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Small and developing competition agencies – CUTS – December 2017 OECD discussion

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This presentation by CUTS’ SG Pradeep S Mehta was made during Break-out Session 2: Enforcement in the framework of the discussion on “Overcoming adversity and attaining success: Small and developing competition agencies” held at the 16th meeting of the OECD Global Forum on Competition on 8 December 2017. More papers and presentations on the topic can be found out at oe.cd/sda.

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Small and developing competition agencies – CUTS – December 2017 OECD discussion

  1. 1. Working relations between competition authorities and sector regulators Pradeep S Mehta Secretary General, CUTS International 1
  2. 2. Overview  About CUTS  Regulating Markets: The Rationale  Functions of Sector Regulators and Competition Authorities  Why the conflict?  Subsequent challenges for competition agencies  Examples  Implications  Possible approaches and Recommendations  Points to ponder/Issues for deliberation 2
  3. 3. About CUTS 3  Independent, non-profit, economic policy research and advocacy organisation  Working for improving equity and quality of competition, regulation, investment, governance, consumer protection and trade in the Global South  Worked in > 35 developing and least developing countries in the last 35 years  Headquartered in Jaipur, present at grassroots, national, regional and global level
  4. 4. Regulating Markets: The Rationale 4  Market regulation necessary to maintain fair competition, address market failures, advance public interest and to assist in transition to competitive markets  Two types: 1. Competition law 2. Sector-specific regulations
  5. 5. Functions of Sector Regulators and Competition Authorities Sector Regulators Competition Authorities Stipulation of technical regulation requirements and provision of operational guidelines for market players Protecting the process of competition through competition enforcement and advocacy 5
  6. 6. Why the conflict? Despite sharing the common goal of protecting and enhancing social/economic welfare, several overlapping factors causing conflict  Different legislative mandates and perspectives vis- à-vis competition  Differences in the underlying methods and approaches to competition (ex-ante and ex-post)  Absence of clearly defined jurisdictional boundaries 6
  7. 7. Subsequent challenges for competition agencies  In most developing countries, sector regulators were established first and competition authorities came afterwards  Due to absence of clear legal provisions, sector regulators tend to put forth arguments such as superiority of institutional experience and capacities  Sector regulators not bound to consult competition agencies and vice-versa  Young agencies facing resource constraints and political backlash 7
  8. 8. Examples  Zambia With SEC on share transfer cases  Tanzania Licencing by the Communication Commission  India Cartelisation by fuel cos; PNGRB or CCI? 8
  9. 9. Implications  Distortions to market competition emanating from sub-optimal regulatory frameworks impacting the economy  Failure to take into account the regulatory context and objectives while enforcing competition laws  Forum-shopping  Erosion/loss of market players’ confidence  Detriment to the quality of grievance redress mechanisms 9
  10. 10. Possible approaches 1. Concurrent approach as in the UK  Gives both competition authorities and sector regulators mandates in competition matters, using the same competition law  Needs high degree of collaboration and mutual understanding 10
  11. 11. Possible approaches 11 2. Collaborative Approach  Each authority has a distinct mandate and consultation from the other is sought E.g. Singapore
  12. 12. Possible approaches 12 3. Competition agency also oversees sector regulations  Use of Competition Authority to Administer Sectoral Regulatory Rules as in Spain and The Netherlands 4. Mandatory consultation  EU member states’ agencies and sector regulators have to compulsorily consult each other as per respective laws
  13. 13. Recommendations 13  One size does not fit all. Jurisdictions need to tailor to their respective needs  Irrespective of the approach followed, it should be clearly laid out in the law itself  Regular consultation and mutual understanding are critical, for cooperation or concurrent approaches to be successful  CUTS’ Report on Harmonising Regulatory Conflicts available here
  14. 14. Points to ponder/Issues for deliberation  Technological disruption and grey areas of market regulation  Growing vertical and horizontal consolidation in markets challenging traditional tools of competition enforcement  Cross-border market activity (blurring jurisdictional boundaries) and lack of regional/international consensus Questions and comments can be directed to psm@cuts.org 14

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