1. OECD
Interaction Between Competition Authorities and
Sector Regulators
Martin Cave
Ofgem, Great
Britain
OECD Paris 1-2 December 2022

2. OECD
Interaction Between Competition Authorities and
Sector Regulators
Martin Cave
Ofgem, Great
Britain
OECD Paris 1-2 December 2022

3. Why do competition authorities exist?
(A UK view)
To provide a generic protection from certain kinds of market failures, by means of
merger approval, prosecution of cartels, action to penalise abuses of market power
(such as predation, excessive prices, etc.)
Other ancillary tasks as well
Process is usually
proscriptive: it states what
is forbidden, and
everything else is lawful
Remedies include fines,
prohibitions of mergers, in
some cases divestments
Goal is usually to promote
the competitive process

4. 4
Why do economic regulators exist?
(A UK view)
Created to deal with sectors facing particular problems (often network-
related), such as ‘natural monopoly’ (where economies of scale and
scope preclude competition)
Regulators may have an obligation of various strengths to promote
competition (as well as protect the interests of consumers)
Regulators often prescribe/order what the firm has to do
They also often have other duties related to protection of vulnerable
customers of essential services

5. 5
Competition law vs regulation 1
Property of competition law Not good if....
• Lengthy requirement to prove
abuse
• Restricted ability to set prices
• Limited resources to monitor
• Large, irreparable damages
• Access to bottlenecks
• Economies of scale and scope
• Persistent monopoly in access or
end user markets
• High and constant information
and monitoring requirements

6. 6
Competition law vs regulation 2
Property of regulation Advantage of regulation
Ex ante remedies Immediacy, dependability
precision
Specialised industry - specific
agency
Specialised knowledge (but risk of
capture)
Prescriptive intervention,
affirmative duties re price and
quality
Heavy impacts (which may reduce
freedom to compete and innovate)

7. 7
Differences between competition and energy
regulatory agencies
Competitive Regulatory
Goals/duties Promote competition Consumer welfare,
(vulnerability)
Individual firm contacts Episodic Continuous
Staffing Generalist Technical/specialist
Discourse & culture Legal? Economistic?

8. 8
Institutional arrangements considered below
An
A general competition authority and a separate
sectoral regulator
A sectoral regulator with exclusive competition
powers in its sector
Some form of power-sharing (concurrency) with
respect to competition powers in the relevant
sector

9. 9
Who does what where? Concurrency
in competition enforcement
Exploits agency comparative advantages
Requires a shared emphasis on competition
Needs clear rules
May lead to stifling of differences in approach

10. 10
Who does what where? Mergers
Most relevant in the case of ‘natural’ oligopolies
Decision normally by competition authority;
in some cases by a sectoral regulator
Example: mobile mergers – 4 to 3 and 3 to 2
These trade-off standard price effects and more case-specific
network investment effects; co-operation extremely helpful

11. 11
Who does what where? Market Studies (MS)
and Market Investigations (MI)
These permit sequential action by
separate authorities with
different skills
Thus: a UK competition authority MI
(following an earlier MS)
led to a radical demerger of airports
The airport regulator could then deregulate many airport prices
Other UK examples exhibiting this sequence include energy retail prices
and emergency mobile communications services

12. 12
Conclusion
Co-operative working by regulators and forms of concurrency
exploit comparative advantage and appear to offer significant
benefits for consumers
No clear design rules for division of tasks;
all are vulnerable to human frailty;
several approaches may work
[Witness the range of options currently contemplated
for digital platform regulation]

13. www.ofgem.gov.uk
Ofgem is the Office of Gas and Electricity Markets. We are a non-ministerial
government department and an independent National Regulatory Authority,
recognised by EU Directives. Our role is to protect consumers now and in the
future by working to deliver a greener, fairer energy system.
We do this by:
• working with Government, industry and consumer groups to deliver
a net zero economy at the lowest cost to consumers.
• stamping out sharp and bad practice, ensuring fair treatment for all
consumers, especially the vulnerable.
• enabling competition and innovation, which drives down prices and
results in new products and services for consumers.