Introduction

This is a brief summary of the proposal for pro-competitive legislative changes submitted by the Italian Competition Authority (“ICA”) to the Italian Government on 23 March 2021.

Every year the ICA is called on to submit a report to the Italian Government on its activities carried out during the preceding year.[1] Such report is the basis for the Government’s drafting of the Annual Competition Law, which is conceived for the purposes of removing regulatory or administrative obstacles to market opening, promoting the development of competition and ensuring consumer protection.

In this context, on its own motion or upon request, the ICA provides the Government with proposals for pro-competitive reforms of the legal and regulatory framework. The Government has to take into account the ICA’s proposals during the preparation of the draft Annual Competition Law which, once completed, is sent to the Parliament for formal adoption through the legislative process.

With respect to the 2021 submission summarised here below, in a report consisting of over 100 pages, the ICA identifies eight trajectories of possible reform:

1. Measures to encourage and speed up investment in strategic infrastructures, such as, for instance, digital and port;
2. Reform of the public procurement sector, in order to modernise and simplify rules and procedures, with a view to relaunching the economy and boosting investment;
3. Completion of the reform of local public services, limitation of in-house management to cases where market alternative is not a more efficient solution, and rationalisation of State-owned companies;
4. Measures to remove obstacles to the entry of new operators and to the development of a dynamic competitive environment, in particular in the concessions and services sectors;
5. Proposals for pro-competitive reforms to facilitate the achievement of environmental sustainability goals;
6. Actions to strengthen the health system and public health protection, in particular through initiatives to increase the supply of health services and their efficiency, as well as more efficient drug procurement policies;
7. Amendments to Italian competition law no. 287/90, in order to improve enforcement in the field of merger control and cartels, to strengthen investigation powers outside of preliminary investigation procedures and to adapt current tools to the challenges of the digital economy;
8. Miscellaneous concerning other relevant competition-related matters.

Investments in strategic infrastructures

Digital networks

The ICA focuses on investments in fixed and mobile communications network, highlighting the importance of (i) infrastructure competition, (ii) the removal of obstacles to investment, (iii) the alignment with European standards and (iv) the boosting of consumer demand and mobility. These areas of intervention have to be dealt with by a transparent and non-discriminatory regulatory framework.

1. Concerning the promotion of infrastructure competition, the ICA first solicits the Government to transpose into the Italian legal system EU Directive 2018/1972 establishing the European Electronic Communications Code. The ICA also deems it necessary to adopt a policy allowing operators to compete effectively and independently, whilst taking into account the differences in investment sustainability in the different geographical areas. In this regard, public support policies should be implemented to generally foster incentives to infrastructure competition and plurality of communication networks and to facilitate investments in ultra-high capacity networks aimed at bridging the existing infrastructure gap in areas of partial market failure.
2. The ICA sets out technical proposals aimed at reducing administrative and authorisation obstacles in order to speed up the deployment of fixed and mobile telecommunications networks. In particular:
   • The ICA suggests, with regard to infrastructures whose installation falls within areas subject to concession (ports, airports, motorways and railway, electricity and gas networks), to provide a specific term within which the concessionaire must actually allow access to telecommunications operators.
   • Moreover, the ICA suggests providing that entities managing State-owned or concessionary assets cannot not impose charges for the installation of telecommunications networks in State-owned or concessionary areas, as well as simplifying the process of concessionaires imposing service charges on motorway sites.
   • It is also recommended to shorten the term set forth by law within which the authorities responsible for managing public land must take decisions on applications for concessions relating to the setting up of infrastructures, and to encourage the adoption of open framework agreements by local authorities in order to reuse existing infrastructures that they already own.
   • The ICA suggests introducing substitution powers, pursuant to the principle of subsidiarity, for those procedures relating to the installation of telecommunications networks in situations where the “silence means assent” rule does not apply, as well as in the event of inaction by public administrations. A fast-track mechanism for the resolution of administrative disputes is also proposed in order to allow operators to obtain a rapid settlement of disputes concerning unjustified refusals by public administrations.
   • Finally, with reference to disputes relating to access to the installation of fibre optic network elements in apartments, mechanisms for the conciliation and settlement of disputes should be provided. In addition, administrative sanctions could be envisaged for condominium managers who refuse, without justification, to install fibre optic network elements.
3. In order to be aligned with European mobile telecommunications standards, to comply with the principle of certainty and stability set out in the European Electronic Communications Code, and ultimately to create an actual level playing field, the ICA puts forward three sets of proposals: adoption of well-established rules on the management of scarce frequency resources, review of the current electromagnetic limits in the light of the new measurement tools and related technologies, and clarification of the role of ARPA, the Italian Regional Environmental Protection Agency, in relation to the review of authorisations already granted to incumbents.
4. Concerning the need to boost demand for ultra-broadband connections, the ICA suggests amending the existing regulation to prevent operators from imposing high charges in case of early withdrawal by consumers. Moreover, the ICA proposes redefining certain mobile and fixed portability procedures. According to the ICA, migration of customers should be allowed irrespective of the portions of the access network to be re-used. Finally, demand for the adoption of the most advanced technologies should be encouraged by establishing a facilitated, transparent and investment rewarding voucher system.

Port infrastructures

The ICA proposes interventions in the field of concessions in order to remove obstacles to investment. In particular, the ICA advocates identifying clear, transparent and non-discriminatory criteria for the granting of port concessions, as well as for their duration and termination procedures. The ICA also advocates limiting the prohibition of the cumulation of concessions for smaller ports. Finally, the ICA suggests repealing the provision limiting the right to self-handling of port operations and services.

Public procurement

The ICA considers it necessary to reform the Italian Code on Public Procurement, so as to update and simplify its rules, following the approach drafted by EU Directives of 2014:[2] on the one hand, a greater discretionary margin has to be ensured for contracting authorities and, on the other hand, the rules and procedures should be simplified.

According to the ICA, in order to reduce the constraints on contracting authorities and businesses, there are two areas where action is needed: (i) simplification of the Code on Public Procurement, which is currently fragmented and complicated, leading to serious inefficiencies when it comes to actual enforcement; and (ii) proper qualification of contracting authorities and economic operators, to be implemented also through the development of innovative procedural tools.

1. Concerning the simplification of the rules, the ICA suggests two different tactics in the short and medium-term, respectively. In the short-term, with reference to the public expenditure to be financed through the Next Generation EU funds, the ICA proposes suspending the enforcement of the Italian Code on Public Procurement, by applying the 2014 EU Directives instead. In the medium-term, the ICA recommends reviewing the Italian Code on Public Procurement aimed at repealing all the provisions which impose unnecessary and higher burdens than those provided at EU level (such as, for instance, the provision of a maximum subcontracting threshold).
2. As per the specialisation of the contracting authorities and the digitalisation of the procedures, the ICA urges the Government to adopt implementing rules aimed at strengthening the proper training of the contracting authorities’ personnel and to bring forward the digitalisation of public procurements procedures (i.e. e-procurement).

Efficiency and quality of local public services to the benefit of citizens and businesses

With respect to the public services sector, and in particular that of State-owned businesses, the ICA’s proposals focus on the need for (i) the adoption of an organic regulation on the procedures for the award and management of local public services of general economic interest, (ii) the rationalisation of State-owned companies, and (iii) the reduction in the use of in-house providing.

1. According to the ICA, the current regulation on local public services is complex and fragmented and the public administration has excessively relied on in-house providing. That is why the ICA considers it necessary to adopt a Regulation on Local Public Services of general economic interest, aimed at providing operators with clear and certain rules, thus ensuring the efficient management of such services.
2. The number of State-owned companies initially decreased over the years, but this trend has been interrupted by legislative measures, particularly at local level. The remaining State-owned companies are often complex and inefficient, and some of them actually distort competition by acting as inappropriate social shock absorbers. Therefore, the ICA advocates repealing the rules currently in force which unjustifiably prevent the divestment of inefficient State-owned companies, and to encourage to this end the necessary divestments of the shares held in such companies by public entities.
3. Concerning in-house providing, the ICA notes that the choice of direct award should be made on the basis of substantive and economic assessments that justify, in actual terms, the preference for in-house providing over the public procedure. Since, according to the ICA, such sound assessment is often omitted, the ICA suggests moving forward the publication of the stated reasons to a stage prior to the adoption of the award decision.

Removal of barrier to entry and new entries to boost productivity

The ICA considers it necessary to remove barriers to entry and exit affecting the dynamics of sectoral development. ICA’s proposals cover various sectors: (i) concessions; (ii) retail trade; (iii) free market for the sales of energy; (iv) pension funds; and (v) multiple voting in companies limited by shares.

Reform of the concessions system

The regime currently in place in Italy often does not comply with the principles of competition and transparency. Therefore, the ICA deems it necessary, for maritime State concessions for tourist and recreational purposes, to repeal the fifteen-year extension of such concessions, leaving the quantification of the concession fees to the same competitive procedure for the selection of concessionaires, and limiting the use of sub-concessions. With regard to parking concessions for trade in public areas, the ICA recommends applying EU Directive 2006/123 on services in the internal market. In relation to large hydroelectric derivation concessions, the ICA proposes leaving to State regulation the procedures for the awarding of such concessions. The ICA also considers it necessary to rapidly conduct competitive awarding procedures for services that are currently subject to concessions and, with reference to highway concessions, to increase the threshold for the mandatory award through tender. Finally, the ICA advocates speeding up the tender procedures concerning natural gas distribution concessions, through providing incentives to local State entities, eliminating conflicts of interest, simplifying procedures and minimising information asymmetries.

Removal of the obstacles to retail trade

Italy is one of the Member States with the highest level of restrictions in the retail sector. Consequently, the ICA deems it necessary to remove legal obstacles, such as strict regulations and requirements, to the complete liberalisation of retail trade. In particular, reference is made to the existing constraints on the opening of commercial activities, on opening hours and weekly closures of shops and on one-off sales.

Elimination of barriers to the creation of a free market for electricity sales

Prices in Italy are among the highest in Europe. It is thus necessary to overcome barriers arising from regulation, market inequalities, operational and procedural obstacles, as well as consumer inaction. In particular, the ICA urges allocating to different suppliers the domestic customers and micro-business that are still serviced under the current protection regime. Moreover, the ICA proposes removing the barrier to innovation, such as the obstacles to the deployment of advanced electricity consumption monitoring solutions (smart metering).

Pension funds portability

The ICA points out that portability of individual positions should be fully ensured, thus avoiding undue constraints or conditions. In this respect, the ICA recommends amending the legislation currently in place by expanding as much as possible the right to choose, whilst removing any undue discrimination on portability.

Amendments to the regulation on voting rights in companies limited by shares

The ICA urges the repeal of the current rules unduly limiting the exercise of multiple voting shares which act as a disincentive for companies wishing to invest in Italy.

Competition at the service of environmental sustainability

The ICA’s proposals focus on the following sustainability matters: (i) infrastructures for charging electric cars; (ii) separate waste management; (iii) incineration / waste-to-energy plants; and (iv) system charges.

Infrastructures for charging electric cars

The ICA deems it necessary to ensure that no distortions are created, in the development of the sector, which could compromise its efficient competitive functioning in the future. In particular, attention is devoted to technological neutrality and equipment interoperability, so as to avoid any possible restriction on competition between operators.

Moreover, public administrations should follow, according to the ICA, transparent and non-discriminatory procedures for the allocation of public spaces for the installation of charging stations.

Finally, the ICA proposes that prices for the new services are not based on regulated tariffs.

Separate waste management

The ICA recommends amending the regulations so as to: eliminate unjustified discrimination between public and private operators in the management of urban waste; prevent the notion of integrated management of the waste cycle from being misused; exclude the participation of sorting companies from the negotiation of the so-called Framework Agreement.

Incineration / waste-to-energy plants

As per the development of plants for an efficient and competitive management of unsorted waste, the ICA advises a further simplification of authorisation procedures, including the mechanisms for substitute powers in the event of inaction by the public administrations concerned, and the provision of incentives for the parties concerned.

The ICA also proposes adopting policies to encourage rapid infrastructure development in geographical areas that are currently under-equipped (i.e. Central and Southern Italy), in order to achieve a more balanced distribution of waste-to-energy capacity across the country.

System charges

In order to improve environmental sustainability in electricity generation, substantial economic incentives have been granted to production from renewable sources, most of which have been financed through the imposition of “general system charges” on electricity end-users.

To ensure greater transparency of electricity prices and adequately manage the financing of renewable sources, the ICA advocates eliminating the system charges in the electricity sector, by gradually and correctly incorporating the financing into the general taxation framework, including the incentives for renewable sources, which could selectively burden the consumption of fossil fuels in heating and transport.

Health and competition protection

The ICA sets out various proposed interventions concerning the pharmaceutical sector, which pursues the objectives of improving the health of the population, and which has been considerably affected by the policies of public expenditure containment.

With regard to health service, the ICA recommends adopting initiatives to increase the supply of health services and their efficiency by: i) eliminating obstacles that limit private parties’ access to healthcare activities that are not covered by the National Health Service, which is currently bound by the verification of the regional needs for healthcare services; (ii) reforming the accreditation system; (iii) providing for periodic regional selections that are adequately publicised; (iv) ensuring full disclosure on the performance of public and private facilities, so as to allow demand to make an informed choice among the available facilities and thus promoting their efficiency.

As regards pharmaceuticals, ICA’s proposals focus on the promotion of a regulatory framework that: i) facilitates comparability, also in tender procedures, between biological drugs having the same therapeutic indications; ii) allows for an increase in the bargaining power of the Italian Pharmaceutical Surveillance Authority (“AIFA”), with particular reference to drugs that can be included in "non-negotiated" Class C; iii) re-modulates the obligations on wholesalers to stock medicines on the basis of flexible quantitative thresholds based on the demand expressed by the territory, so as to allow more efficient and flexible forms of business organisation, while continuing to ensure the availability of medicines in the territory. Further proposals are also aimed at removing the existing constraints on the procedures for registering generics before the patent protecting the originator expires, and at encouraging the development of galenic medicines.

Health service

The ICA considers it necessary to increase competition conditions in accessing health services in private infrastructures. Therefore, it advocates making private individuals’ access to healthcare activities (which are not covered by the National Health Service) not subject to the review of the regional needs for healthcare services.

The ICA also proposes to reform the accreditation system by requiring, instead of a temporary accreditation, a definitive one issued by the Regions for new healthcare facilities or for the start of new activities in existing facilities.

Moreover, the ICA urges that the system for contract arrangements between private companies and the National Health Service operates on a selective, non-discriminatory, regular and transparent basis.

Finally, in the ICA’s view, it is necessary to increase available information regarding the performance of public and private infrastructures, by disclosing the budgets of the Local Health Agencies and of the private infrastructures as well as data on the quality of services.

Pharmaceuticals

The ICA first proposes measures to increase competition in public tenders for the purchase of drugs. In particular, it advocates regulating biosimilar drugs having different active pharmaceutical ingredients on the basis of the therapeutic equivalence / overlap criterion. Therefore, the ICA proposes eliminating the prohibition of tendering together biosimilars with different active ingredients but the same therapeutic indications.  

Secondly, the ICA considers that it is necessary to strengthen the bargaining power of the AIFA vis-à-vis the pharmaceutical companies, by putting in place a proper system of incentives to quickly conclude the price negotiation and by securing at the same time the therapeutic continuity to patients.

Thirdly, the ICA considers that the objective of timely supplying medicines in Italy can be better pursued on the basis of maximum supply times or flexible quantitative thresholds, instead of fixed stock levels. Indeed the storage obligation currently in place under the law (i.e. 90% of all drugs whose cost is borne by the National Health Service) results in a rigid operativity for wholesalers, thus preventing efficient and flexible forms of business organisation.

Fourthly, the ICA suggest removing the existing constraints on registration procedures for generics before patent expiry (patent linkage). In particular, reference is made to the provision which, by making the inclusion of generics in the National Pharmaceutical Inventory (for the purposes of reimbursement by the National Health System) conditional on the expiry of the patent or supplementary protection certificate of the reference medicinal products, it is possible, through disputes on IP and commercial rights, to delay the market entry of such generics.

Fifthly, with respect to galenics, the ICA proposes removing the obligation for the manufacturer of galenic preparations (i.e. pharmacists) to produce the active ingredient required for the preparation itself, when the industrially produced medicine is also covered by a patent.

The powers of the ICA and the proposed amendments to Italian competition law no. 287/90

The ICA proposes amendments to the Italian competition law, with the threefold aim of increasing the effectiveness of merger control and the fight against cartels, adapting the tools currently available to the challenges of the digital economy and, last but not least, achieving the much awaited harmonisation of the national system with the EU with regard to a number of key provisions.

Harmonisation with EU merger control law

The following proposals concern (i) the substantive test for concentrations and the efficiency gains; (ii) notification system of concentration (iii) joint ventures; and (iv) calculation of the relevant turnover for banks and financial institutions.

1. The ICA proposes amending Article 6 of Italian Law no. 287/90 so as the wording mirrors what is laid down in Article 2 of EU Regulation 139/2004. This would allow the ICA to assess a concentration restricting competition when the risk of creating a dominant position is absent, and, on the other hand, to take into account the possible efficiency gains of the concentration.
2. In order to include within the scope of the Italian regulation on merger control also the anticompetitive operations which do not meet the legal thresholds, it is suggested that the ICA is provided with the power to request, stating reasons, the notification of sub-threshold concentrations of which it has become aware. This power for the ICA would be activated provided that a fumus of concrete anticompetitive risks exists, that the concentration has been carried out in the last six months and that at least one of the legal thresholds is met or that the total worldwide turnover of the companies parties to the concentration exceeds € 5 billion.
3. The ICA also proposes extending the scope of the Italian regulations on merger control to include cooperative, full-functioning joint ventures operating on a lasting basis, in order to avoid unequal treatment and to grant the correct enforcement of the referrals pursuant to EU Regulation 139/2004.
4. The ICA proposes to amend the Italian legislation so as to apply, for the purposes of the calculation of the relevant turnover in case of banks and financial institutions, the criteria set out by Article 5(3) of EU Regulation 139/2004 instead of the current criteria related to the value of the assets of the companies involved.

Term under the law for the termination of merger control investigations

The ICA considers that the 45-day term for the termination of the investigation in the field of merger control is too short to allow the complete analysis of the notified concentration. It is therefore suggested to extend such term to 90 days.

Abuse of economic dependence and digital platforms

The ICA proposes amending the existing legislation by providing for a rebuttable presumption of economic dependence in commercial relations with a company offering the intermediation services of a digital platform, where the latter plays a decisive role in reaching end-users and/or suppliers, including in terms of network effects and/or data availability.

Strengthening of ICA’s powers to counter the market power of companies operating in several markets

In order to counter distortions of competition more effectively, particularly in markets where a digital platform exists or where there are undertakings which need such platform to gain access to end users or suppliers, the ICA suggests the adoption of a specific provision. That would make it possible to give to certain undertakings the status of undertakings of primary importance for competition in several markets, to which certain particularly distortive conducts of competition may be prohibited, unless the undertaking proves that its conduct is objectively justified.

In particular, ICA’s power to classify undertakings as of primary importance would take into account indications which are capable of highlighting the crucial role that these operators play in the digital economy.

Settlement procedure

The ICA suggests introducing also in the national legal system the settlement procedure in administrative proceedings conducted by the competition authority resulting in a 20% reduction of the fine imposed on the undertakings which successfully apply and adhere to such procedure.

Sanctioning outside formal investigations

The ICA considers it appropriate to strengthen its powers to obtain information and documents even outside the investigative procedures, by giving it the power to impose administrative sanctions in case of refusal to or delay in providing the requested information or documents or in case of misleading or incomplete information also where such requests are submitted without opening a formal investigations proceedings.

The ICA and the agri-food chain

According to the ICA, the transposition into Italian law of EU Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain represents an opportunity to review and rationalise the entire legislation on the subject, with a clear allocation of powers relating to enforcement activities.

In particular, it is suggested that the ICA is identified as the only competent authority in case of breach of the said legislation. Moreover, the implementation of the said Directive should also occur in those cases where rules risk to be an instrument that is difficult to reconcile with the maintenance of adequate competition within the reference markets. According to the ICA, it would also be appropriate to identify more clearly the tools and players through which the necessary aggregation of agricultural supply can be achieved in order to increase the contractual power and competitive capacity of farmers.

Miscellaneous of other relevant competition-related matters.

As a conclusive set of remarks the ICA refers to its most important past opinions in the economic sectors that are mostly exposed and affected by anticompetitive constraints stemming from unwarranted legislative burdens, namely: professional services; health advertising; urban mobility services; chambers of commerce; pharmacies and para-pharmacies; and postal services.

Next steps

At present, it is not possible to predict if and when the next Annual Competition Law, which has to take into account the ICA’s proposals above during the preparation of the draft law, will actually be adopted and its entry in force.

Indeed, even though the yearly adoption of the Annual Competition Law is mandatory under Italian law, to date, only one, in 2017, has been ever adopted despite the ICA having submitted four sets of proposals between 2010 and 2014.