REGULATIONS GOVERNING FUEL RETAILING
PRESS RELEASE
PRESS RELEASE
COMPETITION AUTHORITY REPORT ON LEGISLATION GOVERNING FUEL DISTRIBUTION
At its meeting on 4 November 2004, the Competition Authority adopted a report pursuant to section 21 of the Competition Act regarding the legislation governing fuel distribution in Italy, for submission to the Prime Minister, the Speaker of the Senate, the Speaker of the Chamber of Deputies, the Minister of Production, the Minister for Regional Affairs, the President of the unified Conference of Central, Regional and Municipal Government and Local Authorities, and the Presidents of the Regions and Autonomous Provinces of Trento and Bolzano.
In the view of the Authority - which had frequently pointed out in the past that the legislation governing this matter was not appropriate to boost the competitive development of this market - the level of modernisation of the Italian fuel distribution network is still insufficient, despite the restructuring introduced over the past decade, and competition has been insufficiently developed, to the detriment of consumers.
For the national network is still made up of a large number of service stations, with average fuel sales per petrol station that are far below the European average, with a very small percentage of self-service stations. Current legislation has also hampered market entry by new fuel distributors that are not vertically integrated, which has helped to perpetuate the existing competition structure, still characterised by a powerful oligopolistic structure between the oil companies, with the result that the industrial price of every litre of fuel in Italy is among the highest in Europe, and about 4-5 cents above the EU average, while all the national markets are faced by the same oil price increases and similar levels of taxation.
Among the main legal curbs on competition in this sector, the Authority pointed out in particular the prohibition on extending maximum opening times, and the rules defining the catchment areas, minimum mandatory distances between petrol stations, and minimum reference areas for commercial activities. These are constraints that have led to establishing a maximum number of operators, thereby impeding the opening of new petrol stations equipped with modern and automated facilities. In the Authority's opinion, over-regulation of this kind can deter market entrants wishing to pursue a commercial price reduction strategy that can be achieved by containing costs.
As far as new licences are concerned, the fact that the setting quality standards has been devolved to the regions has created wide differences in the conditions for operating in this industry, mainly to the detriment of the main new market entrants, which are precisely the ones whose dimensions are such that they can bring effective competitive pressure to bear and which, generally speaking, have to develop their investment plans on a nationwide scale.
In the Authority's opinion, it is only by removing market entry restrictions against new competitors that are not vertically integrated, that prices can be reduced and service quality improved, all to the benefit of the consumer. This applies in particular - as experience has shown in France, the United Kingdom and Germany - to the leading chain stores which, while accounting in Italy for barely 0.2% of total fuel distributors, have been able to offer discounts of between 10% in 15% of the industrial fuel prices charged on the ordinary market.
The competitive capacity of these operators is also hampered by the overlapping of two uncoordinated sets of regulations, one set governing the retail trade, and the other governing fuel distribution. Bearing in mind the specific features of the offering of large chain stores, the Authority advocates the removal of the typical regulatory restrictions regarding fuel network distribution in the high street, in the case of the chain stores, and consistently with the "one-stop shop" principle set down in the National Plan, and the introduction of the possibility to request one single license to open a shopping centre which includes a service station.
This being so, the Authority hopes that decisive measures will be taken to reform national and regional legislation to introduce more competition, remove the remaining barriers to entry by new operators to the Italian fuel distribution market, and abolish the rules penalising large chain stores wishing to open petrol stations on their premises using their own brand name.
Rome, 11 November 2004