AS379 – REGULATION OF FUEL DISTRIBUTION
PRESS RELEASE
PRESS RELEASE
PETROL: ANTITRUST AUTHORITY PROPOSES SALE AT HYPERMARKETS, FREE OPENING HOURS AND MORE ADVERTISING TO REDUCE PRICES
Submission to Parliament, Government and Regions calls for removal of local hindrances to opening up of the distribution network
Remove all the restrictions that are hindering market development in fuel distribution in order to improve the sector’s competitiveness and reduce industrial prices; in Italy these are always higher than the average of 15 EU countries. This is the Antitrust Authority’s recommendation in a submission approved at the meeting on 18 January 2007 and forwarded to the Government, to Parliament and to the Regions.
The Authority underlines that, although the need to restructure and modernize the petrol distribution network has for some time been declared a priority item for legislation, progress has been insufficient. The 39,000 service stations existing in 1980 have now been reduced to 25,000, but even this is a particularly high number. Sales per location are much lower than the European average and only a tiny percentage of petrol stations has self-service pumps while supermarkets have a negligible presence in this sector.
Making Room for Supermarkets
These are unsatisfactory results: the Authority believes that in order to achieve a genuine rationalization and restructuring of the network which will bring benefits to consumers in terms of lower prices and better quality service, it is necessary to leverage the supermarket channel which today represents less than 0.5% of all service stations by number and 1% by volume. In Germany and the U.K. but above all in France, where sales of fuel through supermarkets account for over 50% of the total, service stations managed by these operators are marked by high sales volumes and lower prices than at the service stations owned by the oil companies. In Italy, the elimination of regulations that restrict the entry of new operators having adequate resources and incentives, such as the supermarket chains, could create the competitive pressure needed for an effective modernization of the network, converting efficiency gains into price reductions and improved service for the consumer.
Eliminating Barriers to Entry
The Authority draws attention to the fact that in November 2004 it had already sent a report to Parliament, to the Government and to the Regions pointing out that the goals of rationalization and liberalization had not been achieved to a satisfactory extent. Since then, however, there has been no change in either national or regional legislation of the kind recommended. On the contrary, the wide room for discretion left to the Regions has been used, for the most part, in a way totally different from the reform proposals formulated at the time. National law, the Authority points out, imposes quantitative restrictions on the entry of new operators (obligatory distances and minimum surface areas), leaving the Regions to decide the criteria for the building of new service stations based on parameters such as total regional sales volume, the number of vehicles in circulation, the number of residents, the number of existing service stations, traffic flows, the seasonal nature of demand from tourists, distances and minimum surface areas.
In reality, the regional administrations have adopted planning measures for outlets that have perpetuated the existing distribution arrangements, effectively favouring the interests of existing operators and limiting the entry of more efficient operators.
The Authority further emphasizes that objectives such as the preservation of the landscape or road safety are already taken care of by other national and local regulations. Additional objectives, such as the proximity of the service could be effectively pursued by offering incentives to locate in disadvantaged or poorly served areas using direct subsidies. By the same token, the objective of reducing the number of service stations and consequently increasing average sales can be more effectively achieved by way of the competitive pressure exerted by a greater liberalization of the industry and if need be, but only as a last resort, using alternative tools like direct incentives for the closure of service stations considered unsuitable.
Liberalizing Opening Hours
In matters of limitations on business practices like the imposition of maximum daily opening hours, a closing of variable duration in the middle of the day, obligatory closing for one or more shifts (for instance following a Sunday opening), most of the existing provisions at the regional level are calculated to render even more rigid the already stringent provisions stipulated by national legislation. The imposition of maximum opening hours reduces consumer choice while guaranteeing existing market operators a stable clientele. A supermarket that wants to extend the services offered its customers by opening a service station is then obliged to observe different rules on opening hours, resulting in a paradoxical situation: when the shopping centre/hypermarket is open the service station may be closed and vice versa.
Transparency for the Consumer
In its submission, the Authority requests the abolition of the daily publication of recommended prices by each oil company; this leads to transparent market conditions that are useful only to the oil companies. Real help for consumer choice would come instead from methods for publicizing locally the prices actually offered by operators in individual service stations: for example, bulletins on the Internet, in the local news supplements of daily newspapers or large signs along the motorways or highways.
Rome, 18 January 2007