The Regulation of Public Services in Italy
| Published date | 01 March 2002 |
| Author | Giacinto Della Cananea |
| Date | 01 March 2002 |
| DOI | 10.1177/0020852302681004 |
| Subject Matter | Articles |
The regulation of public services in Italy
Giacinto della Cananea
Regulation and the reshaping of the Italian state
Nowadays regulation is a general trend, characterizing more or less all parts of
public intervention in the economic and social spheres in OECD countries.1 What
makes the Italian experience worth studying then, from a comparative perspec-
tive, is not that public authorities use these types of techniques and procedures. It
is rather the fact that the present regulatory framework is the result of only a
decade of reforms, aimed at modifying both the borders of the state and its inter-
nal organization. As a matter of fact, liberalization and the recognition of users’
rights, on the one hand, and the creation of new authorities, entrusted with the
tasks of ensuring free competition and promoting technological progress and
social interests, on the other, all imply the reshaping of the Italian state.2
Moreover, since recent changes have been strongly influenced by the European
Union (EU), the Italian case may show how a specific legal and political environ-
ment reacts to changes mainly determined by external forces.
The article thus explains, as a first step, why public service regulation is not
rooted in the Italian legal tradition. It then identifies and discusses the causes of
recent changes. The following sections examine the institutions, tools and pro-
cedures for regulation, with special attention being given to the regulation of
public utilities. Next, their weaknesses are pointed out. Finally, some concluding
remarks are expressed.
The traditional model based on direction and ownership of public services
Although public service regulation is a recent phenomenon, it has been the sub-
ject of legislation since 1890. Unlike the USA, however, for an entire century this
legislation was based on other types of public action, as regards both the legal
tools and their underlying assumptions and substantive values.
The legal tools consisted essentially of direction and ownership of public
services. This means that, as a first solution, these services had to be carried out
Giacinto della Cananea is Professor of Administrative Law and Public Finance, Faculty
of Political Sciences, University of Urbino, Italy. CDU: 35 (45). This article is a revised
version of a paper prepared in the context of TEPSA comparative research on ‘Regulation
of Public Services in Europe’, directed by Jacques Vandamme. I wish to thank both
Professor Sabino Cassese for his comments on the earlier version and the anonymous IRAS
referees for their remarks. Of course, I am responsible for errors and omissions.
International Review of Administrative Sciences [0020–8523(200203)68:1]
Copyright © 2002 IIAS. SAGE Publications (London, Thousand Oaks, CA and New
Delhi), Vol. 68 (2002), 73–93; 022638
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International Review of Administrative Sciences 68(1)
by public bodies. Otherwise, they could be delivered by private bodies under
public control, through economic policy programmes and individual administra-
tive acts, like concessioni (licences) and orders. The delivery of these activities
was based on licences and the delivering bodies were either public administra-
tions with a general competence or ad hoc public bodies, instead of private com-
panies. For instance, since 1905 the railways have been managed by an agency
(azienda autonoma) of the Ministry of Transport.3 Public action was conceived as
authoritative and discretionary. Administrative law tools (legal procedures and
controls) were used instead of private law ones (like contracts). The criteria
which characterize private firms were ignored, as if bodies delivering public
services should not be bound by even the criteria of efficiency and effectiveness.
The underlying assumption was that not only the available technology (which
did not allow a plurality of providers or would make the service economically
unfeasible), but also the public interest required a monopoly in favour of public
powers. This implied a restriction on economic initiatives,4 since public powers
enjoyed a legal monopoly with regard to activities considered to be of public
interest. This depended on a lack of trust in the market economy and its rules.
From a cultural point of view, this is surprising, since at the end of the 19th
century the most prominent lawyers (Vittorio Emanuele Orlando and Santi
Romano) and economists (like Francesco Ferrara and Maffeo Pantaleoni) were of
liberal inclination. However, the Act of 1890 codified the principles and practices
developed at the local level in the last decades of the19th century and character-
ized by direct public intervention. This became the rule during the 20th century,
when Italy represented a ‘case of accentuated dirigisme’.5 As a matter of fact, in
the 1930s, banking activities were placed under state control. Planning grew in
many fields, such as agriculture and housing. Price and rate control was exten-
sively used. State subsidies, too, were widely adopted, especially in southern
areas.
These features were left substantially unchanged by the 1948 Constitution,
although its fundamental principles safeguarded economic freedom. The reason
is that the Constitution was drafted in a period in which the prevailing political
forces (Christian democrats, socialists and communists) expressed a strong
mistrust of the market and a preference for extensive and direct public action in
the economy.6
This emerges clearly from Article 41:7 although it guarantees the right of
private parties to take economic initiatives, this was subject to public pro-
grammes and controls aimed at promoting the public interests established by
legislation. Any public interest may thus legitimate limits to individual rights in
the economic sphere. Planning and control were clearly the tools of direction
instead of regulation. Moreover, no attention was paid to the relations between
private firms: only the ‘vertical’ relation between the individual and the state is
considered.8 However, it may be observed that Article 41 is so vague that differ-
ent interpretations could be rendered but were not until the 1990s, for two main
reasons.
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Cananea: Regulation of public services in Italy
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The first reason lies again in the Constitution, where Article 43 places stronger
limits on economic freedoms. As a matter of fact, it provides that (for ‘purposes
of general utility’) the activities which fall within its domain — ‘the categories
which relate to essential public services or sources of energy . . . and which have
the nature of primary general interest’ — may from the outset be transferred or
reserved for the state, public bodies or even ‘communities of workers or users’ (as
in the soviets). Thus, the Constitution does not forbid monopolies per se but only
private monopolies, which must simply be replaced by public monopolies. A
comparison with the expropriation of private property is telling. In both cases,
private parties are deprived of their rights by legislation, but private property is a
constitutional right (Article 42), while services may be ‘reserved’ from the begin-
ning. In sum, the Constitution does not protect free competition, particularly if
public services are under consideration, and conceives the role of public powers
in terms of direction and ownership, instead of regulation.9
The other reason for neglecting both competition and regulation has depended
on the ways in which the Constitution has been implemented. From the first point
of view, the energy industry was nationalized in 1962 and the natural gas industry
in 1957. Other monopolies have been confirmed in such areas as the postal ser-
vice and telecommunications (1973). More generally, state action has expanded
either through ownership of companies (partecipazioni statali) or through subsi-
dies. In many cases, moreover, licences have been released without a formal
reserve in favour of the state, thus violating the limits set by the Constitution.10
From the second point of view, both tariffs and the conditions for the delivery of
services have been defined by central departments: by way of ministerial decrees
and internal guidelines, if the service was directly delivered; by the licence (con-
cessione) and the related convention, if it was delivered by a licensee. This could
be either a private subject or, more frequently, a public corporation, such Alitalia,
owned by Iri, a public holding, controlled by the Treasury.
In conclusion, the legal and cultural background of public services was charac-
terized by a strong anti-market bias, which has involved the denial of the right for
private economic action, in contrast with the Anglo-Saxon tradition. At the same
time, it was not based on regulation, but on direct public delivery of services.
There is a difference, too, from the French tradition, since, instead of dirigisme
through plans, there was dirigisme through individual measures of a discretionary
nature, mainly licences.11
Regulation as a result of liberalization
The situation just described has gradually changed in the last ten years, due
to technological progress and European integration. Technology has evolved
dramatically, reducing the importance of ‘natural’ obstacles to free competition.
This has meant abandoning legal obstacles which have been deprived of their
raison d’être. More recently, the available technology has allowed a single net-
work (in fields...
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