Transcript Slide 1

Consumer Unity & Trust Society International
The Relationship of Competition and Regulation Policy and
Administration
Professor Allan Fels, AO
Dean
Australia and New Zealand School of Government
(and former Chairman of the Australian Competition and
Consumer Commission)
15 May, 2006
New Delhi, India
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1. Introduction
• Competition policy and general regulation
• Competition policy and regulated industries
• Competition authorities and sectoral regulators
• Competition law in regulated industries
• Do competition and regulatory policies complement
or conflict with one another?
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2. General Regulation
• Vast number of laws, regulations and
government policies affect the state of
competition
• Comprehensive competition policy
includes all government policies that
affect the state of competition
• Antitrust or competition law only one
element
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National Comprehensive Competition Policy
Includes laws and regulations at all levels of government (federal,
state and local) that affect the state of competition. It includes:
• prohibition of anti competitive conduct (traditional antitrust laws) for all
businesses without exception
• liberal international trade policies
• free movement of all goods, services and factors of production (labour,
capital etc) across internal borders
• removing government regulation that unjustifiably limits competition, eg
legislated entry barriers of all kinds, professional licences, minimum
price laws, restrictions on advertising
• the reform of inappropriate monopoly structures, especially those
created by governments
• appropriate access to essential facilities
• a level playing field for all participants, including competitive neutrality
for government businesses and an absence of state subsidies that
distort competition
• separation of industry regulation from industry operations, eg dominant
firms should not set technical standards for new entrants
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The medical profession
Deregulation policies
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Elements in National Comprehensive
Competition Policy
• Competition law applicable to all forms of business
• Review and reform of:
– all laws at all levels of government that restrict
competition
– Public utility monopoly structure
• Competitive neutrality
• Generic law regarding regulating access to “essential
facilities”
• Prices surveillance regime
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Regulation of Utilities
• Energy, telecommunications, transport, water etc.
• Utilities which are natural or artificial monopolies
• Most often policy approach is regulation – but
there is a range of possibilities for dealing with
utilities:
– Ownership and control policies
– Exposure to increased interstate, interregional and
international trade and competition
– Structural break-up
– Application of competition law
– Access laws
– Variety of other government polices
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Access Laws
• Telecommunications – example “the last mile is
uncompetitive”.
• Without access by competitors to use lines owned by
monopolist it is difficult to compete
• “Essential Facilities” – facility is a monopoly
• Criteria (in Australia) for access under the law:
– Use of the facility is necessary input in a production process
– Would be uneconomic to duplicate or develop that facility, or
more simply, that it is a natural monopoly
– Would be in the public interest to give access as it would
promote competition and efficiency
• Pricing access – balancing effects on competition and
investment
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Retail Price Control
•Rate of return regulation
•CPI - X
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Competition Authorities and
Sectoral Regulators
Competition authorities view the relationship
as very challenging
• Regulated sectors usually uncompetitive
• Competition constrained by regulation
• Overlapping work causes tensions
• Problems largest in developing countries
The problems not unique to government
(“joined up government” etc.)
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Ideal Relationships
Little or no anticompetitive regulatory law
Competition body has paramount decision making
power on competition-related issues
In theory, the regulators should be on same side:
• Procompetition regulation enhances growth
• Objectives similar
In practice, they may not be
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Achieving Ideal Relationships
Importance of competition
culture, and central government
pressure for competition law
Australia’s experience
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The Reality:
Non Ideal Relationships
• Non ideal relationships exist in most
countries
• Problems may be worse in developing
countries
• The importance of acknowledging that
arrangements are not ideal – and of making
the best of the situation
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Differing Ways Agencies’ Interests can Intersect
Shared value
Conflicting value
Agency A
Agency A
Agency B
Extra value for one, neutral for the other
Dovetailing differences
Agency A
Agency A
Agency B
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Agency B
Agency B
Instruments of Cooperation
• Statutory powers of competition agency
• Concurrent powers
• Joint appointments, staff transfers and
exchanges
• Advocacy power for competition agency
• Agreements to cooperate
• Information exchange
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Consistency in Law
• Common appeals route
• Procompetition regulatory impact
assessment
• Competition authorities can
intervene
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Managing Collaboration
• Shared culture and values
• Strong direction from centre, and
from legislation
• Recognition, acceptance by
agencies of need to cooperate
• Sound, ongoing cooperative
relationships
• Careful management of political
environment
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Conclusion (1)
Do competition and
regulatory policies
complement or conflict with
one another?
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Conclusion (2)
• Aim for the ideal
• Acknowledge cross-agency
relationships may be imperfectly
structured
• Make an inventory of problems
• Analyse and resolve them
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