Watching GovernmentDecontrol in Italy

Nov. 22, 1999
Italian drivers were lined up at the nation's gasoline stations last week, not because of shortages but as an indirect result of deregulation.

Italian drivers were lined up at the nation's gasoline stations last week, not because of shortages but as an indirect result of deregulation.

The government recently announced it would open the Italian gasoline market to competition next June, a year ahead of schedule. It also plans to end waiting periods for opening self-service stations and faster permitting for regular station openings.

The government has complained there is too little competition in the retail gasoline market, resulting in nearly identical prices everywhere.

Industry Minister Pierluigi Bersani said the Italian gasoline market is the least efficient in Europe, and action is needed to increase market efficiency and reduce the costs for consumers.

But gas station operators said they are not ready for full competition and fear larger stations will push smaller ones out of business, at the loss of thousands of jobs.

So they are holding intermittent strikes until Dec. 10, and that prompted many consumers to line up to top off their tanks last week.

Price probe

Meanwhile, the Autorita Garante della Concorrenza e del Mercato, Italy's antitrust authority, is investigating possible gasoline price-fixing.

The agency said it has targeted nine oil companies, including units of ENI SPA, TotalFina SA, Exxon Corp., and Royal Dutch/Shell, as well as the oil companies' association, Petrol Union.

It said consumer and business groups have complained that oil firms were striking deals with service station operator groups to raise prices by similar amounts.

Treasury Minister Giuliano Amato, who previously headed the antitrust agency, recently said that some companies' costs were 30% below their competitors, yet all had raised prices to the same level.

Amato questioned how companies with diverse cost structures could sell all their products at the same prices.

Snam breakup

Also, the antitrust agency has recommended that Snam SPA, the gas pipeline subsidiary that earns two thirds of ENI's revenues, should be dismantled.

The agency said dismantling Snam is "indispensable" if Italy is to have a competitive natural gas market.

It said Snam's gas transportation, storage, supply, and sales operations should be sold to separate companies by a certain date.

And it said Snam, which has a monopoly on gas imports, should sell some of its long-term supply contracts to other firms to boost competition.

The European Union is requiring Italy to open its gas market by next August. Italy's parliament has asked federal agencies to recommend by February steps to implement the EU directives so that legislators can pass the necessary laws by May.

The antitrust agency said Snam's storage and transportation assets should be placed in different companies.

It said a federal agency, Autorita per l'Energia Elettrica e il Gas, should regulate prices for access to the transportation network and to storage sites. But it said large customers should continue to be allowed to negotiate their own supply contracts with Snam.