The Italian Competition and Market Authority (AGCM) has recently disclosed a report[1] sent at the end of July to the Italian Transport Regulation Authority (ART), the Italian Ministry of Transport and the Regions of Sardinia and Sicily on protection of free competition in the market of maritime cabotage to and from Italian minor islands.

The report arises from certain complaints received by the Authority alleging that transport service rates for Sicilian and Sardinian residents increased as a result of monopolies arising in the market for the provision of said services.

AGCM opted for dismissing the complaints. Indeed, the Authority stated it was not in a position to subject minor island cabotage to antitrust compliance review, as the relevant services are “granted to undertakings under service contracts entered into with competent public authorities, who are responsible for setting rates and frequency of service as well as for identifying the categories of users entitled to benefits or exemptions”.

Consequently, any investigation of the Authority in that respect would question “the methods chosen by the authorities concerned to determine the services falling within the scope of Public Service Obligations (PSOs)“.

In light of the above, it would seem that the application of antitrust law in the Italian legal system encounters an implied limit in the discretionary power of public authorities, which involves high freedom of manoeuvre in selecting the methods whereby public interest can be served.

In the case at issue, public interest is linked to protecting the so-called “territorial continuity” in favour of all residents of Italian minor islands and commuters (as well as in favour of other categories such as non-resident natives).

At this point, one may wonder to what extent the discretionary power of public authorities can limit the action of the Italian Competition and Market Authority.

A first answer can be found in a recent decision of the AGCM[2] that reveals a new approach followed by the Authority, which, while confirming the above limitations, shows its intention to submit to its scrutiny the correctness, good faith and transparency of the activity carried out by public entities in the exercise of its discretionary power.

Despite asserting it was not in a position to go into the merit of the complaints received, the AGCM opted for giving an opinion on what measures should be taken to reconcile the need to ensure a public interest service with the principle of free access to the transportation service market.

The Authority starts by mentioning a 2014 Communication from the EU Commission[3] aimed at clarifying the scope of the principles set out in Council Regulation (EEC) No. 3577/92 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage)”. In that regard, the Commission stated that (i) “exclusivity” in maritime cabotage must be deemed as exceptional, and that (ii) before imposing public service obligations (and thus, before concluding public service contracts), Member States must “determine” that the regular transport services would be inadequate with respect to the public interest to be protected “if their supply was left to market rules alone”.

In light of the above considerations, the AGCM stated that the PSO[4] regime should be applied only when it is specifically determined that a public service cannot be guaranteed in the context of free competition.

The Authority therefore suggested that competent authorities periodically carry out “in-depth market analysis” to verify whether the operators of the sector may be able to serve public interest without public action, and, should such action be required, to verify whether the attribution of exclusive rights can be avoided.

The purpose of the above suggestions is certainly worthy. The existence of multiple players in the relevant market operating under a regime of free competition will certainly involve advantages for costumers in terms of reducing rates but also in terms of reducing public expenditure (e.g. public contributions for the operation by private persons of public services).

At the same time, however, the Authority’s suggestions are not so easy to follow, when taking into account both the financial resources available to the public authorities that should carry out said market analysis and the actual number of the shipowners who are in a position to operate the services connecting the Italian minor islands.