. Market share capping can of course be used to require companies in a dominant position to dispose of plant and facilities, but only as a temporary measure.
However, as far as international price and tariff benchmarking is concerned, the Authority believes that the indication of international levels which companies may not exceed when setting their prices and tariffs should only be limited to the initial phase of regulation.
D) RESTRICTIONS ON SUPPLY
The Authority advocates the abolition of restrictions designed to pre-establish the market structure, as in the case of long- and medium-haul passenger transport, and pharmacies, because they are generally based on hypothetical assumptions regarding future demand trends. The sole exception would be in cases where the resources that can be used for it are actually limited (frequency bands, public land etc.). In such cases, these scarce resources should be allocated on the basis of competitive tendering.
E) RESTRICTIONS ON ACCESS TO THE PROFESSIONS
Statutory requirements for access to the professions should be such that they do not surreptitiously introduce restrictions on the actual numbers admitted to the professions. The Authority believes that members of professions should only be required to be registered with professional associations not only when their qualifications to practise the profession need to be ascertained, but also when public control is required over the way in which the professions are practised.
F) CONCESSIONS
In principle, the Authority believes that any concessions that are not compliant with Community law should be abolished, and that administrative authorization should only be required if they are justified as being in the pursuit of the paramount public interest. Concessions which are not justified by the existence of a statutory monopoly over specific corporate activities compliant with Community law are still required on many markets, such as radio and television broadcasting, and in transport, should therefore be abolished.
G) MINIMUM PRICES AND MAXIMUM PRICES
The Authority advocates the abolition of any provisions that set minimum selling prices for goods and services, including the recent regulations governing under-cost sales and discount-capping in the retail book distribution. Minimum price-setting has never been used directly to guarantee the maintenance of a minimum level of service quality, which is the main objective usually claimed in its support. There are fewer problems with maximum price ceilings on services from the point of view of competition, even though, with the exception of a few particular cases regarding consumer protection, it is a matter of debate whether this is strictly necessary in the pursuit of the general interest, in view of the costs and the drawbacks which are generated.
H) LIBERALISATION OF OPENING TIMES
The Authority believes that leaving opening times in the retail industry completely free could lead to discrimination to the benefit of the larger retail outlets, unless there is also the possibility for a more flexible use of the labour force. For this reason, it is to be hoped that the deregulation of opening times will be coupled with measures to guarantee greater flexibility to negotiate the contractual terms for the most appropriate working hours.
I) QUALITY STANDARDS AND LIMITS ON THE PRODUCT VARIETY
To improve the quality of goods and services offered, instead of specific bans on the marketing of poor quality items, self-regulation would be very appropriate. For the imposition of quality standards is likely to raise prices without improving quality. In the same way, regulatory limits on the product variety that can be sold can lead to higher costs and prices, depending upon the markets involved, and lesser innovation.
J) UNIVERSAL SERVICE CONCEPT
It is essential to guarantee universal public services, even under complete or partial liberalisation, because the right to a "minimum standard of service" is now considered to be a general principle of constitutional rank. The regulation of guaranteed minimum standards of service, which has substantially improved the quality of public utilities, must therefore be retained. But it must not be allowed to be used as an opportunity to impose unjustified restrictions on competition.
Rome, 16 January 2002