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2nd CUTS-CIRC International Conference

REVIEWING THE GLOBAL EXPERIENCE ON ECONOMIC REGULATION– A forward looking perspective

 Session VII - Interface between Competition Law

and Sector Regulation 

 Professor Allan Fels, AO

Dean, Australia and New Zealand School of Government (formerly Chairman of the Australian Competition and Consumer

Commission) 

Wednesday, April 20, 2011 

New Delhi, India 

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IntroductionIntroduction

• 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?

The Broad Policy Approach to The Broad Policy Approach to Regulated IndustriesRegulated Industries

• Commercialisation, corporatisation, privatisation• Removal of entry barriers imposed by

governments• Removal of interstate or international trade and

investment restrictions• Appropriate horizontal and vertical structural

breakup• Access laws to deal with vertically integrated

businesses• Price regulation of monopoly power

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The Broad Policy Approach to The Broad Policy Approach to Regulated Industries cont.Regulated Industries cont.

• Application of competition law

• Mergers

• Cartels

• Abuse of dominance

• Other procompetitive measures

• Competitive neutrality

• State aids

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Limited Relevance of Limited Relevance of Competition Law to MonopoliesCompetition Law to Monopolies

• No cartels

• No anticompetitive mergers

• No abuse of dominance

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High Relevance of Competition High Relevance of Competition Law to Deregulated MonopolyLaw to Deregulated Monopoly

• Cartels

• Mergers

• Abuse of dominance

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Alternative ModelsAlternative Models

• Full integration• One law

• One regulator

• Separation of competition and regulation• Two laws

• Two regulators

• Coordination, cooperation? Conflict?

• Multilevel government issues• National/state or provincial regulators

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Integration Versus SeparationIntegration Versus Separation

• Industry specific or general regulation?

• State/provincial or national regulation?

• Integration of regulation with competition law agency?

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Technical RegulationTechnical Regulation• Can it be separated from economic regulation?

• If separated, need for competition agency to have power to override or direct technical regulator

• Issues re technical competence of competition staff

• Issues re power of integrated and/or separate regulator

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Access LawsAccess Laws• Telecommunications – “the last mile is

uncompetitive” • It is difficult to compete without access by

competitors to lines owned by monopolist • “Essential Facilities” • Criteria (in Australia) for access under the law:

– Use of the facility is a 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 ControlRetail Price Control

•Rate of return regulation

•CPI - X

• Competition authorities view the relationship as very challenging

– Regulated sectors usually uncompetitive

– Competition may be constrained by regulation

– Overlapping work causes tensions

– Problems largest in developing countries

• The problems not unique to government (“joined up government” etc.)13

Competition Authorities and Competition Authorities and Sectoral RegulatorsSectoral Regulators

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Ideal RelationshipsIdeal RelationshipsLittle 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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Importance of competition culture, and central government pressure for competition law

Australia’s experience

Achieving Ideal RelationshipsAchieving Ideal Relationships

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• 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

The Reality: The Reality: Non Ideal RelationshipsNon Ideal Relationships

Differing Ways Agencies’ Interests can Differing Ways Agencies’ Interests can IntersectIntersect

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Shared value

Agency A

Extra value for one, neutral for the other

Agency A

Agency B

Agency B

Conflicting value

Agency A

Agency B

Dovetailing differences

Agency A

Agency B

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• Statutory powers of competition agency

• Concurrent powers

• Joint appointments, staff transfers and exchanges

• Advocacy power for competition agency

• Agreements to cooperate

• Information exchange

Instruments of CooperationInstruments of Cooperation

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• Common appeals route

• Procompetition regulatory impact assessment

• Competition authorities can intervene

Consistency in LawConsistency in Law

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• 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

Managing CollaborationManaging Collaboration

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Do competition and regulatory policies

complement or conflict with one another?

Conclusion (1)Conclusion (1)

Conclusion (2)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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