Italy’s general election in 2018 and rise to power of a coalition government has been “a big cultural change”, say sources. Said change has impacted the legal market in a significant way, with practitioners reporting “some political instability with the new Italian government, which is not active in fostering the interests of businesses”. This political environment has spooked a number of investors in the republic, and as a consequence interest rates on 10-year Italian bonds have steadily increased, the value of Italian share prices has dropped, and the value of the euro fell upon the Italian budget’s announcement. Furthermore, Italy currently holds the largest government debt of all EU member states at £2 trillion, which accounts for 152.4 per cent of GDP, while economic growth has stagnated and business confidence has declined. This challenging economic and political landscape has had significant ramifications for the legal market. Firstly, there has been a slowdown in commercial and financial transactions in the Italy over the past year, as investors wait for the political landscape to solidify. Secondly, real estate transactions are down on last year as investors have lost confidence in the market. Thirdly, the new government’s approach to the life sciences sector has been viewed as uncommunicative and detrimental to the industry as a whole. These are the challenges that the Italian legal market faces.
Despite political changes in 2018, competition specialists in Italy have enjoyed “a very busy year”. The Italian Competition Authority (AGCM) “has been very active in pursuing cartels” and other consumer protection investigations, especially in markets where antitrust activity is more difficult to detect. Practitioners have also highlighted the AGCM’s increased investigatory focus on the electronic and digital markets, rather than on more traditional industrial markets. As such, the AGCM appears to be aligning itself with the investigatory focus of other regulators in Europe, who take their cue from the EU Commission, which has conducted high-profile investigations into major players including Google in the past year. Lawyers have also noted increased cooperation between the anti-corruption authority and the AGCM, which has translated to a joint focus on – and increase in – bid-rigging investigations in Italy.
Sources also report that the increase in the threshold for merger investigations by the Italian parliament in March 2018 has had a significantly impact on the legal market, with “the number of merger investigations now significantly lower than in the rest of Europe”. Now, Italian entities with a combined turnover of €495 million or more meet the threshold for investigation. Like the Italian economy, the AGCM is not without its own challenges: it lacks a chairman at the point of writing, as the current candidate is waiting for approval from his former office to take up his new position. This does not mean that the AGCM’s teeth have been dulled, with practitioners imparting that “many big Italian companies are carrying out antitrust compliance steps due to harsh fines of the Italian Competition Authority”.
Practitioners note that it has been “a good year for Italian real estate market, but not as good as last year”. Many of those we spoke to attribute this dip in market activity to the new government, which has put off some international investors as they are “not sure whether the government will be business conducive or not”. Nevertheless, there is still a great deal of activity in certain niches of the real estate and construction market. For one, “Hotels are in demand and this will be a growth area for real estate in Italy as the needs of the tourism industry are addressed,” comments one source. Another area of activity is found in student housing in university towns, with lawyers reporting that “there is strong demand in cities such as Milan and Rome for student housing”. Market commentators are confident that “there are enough practitioners to meet demand in real estate sector”; however, they stress that there are questions as to whether practitioners are “flexible enough to deal with distressed transactions in Italy” which requires expertise in bankruptcy laws – especially considering that real estate specialists have seen a lot of distressed asset work recently. Interviewees also report a rising pressure on fees as “clients are less willing to pay for day-to-day work and are more willing to pay for services with more added value”. This has translated into many firms pursuing more sophisticated legal work in the sector.
In a highly regulated sector, a change in government can translate into significant changes to regulations, and therefore to business operations and research projects. This seems to have been the case with Italy’s life sciences sector in light of the 2018 general election. Practitioners report that the new government has “had a big impact on the market”. For example, the new minister of health reportedly has “a very different approach to his predecessors and hasn’t been communicative with industry players, much to the detriment of the industry”. There have also been changes within the Italian Agency of Pharmaceutical Products and Ministry of Health which “have led to more confusion in the industry” as a whole. The end result is that “the market is not at the top of performance, for lawyers and life sciences practitioners”. This means work in the sector is now more focused on contentious and international work with market players exhibiting “a continued trend to expanding outside of Europe, with the US, Japan and China the markets being targeted”.
This is not to say that this sector is not seeing innovation and activity. There is an increasing trend towards companies using social media in this sector, as well as the use of new software to “monitor patients remotely” which has generated not only regulatory but also contractual work with technology companies to secure said technology. There has also been a great deal of debate in Italy surrounding the Italian medicines agency’s change in biosimilars regulation in 2018. The new regulations allow inter-changeability of originator drugs and biosimilars, regardless of whether or not patients have begun treatment. This has opened up the pharmaceutical market to greater competition, in an economic climate where public pharmaceutical expenditure is under pressure and spending sustainability is a key goal to ensure population coverage.
The importance of Italy as a member of the EU should not be underestimated, given the size of its economy and its political influence in the bloc. This makes the country’s response to the number of economic and political challenges it faces all the more crucial. With the new government’s focus on public spending, and the aggressive restructuring of some regulatory bodies and ministries, legal practitioners report unease across several sectors that is being generated by uncertainty surrounding the government’s policies. This uncertainty is going on to impact investor confidence in the country, especially at the international level. Going forward, it remains to be seen whether this confidence and certainty can be won back by Italy’s new coalition government.