AGCM

PRESS RELEASE

COMPETITIVENESS ACT: ANTITRUST AUTHORITY, PRIORITY REGULATORY INTERVENTIONS FOR POSTAL, RAILWAY, HIGHWAY AND AIRPORT SERVICES

A framework law is the key to revising governance in the banking sector. Continuous and progressive reforms call for an all-encompassing, comprehensive framework. Promote modernization starting with the Country's most critical sectors. More power for the Antitrust Authority means better protection for competition and consumers

The top priority is to revise the laws that shield postal, railway, highway and airport services from open competition. The Antitrust Authority communicated its recommendations to the Government and Parliament in light of the first annual law on competition. According to the Antitrust Authority, the annual law is particularly effective as a regulatory tool for modernizing competition in the national economy. The reforms call for a comprehensive plan to be applied gradually over time, starting out with the most critical sectors before expanding into less 'protected' ones.
The Antitrust Authority views Postal, Railway, Highway and Airport services as the priority sectors for cultivating real competition in the economic life of our country. Independent, authoritative regulators should be created for these sectors without establishing new Authorities.
For banks and insurance companies, the Antitrust Authority reasserts the need for governance reform by means of a law on principles. Energy sector reforms are also essential, and should being with a new and more efficient structure for the fuel distribution network and modifications in storage market access procedures.
The recommendations to the Government and Parliament include a request to attribute greater powers to the Antitrust Authority for the safeguarding of competition and consumers.

The specific recommendations for the primary sectors are as follows.


POSTAL SERVICES - 'NO' TO RESTRICTED MARKETS
In the small number of liberalized areas in the postal sector, competition is obstructed by legislative decisions from the 1990s that allow the Italian Postal Service (universal service supplier) to extend its monopoly in legal reserve into areas already open to competition. The introduction of the 2008/6/CE directive means that the sector must open fully to competition by the end of the year, eliminating all opportunities for restricted markets.  More competitive methods also need to be found for financing the supply-side costs of the universal postal service.  Presently defined by the Italian Postal Service itself, in essence, the terms and conditions for accessing the postal system and the fee structure for the supply of related services are in need of revision.  

RAILWAYS - MORE COMPETITIVE BIDDING AND CLEARER DISTINCTIONS BETWEEN PUBLIC SERVICES AND COMPETITION-BASED SECTORS
The difficulties encountered during liberalization of the railway transport sector translate into weak supply-side competition in terms of price and service quality. The most troublesome aspect is the absence of clear distinctions between the sectors that are open to competition and the sectors performing public services, coupled with regional practices of extending long-term concessions in the transport sector. This situation resulted
in the inflation of public subsidies and the reduction of supply-side competition and quality standards.
According to the Antitrust Authority, the annual Law needs to articulate clear new regulatory principles along with a more precise definition of universal service in this sector, identifying specific guidelines and publicly-fundable services while maintaining clear distinctions between regional and inter-regional services. A solution of this kind supports transparency, public openness, the verification of contracted service limits and the accurate quantification of related fees. New rules for the sector should include an obligation to use competitive bidding procedures for awarding transport service management contracts in non-profitable areas (beginning with regional areas), so as to minimize the resort to public subsidies with the same fee rates and service quality.  

COMPETITIVE BIDDING AND CONTRACT DURATION FOR HIGHWAY AND AIRPORT CONCESSIONS
The unsatisfactory nature of highway and airport services is due to similar monopoly concessions. For the Highways, the Antitrust Authority reiterates the need to use public procedures for selecting concession holders and to limit the duration and extent of such contracts.
The failure to use tendering procedures weighs down on airport management as well, which has long been characterized by routine renewals for unjustifiably long time periods (as much as 40 years) and the highly-fragmented subdivision of regulatory activities between ENAC and CIPE. According to the Antitrust Authority, the fees that airport operators pay to managers should be directly correlated to the actual costs sustained for managing the infrastructure.
In addition, regulatory provisions that restrict the operational capacity of major airports need to be removed because of the limits they impose on the number of competitors involved.

INDEPENDENT REGULATORS FOR POSTAL AND TRANSPORT SERVICES - NO NEW AUTHORITIES
Completing the liberalization process and consolidating competitive conditions in the postal and transport sectors requires the creation of two independent regulators with high levels of technical competency. The general principles of efficiency and bureaucratic containment suggest that the proliferation of control organs is best avoided: new functions should be assigned to pre-existing Authorities with the most appropriate characteristics. If necessary, such Authorities could incorporate new competition-promoting functions by creating new sections within their existing organizational structure.

ENERGY - RESTRUCTURE FUEL DISTRIBUTION AND MODIFY STORAGE REGULATIONS
In the energy sector, the fuel distribution system needs to be adjusted to reduce its unusually high level of inefficiency. Although access to this activity was recently liberalized, some residual restrictions on business hours and types of services still need to be eliminated and incentives need to be offered to promote a leaner and more efficient distribution structure. While the Antitrust Authority approves of initiatives that are intended to promote greater independence between supply chain distributors and producers, new forms of structure and price regulation should be avoided.  What the fuel network really needs are incentives that can trigger a restructuring process based on market criteria and the principle of efficiency.



For the gas market, according to the Antitrust Authority it is essential to consolidate the use of publicly-evidenced procedures for selecting new holders of distribution concessions. The access procedures for the storage activity market also need to be modified.  The inherent advantages enjoyed by existing concession holders should be counterbalanced by greater efficiency and transparency in the procedures for assigning new concessions, which are managed by the Ministry for Economic Development.

LAW ON PRINCIPLES OF GOVERNANCE FOR BANKS AND INSURANCE COMPANIES
From the Antitrust Authority's perspective, the critical issue with banks and insurance companies is about governance. The wide diffusion of personal and share-capital ties between competing operators and the ambiguity of the 'independent executive' position function to impede the establishment of real competition in the final services markets. Legislators need to intervene with a law on principles, leaving its implementation to the statutes.




NEW POWERS TO THE ANTITRUST AUTHORITY
The Antitrust Authority requests the power to bring constitutional legitimacy into question when laws are found to violate the constitutionally-protected principle of free competition.  This power would be applied directly in the context of its own proceedings or through the Council of Ministers, and would make the application of national liberalization reforms more homogeneous at the local level. The Antitrust Authority should also be allowed to come before an administrative law judge to challenge economically-relevant public administrative actions that violate Community and national laws on the protection of competition.  This is the best form of incentive for promoting non-discriminatory tendering procedures for public contracting and concessions.
In regard to consumer protection, the Antitrust Authority believes it is essential to reconstitute the highly-fragmented administrative responsibilities by concentrating them in the Antitrust Authority, which should also be allowed to use administrative channels to eliminate oppressive clauses from standardized and mass contracts.
To improve the effectiveness of institutional efforts against false advertising on TV, a new law should give the responsible party 7 days (from the initiation of Antitrust Authority proceedings) to propose and implement commitments to remove the message's deceptive profile. If the proposed commitments are deemed to be sufficient, the Antitrust Authority could then close the investigation without registering an offence.
Lastly, sanctions should be introduced for cases in which the owner of the means of communication used for broadcasting a misleading message provides false information or refuses, with no legitimate justification, to identify the purchaser or to provide copies of the commercial agreement.   



Rome - February 9, 2010