Riassunto esame Economia industriale , Prof. crisci stefano, libro consigliato Understanding Regulation, Theory, Strategy, and Practice, Badwin, Cave, Lodge

Market regulation notes

Introduction

Regulation is often spoken of as a government activity which restricts private behaviour, preventing undesirable outcomes. The broader view is, however, that setting up rules and ordered fashions may influence the markets, making them efficient rather than chaotic and uncontrolled. There’s a continuing need for regulatory oversight, especially in the running of public services (naturally monopolistic elements, …). In particular, the financial crisis pointed to the problems concerning the over-reliance on the self-regulatory capacities of private organizations and it also opened new debates about the role of jurisdictions in coping with systemic risks and about the macroprudential coordination across nations. Nevertheless, there must be a proper balance between private and public interests, which is why the excessive red tape should be avoided.

The framework

Regulation is a warranty for the market to act in the right way. In fact, there would be no legal certainty in the country without some limitations to free enterprise, which must satisfy some conditions: provided by the law; respect their essence; comply with the principle of proportionality; non-discriminatory; adequate reasons; based on objectives. The legislator delegates the responsibility to make policies to regulators, the Independent Regulatory Authorities (IRAs), which are public entities established by law and part of administrative law. They mainly exercise administrative functions in sensitive or high technical content areas (competition, privacy, …) in the position of autonomy, independence, impartiality, neutrality. They’re specialized in sectors and are characterized by technical discretion and knowledge: because of this, they improve the general credibility of public institutions. IRAs play a key role within the subject of market regulation. In Italy, there are 19 (like AGCM, ANAC, CONSOB, Guarantor of the protection of personal data) and their main functions are the following:

• Protection of consumers’ and producers’ interests towards large monopolistic concentration
• Protection of investors towards companies listed on the stock exchange
• Protection of the collective interest, like the stability of the market provided by the Bank of Italy
• Sanctioning
• Regulating if and only if the legislator was unable to cover some behaviour; in this case, regulatory powers are delegated by Parliament.

At the European level, they have four areas of interest:

• Legal and organizational autonomy
• Management autonomy
• Structural autonomy

*It is a branch of public law whose rules regulate the organization of public administration, the pursuit of public interest and the relations between public power and citizens.

Political decision-makers <-> market operators

The state and the market

State: Organized community living under a unified and centralized political system, the government, that maintains a monopoly of the legitimate use of force within a certain territory. States are served by a continuous succession of different governments.

Government: The specific group of people, the administrative bureaucracy, that controls the state apparatus at a given time. Governments are the means through which state power is employed.

Market: An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods, services, or contracts or instruments, for money or barter.

• Means for determining price
• Communicating the price information
• Facilitating deals and transactions
• Effecting distribution

It is necessary to strike the right balance between the State and the Market. The better situation for welfare is a perfectly competitive market, in which there are atomistic agents, who, as consumers, maximize their utilities, while producers, acting as price takers, are engaged in maximizing profits. Nevertheless, problems arise when the initial distribution of resources is iniquitous, making the market fail (monopoly elements, incomplete or asymmetric information, public goods, decreasing costs industries) such that in these cases, it would be necessary to have governmental intervention in order to ensure the efficiency of the resource use (ex: Pigouvian taxes).

The financial crisis influenced the governments to implement some policies, given that the crisis is a transformative moment. In particular, the most determinant crises were:

• The mortgage crisis, which inevitably spread to financial institutions, causing foreclosures and reputable Wall Street firms, such as Lehman Brothers, to collapse overnight.
• Decline in Manufacturing and Trade, determining the automotive industry (GMs and Chrysler) Industrial production being down by 12 percent in Europe, 11 percent in the United States, and 43 percent in Taiwan.
• Global Power Shift, for which BRIC (Brazil, Russia, India, China) countries, enhanced their power vis-à-vis the United States, Western Europe, and Japan.

Dangers of governmental interference:

• The state overextends itself.
• Governments will continue to see as their duty which firms to save and which to let fail.
• Shift away from globalization, coming back to re-nationalization of markets.
• “A government big enough to give you everything you want is strong enough to take everything you have”.

The constitution

The constitutionalism is a complex of principles that characterizes the form of government called “constitutional” – which arises in reaction to the “absolute State” – and has its legal system regulated by stable, written rules contained in a constitution, charter, or statute. The Constitution is the proclamation of rights and duties of the associates; it is a solemn, generally, written document containing the discipline of the organization of the State. The Italian Constitution is the fundamental law of the State. It is the primary law in the hierarchy of the sources containing the economic and market-building objectives inspired by both legislative initiatives and constitutional adjudication.

Art. 3 of Italian Constitution: It states that all citizens have equal social dignity and are equal before the law, without distinction of any sort (sex, race, language, religion, politics). The Republic has the duty of removing those obstacles of economic or social nature.

Art. 24 of Italian Constitution: It states that anyone may bring cases before a court of law in order to protect their rights under civil and administrative law. For the same aim, defense is an inviolable right at every stage and instance of legal proceedings. The law shall define the conditions of reparation in case of judicial errors.

Art. 9 of Italian Constitution: It states that the Republic protects the environment, the biodiversity, the ecosystems also in the interest of future generations, such that the market itself must be regulated to satisfy the above conditions. In both articles, the reference to sustainability has recently been introduced, becoming a new principle of the Constitution.

Art. 41 of Italian Constitution: It represents the economic part of the Constitution, which shows the principles of the entire legal system. In light of art. 41, free economic initiative is free and defended unless it damages safety, freedom, human dignity, and health environment also in the interest of future generations (→ principles of freedom and solidarity combined). Art. 41 is the basis for the introduction of controls on private activity for social and environmental ends (the IRAs): the law determines an appropriate planning and control so that public-private economic activity is directed and coordinated towards social ends.

Art. 97 of Italian Constitution: It describes the organization of public offices, stating that public offices are organized according to the provisions of law, so as to ensure the efficiency and impartiality of administration and that the regulations of the offices lay down the areas of competence, the duties, and the responsibilities of the officials.

Art. 102 of Italian Constitution: Judicial proceedings are exercised by ordinary magistrates. There may not exist extraordinary or special judges, only specialized sections for specific matters within the ordinary judicial bodies may be established, and these sections may include the participation of qualified citizens who are not members of the Judiciary. The law regulates the cases and forms of the direct participation of the people in the administration of justice.

Art. 111 of Italian Constitution: It describes the legal proceedings fair trials defined by law. Jurisdiction is implemented through due process regulated by law. All court trials are conducted with adversary proceedings and the parties.

Art. 113 of Italian Constitution: The judicial safeguarding of rights and legitimate interests before the bodies of ordinary or administrative justice is always permitted against acts of the public administration. Such judicial protection may not be excluded or limited to particular kinds of appeal or for particular categories of acts. The law determines which judicial bodies are empowered to annul acts of public administration in the cases and with the consequences provided for by the law itself.

Art. 103 of Italian Constitution: The Council of State and the other bodies of judicial administration have jurisdiction over the protection of legitimate rights before the public administration and, in particular matters laid out by law, also of subjective rights.

European Union constitution

In October 2004, the Treaty establishing a Constitution for Europe (TCE) was first signed by 25 EU States but only ratified by 18 of them. Then, in December 2009 the Lisbon Treaty replaced the Constitutional Treaty. The Lisbon Treaty describes constitutional norms and principles; fundamental economic rights and key economic institutions; the major global unions, supervisory authorities, and economic situation. The purpose of the treaty was to make the EU more democratic, more efficient, and better able to address global problems, such as climate change. The main changes are: more power for the European Parliament, change of voting procedures in the Council, citizens' initiative, a permanent president of the European Council, a new High Representative for Foreign Affairs, a new EU diplomatic service. The Lisbon treaty clarifies which powers belong to the EU, which ones belong to EU member countries, and which ones are shared. In particular, the Lisbon Treaty establishes the principle of conferral, according to which the Union shall act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein, such that competences not conferred upon the Union in the Treaties remain with the Member States. Another important principle is the subsidiarity one: it aims to ensure that decisions are taken at the closest possible level to the citizen and that constant checks are made to verify the action at the EU level is justified. Thus, the EU doesn’t take action unless it is more effective than action taken at national, regional, local level. This principle is linked to the principle of proportionality, requiring that EU actions do not have to go beyond what is necessary to achieve the treaties aims.

EU treaties

The European Union is based on the rule of law, meaning that every action taken by the EU is founded on treaties, a binding agreement between EU member countries, that have been approved voluntarily and democratically by all EU member countries. Treaties set out EU objectives, rules for EU institutions, how decisions are made, and the relationship between the EU and its member countries. Treaties are amended to make the EU more efficient and transparent, to prepare for new member countries, and to introduce new areas of cooperation – such as the single currency. Under the treaties, EU institutions can adopt legislation, which the member countries then implement.

• Merger Treaty – Brussels Treaty: It entered in force in 1967. The purpose: to streamline the European institutions, with the creation of a single Commission and a single Council to serve the then three European Communities (EEC, Euratom, ECSC). Repealed by the Treaty of Amsterdam.
• Treaty of Amsterdam: It entered into force in 1999. The purpose: to reform the EU institutions in preparation for the arrival of future member countries with the amendment, renumbering, and consolidation of EU and EEC treaties and a more transparent decision-making (increased use of the ordinary legislative procedure).
• Single European Act: It entered into force in 1987. The purpose: to reform the institutions in preparation for Portugal and Spain's membership and speed up decision-making in preparation for the single market. Main changes: extension of qualified majority voting in the Council (making it harder for a single country to veto proposed legislation), creation of the cooperation and assent procedures, giving Parliament more influence.
• Treaty on European Union - Maastricht Treaty: It entered into force in 1993. The purpose: to prepare for European Monetary Union and introduce elements of a political union (citizenship, common foreign and internal affairs policy). Main changes: establishment of the European Union and introduction of the co-decision procedure, giving Parliament more say in decision-making. New forms of cooperation between EU governments – for example on defence and justice and home affairs.
• Treaty of Nice: It entered into force in 2003. The purpose: to reform the institutions so that the EU could function efficiently after reaching 25 member countries. Main changes: methods for changing the composition of the Commission and redefining the voting system in the Council.

Public and private law

The public law is a complex of the norms that regulate the organization and the function of the State or, in general, of the institutions provided with sovereignty. So, public law is the body of rules which regulates the functioning of the State’s organ, such as public bodies and administration (local authority) and the relation between citizen and the State. Regarding public international law (the law of nations), it is the system of law whose primary function is to regulate the relations between states.

The private law is a complex of the norms that regulate the relationships of the individuals among them, or between them and the State and the other public agencies if the latter do not express functions of political and sovereign power. Then, in the field of private law, many distinctions are made between the various branches of law. Among these, the most important are commercial law, which regulates trade, companies and companies, labor law, and civil law.

Public procurement

A public contract is a legally enforceable commitment of a party to undertake the work or improvement assigned by a public authority. The legal discipline of the public procurements sector is contained in the Public Contracts Code (Legislative Decree n. 50/2016), which was adopted by the Italian Government to implement the European Directives on the coordination of procedures for awarding concession contracts; on the coordination of procedures for awarding public works, supply, and service contracts; coordinating the procurement procedures of entities operating in water, energy, transport, and postal services sectors. The public contracts sector is regulated and controlled by the National Anticorruption Authority (ANAC). The Code applies to public works, supply and service contracts, and concessions awarded by contracting authorities and other awarding entities (State, regional or local authorities, public companies, bodies governed by public law, etc.).

It is important to make public procurement transparent at local and regional levels in order to activate competition and new markets, since public procurement tends to be vulnerable because of corruption, which corrodes public resources. Comparing the implementation of the Directives in Italy with the implementation of the same Directives in the other European countries analyzed, it is possible to say that, beside the UK, no other country was prompt like Italy and no other county has a discipline so short and incisive like Italy.

Inefficiency in the Italian public contracts system. First of all, the inefficiency in the economy refers to a situation in which it is possible to generate a larger share of welfare from the available resources. If applied to the public contracts sectors, the idea of inefficiency means that the costs connected to a certain regulation are higher than the potential costs connected to a different regulation. Comparing the actual costs with the potential costs, the Italian public contracts system is inefficient. However, it must be said that the costs data are not always accurate. There are indeed problems related to the data access, data quality, and timing of data analysis.

Administrative law

It is a branch of public law whose rules regulate the organization of public administration, the pursuit of public interests, and the relations between the various manifestations of public power and citizens. The functions of administrative law are the following:

• Enabling the tasks of government to be performed.
• Governing the relations between public bodies.
• Governing the relations between a public agency and the individual or private bodies over whose affairs the agency exercises power.

In Italy, the administrative law is regulated by the administrative procedure act (law n. 241 of the 7th of August 1990), which follows some principles and criteria:

• The economy of actions (economicità)
• The concept of transparency
• Publicity
• Impartiality
• Effectiveness (it implies that the goal must be achieved using the minimum possible resources)
• Efficiency (available resources should be used to achieve the maximum possible result)

The administrative law defines a valid line of action to achieve public interests. The administrative law power is in compliance with the Constitution, the legitimate interest arises from artt. 24, 103, 113. Regarding the locus standi, i.e., the right or the ability to bring a legal action.